10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2018

or

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

For the transition period from                          to                           .

Commission File Number: 000-24248

LRAD CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	87-0361799
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
16990 Goldentop Rd. Ste. A, San Diego, California	92127
(Address of principal executive offices)	(Zip Code)

(858) 676-1112

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	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 May 11, 2018 was 32,394,288 .

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LRAD Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,
	2018			September 30,
	(Unaudited)			2017
ASSETS
Current assets:
Cash and cash equivalents	$	12,732,882		$	12,764,421
Short-term marketable securities		4,063,109			4,359,542
Restricted cash		363,745			39,466
Accounts receivable, net		5,718,396			5,681,882
Inventories, net		5,443,342			5,257,234
Prepaid expenses and other		845,831			983,322
Total current assets		29,167,305			29,085,867
Long-term marketable securities		991,178			711,124
Deferred tax assets, net		5,463,661			8,331,000
Long-term restricted cash		104,146			-
Property and equipment, net		483,467			509,603
Goodwill		2,603,687			-
Intangible assets, net		1,833,847			55,689
Other assets		242,196			164,517
Total assets	$	40,889,487		$	38,857,800
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,890,427		$	1,112,366
Accrued liabilities		3,414,362			2,561,395
Notes payable, current portion		896,317			-
Total current liabilities		6,201,106			3,673,761
Notes payable, less current portion		269,231			-
Total liabilities		6,470,337			3,673,761
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.00001 par value; 5,000,000 shares authorized; none issued and outstanding		-			-
Common stock, $0.00001 par value; 50,000,000 shares authorized; 32,394,288 and 32,158,436 shares issued and outstanding, respectively		322			322
Additional paid-in capital		88,426,807			87,956,839
Accumulated deficit		(53,994,197	)		(52,771,853	)
Accumulated other comprehensive loss		(13,782	)		(1,269	)
Total stockholders' equity		34,419,150			35,184,039
Total liabilities and stockholders' equity	$	40,889,487		$	38,857,800

See accompanying notes

1

LRAD Corporation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018			2017
Revenues:
Product sales	$	7,125,258	$	5,471,613	$	14,461,283		$	8,173,572
Contract and other		743,190		270,778		1,035,732			510,154
Total revenues		7,868,448		5,742,391		15,497,015			8,683,726
Cost of revenues		3,832,468		2,808,546		7,503,494			4,525,370
Gross profit		4,035,980		2,933,845		7,993,521			4,158,356
Operating expenses:
Selling, general and administrative		2,517,891		1,893,045		4,706,289			3,859,480
Research and development		913,935		605,239		1,691,972			1,192,650
Total operating expenses		3,431,826		2,498,284		6,398,261			5,052,130
Income (loss) from operations		604,154		435,561		1,595,260			(893,774	)
Other income		15,205		32,074		49,735			62,202
Income (loss) before income taxes		619,359		467,635		1,644,995			(831,572	)
Income tax expense (benefit)		158,451		169,285		2,867,339			(317,243	)
Net income (loss)	$	460,908	$	298,350	$	(1,222,344	)	$	(514,329	)
Net income (loss) per common share - basic and diluted	$	0.01	$	0.01	$	(0.04	)	$	(0.02	)
Weighted average common shares outstanding: - basic and diluted
Basic		32,275,647		31,800,103		32,212,286			31,800,103
Diluted		33,299,206		31,863,902		32,212,286			31,800,103

See accompanying notes

2

LRAD Corporation

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three months ended					Six months ended
	March 31,					March 31,
	2018			2017		2018			2017
Net income (loss)	$	460,908		$	298,350	$	(1,222,344	)	$	(514,329	)
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on marketable securities, net of tax		(8,837	)		4,332		(16,868	)		(1,978	)
Unrealized foreign currency gain, net of tax		4,355			-		4,355			-
Comprehensive income (loss)	$	456,426		$	302,682	$	(1,234,857	)	$	(516,307	)

See accompanying notes

3

LRAD Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended
	March 31,
	2018			2017
Operating Activities:
Net (loss)	$	(1,222,344	)	$	(514,329	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		193,809			62,834
Warranty provision		12,361			111,369
Inventory obsolescence		85,435			(181,486	)
Share-based compensation		284,250			642,151
Deferred income taxes		2,867,339			(317,243	)
Changes in operating assets and liabilities:
Accounts receivable, net		389,434			168,183
Inventories, net		(271,543	)		(174,720	)
Prepaid expenses and other		174,589			(101,304	)
Other assets		(60,614	)		133,188
Accounts payable		502,933			707,549
Accrued and other liabilities		(56,313	)		521,375
Net cash provided by operating activities		2,899,336			1,057,567
Investing Activities:
Purchases of marketable securities		(2,402,346	)		(1,773,530	)
Proceeds from maturities of marketable securities		2,401,856			1,874,823
Capital expenditures		(90,135	)		(57,473	)
Patent costs paid		-			(4,286	)
Purchase of Genasys, net of cash and restricted cash acquired		(2,246,545	)		-
Net cash (used in) provided by investing activities		(2,337,170	)		39,534
Financing Activities:
Proceeds from exercise of stock options		185,718			-
Proceeds from issuance of unsecured promissory notes		63,144			-
Payments on unsecured promissory notes		(414,477	)		-
Net cash used in financing activities		(165,615	)		-
Effect of foreign exchange rate on cash		335			-
Net increase in cash, cash equivalents and restricted cash		396,886			1,097,101
Cash, cash equivalents and restricted cash, beginning of period		12,803,887			13,466,711
Cash, cash equivalents and restricted cash, end of period	$	13,200,773		$	14,563,812
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents	$	12,732,882		$	14,524,346
Restricted cash, current portion		363,745			39,466
Long-term restricted cash		104,146			-
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	13,200,773		$	14,563,812

See accompanying notes

4

LRAD Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Continued) 

	Six months ended
	March 31,
	2018			2017
Supplemental disclosures of cash flow information:
Interest paid	$	9,186		$	-
Noncash investing and financing activities:
Change in unrealized loss on marketable securities	$	(16,868	)	$	(1,978	)
Business combinations accounted for as a purchase:
Fair value of assets acquired	$	5,520,504		$	-
Cash paid or payable		(3,011,439	)		-
Liabilities assumed	$	2,509,065		$	-

See accompanying notes

5

LRAD Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. OPERATIONS

LRAD^® Corporation, a Delaware corporation (the “Company”), is engaged in the design, development and commercialization of directed and multidirectional sound technologies, voice broadcast products, and location-based mass messaging solutions for emergency warning and workforce management. The principal markets for the Company’s proprietary sound reproduction technologies, voice broadcast products and mass messaging solutions are in North and South America, Europe, Middle East and Asia.

On January 18, 2018, the Company acquired all of the issued and outstanding shares of capital stock of Genasys Holdings, S.L. and its subsidiaries (“Genasys”), pursuant to a Stock Purchase Agreement, dated January 18, 2018. Genasys is a leading software provider of advanced location-based mass messaging solutions for emergency warning systems and workforce management. See Note 4 for additional information about this transaction.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

General

The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to Form 10-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 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, 2017 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on December 13, 2017. The accompanying condensed consolidated balance sheet at September 30, 2017 has been derived from the audited consolidated balance sheet at September 30, 2017 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.

Principles of Consolidation

The Company has four wholly owned subsidiaries, Genasys Holding, S.L. and Genasys II Spain, S.A.U. and two currently inactive subsidiaries, Genasys America de CV and LRAD International Corporation. The condensed consolidated financial statements include the accounts of these subsidiaries after elimination of intercompany transactions and accounts.

Reclassifications

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

3. RECENT ACCOUNTING PRONOUNCEMENTS

In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"), which amends Topic 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The provisions of this guidance are to be applied using a retrospective transition method to each period presented. ASU 2016-18 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The Company adopted ASU 2016-18 effective January 1, 2018. For the six months ended March 31, 2018, the increase in restricted cash resulted primarily from restricted cash balances included in the assets acquired in the acquisition of Genasys, as described in Note 4. The adoption did not have a material impact on the Company's consolidated financial position, results of operations and cash flows, other than the impact discussed above.

6

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This guidance changes how companies account for certain aspects of share-based payments to employees. Among other things, under the new guidance, companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital (“APIC”), but will instead record such items as income tax expense or benefit in the income statement, and APIC pools will be eliminated. Companies will apply this guidance prospectively. Another component of the new guidance allows companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards, whereby forfeitures can be estimated, as required today, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. The guidance was effective for the Company in the first quarter of fiscal 2018. The adoption of this standard resulted in the recognition of $1.1 million of gross deferred tax assets related to the historical excess tax benefits from stock-based compensation that was not previously included in deferred tax assets and a corresponding increase in the Company’s valuation allowance.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which issued new guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company in the fiscal year beginning October 1, 2019. Early adoption is permitted. The Company is currently evaluating the impact of this guidance, if any, on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective. In July 2015, the FASB deferred the effective date of the standard by an additional year; however, it provided companies the option to adopt one year earlier, commensurate with the original effective date. Accordingly, the standard will be effective for the Company in the fiscal year beginning October 1, 2018. The Company is currently evaluating the impact of this guidance, if any, on its consolidated financial statements and related disclosures.

4. ACQUISITIONS

On January 18, 2018, the Company completed its acquisition of Genasys pursuant to a Stock Purchase Agreement. Genasys, headquartered in Madrid, Spain, is a leading software provider of advanced, location-based mass messaging solutions for emergency warning systems and workforce management. Genasys has 16 employees based primarily in Spain.

The Company believes the combination of Genasys’ mass messaging solutions and software development capabilities will enable the Company to enhance existing product offerings through integrated mass messaging solutions as well as provide growth opportunities in new markets. Genasys’ operating results were included in the Company’s consolidated financial statements beginning January 18, 2018 and include $415,000 in net sales and net operating income of $25,000, through March 31, 2018.

The preliminary acquisition consideration consisted of the following:

Cash paid	$	2,826,189
Acquisition escrow liability		185,250
Total consideration	$	3,011,439

As of March 31, 2018, the acquisition consideration is subject to change upon finalization of net working capital and other adjustments. Net working capital adjustments will be settled during the three months ended June 30, 2018. The cash portion of the purchase price was funded from cash on hand. The Company incurred $237,345 in acquisition expenses related to this transaction, through March 31, 2018. These expenses were recorded in selling, general, and administrative expenses in the consolidated statement of operations as follows: $151,313 in the second quarter of fiscal 2018, $45,016 in the first quarter of fiscal 2018 and $41,016 in the fourth quarter of fiscal 2017.

7

Purchase Price Allocation and Other Items

The determination of the purchase price allocation to specific assets acquired and liabilities assumed is preliminary as of March 31, 2018. The purchase price allocation is subject to change based upon the final determination of fair value estimates of certain assets acquired and liabilities assumed. Based on the fair value estimates, the purchase price for Genasys has been allocated to individual assets acquired and liabilities assumed as follows:

Assets Acquired
Cash and restricted cash acquired	$	579,644
Accounts receivable		426,940
Fixed assets		5,712
Intangible assets		1,850,000
Goodwill		2,603,688
Other assets		54,520
Total assets acquired		5,520,504
Liabilities assumed
Accounts payable		275,653
Accrued expenses and other liabilities		315,817
Severance obligation		397,558
Debt		1,520,037
Total liabilities assumed		2,509,065
Net assets acquired	$	3,011,439

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

	Fair Value		Useful Lives (in years)
Technology	$	690,000	7
Customer relationships		660,000	7
Trade name portfolio		240,000	5
Non-compete agreements		260,000	3
	$	1,850,000

Identifiable intangible assets are amortized over their useful lives based upon a number of assumptions including the estimated period of economic benefit and utilization. The weighted average amortization period for identifiable intangible assets acquired is 6 years.

The goodwill for Genasys is attributable to combining the mass messaging solutions and software development capabilities with existing LRAD products for enhanced offerings and the skill level of the acquired workforce. The Company will continue to analyze the transaction and refine its calculations, as appropriate during the measurement period, which could affect the value of goodwill. Goodwill from the Genasys acquisition will not be deductible for tax purposes.

8

Pro Forma Information

The following table provides the unaudited pro forma results of operations for the three and six months ended March 31, 2018 and 2017, respectively, as if Genasys had been acquired as of the beginning of fiscal year 2017. Pro forma results do not include any anticipated synergies from the combination of the companies, and accordingly, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the dates indicated or that may result in the future.

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018			2017
Net revenues	$	8,042,879	$	6,034,248	$	16,222,894		$	9,474,427
Net income		529,094		276,048		(1,081,478	)		(788,438	)
Basic and diluted earnings per share	$	0.02	$	0.01	$	(0.03	)	$	(0.02	)

The following is a reconciliation of actual net revenue and net income to pro forma net revenue and net income:

	Three months ended March 31,
	2018				2017
	Net revenues		Net income		Net revenues		Net income
LRAD actual results	$	7,453,794	$	384,516	$	5,742,391	$	298,350
Genasys actual results		589,085		89,727		291,857		79,067
Pro Forma adjustments		-		54,851		-		(101,369	)
Pro forma results	$	8,042,879	$	529,094	$	6,034,248	$	276,048

	Six months ended March 31,
	2018					2017
	Net revenues		Net income			Net revenues		Net income
LRAD actual results	$	15,082,361	$	(1,298,736	)	$	8,683,726	$	(514,329	)
Genasys actual results		1,140,533		126,844			790,701		(172,740	)
Pro Forma adjustments		-		90,414			-		(101,369	)
Pro forma results	$	16,222,894	$	(1,081,478	)	$	9,474,427	$	(788,438	)

The following table identifies the pro forma adjustments:

	Three months ended						Six months ended
	March 31,						March 31,
	2018			2017			2018			2017
Acquisition costs	$	151,313		$	-		$	196,329		$	-
Depreciation and amortization costs		(81,881	)		(163,762	)		(81,881	)		(163,762	)
Tax effect of adjustments		(14,581	)		62,393			(24,034	)		62,393
Pro forma adjustmenst	$	54,851		$	(101,369	)	$	90,414		$	(101,369	)

 5. GOODWILL AND INTANGIBLE ASSETS

During the three months ended March 31, 2018, the Company recorded intangible assets of $1,850,000 and goodwill of $2,603,687 in connection with the acquisition of Genasys, as described in Note 4.

Identifiable intangible assets are amortized over their useful lives based upon a number of assumptions including the estimated period of economic benefit and utilization. The Company will assess the impairment of identifiable amortized intangible assets when events and circumstances indicate the carrying value of the assets might not be recoverable.

9

The goodwill attributable to the acquisition of Genasys is due to combining the mass messaging solutions and software development capabilities with existing LRAD products for enhanced offerings and the skill level of the acquired workforce. The Company will continue to analyze the transaction and refine its calculations, as appropriate during the measurement period, which could affect the value of goodwill. Subsequent to the measurement period, the Company will periodically review goodwill for impairment in accordance with ASC Topic 350 “Intangibles – Goodwill and Other – Testing Indefinite-Lived Assets for Impairment”.

The Company’s intangible assets consist of the following:

	March 31, 2018							September 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Technology	$	690,000	$	(20,536	)	$	669,464	$	-	$	-		$	-
Customer relationships		660,000		(19,642	)		640,358		-		-			-
Trade name portfolio		240,000		(10,000	)		230,000		-		-			-
Non-compete agreements		260,000		(18,056	)		241,944		-		-			-
Patents		108,247		(56,166	)		52,081		108,247		(52,558	)		55,689
	$	1,958,247	$	(124,400	)	$	1,833,847	$	108,247	$	(52,558	)	$	55,689

The amortization expense for the three months ended March 31, 2018 and 2017 was $70,038 and $1,859, respectively. The amortization expense for the six months ended March 31, 2018 and 2017 was $71,842 and $3,681, respectively.

Estimated Future Amortization Expense Years Ended September 30,
2018 (April 1, 2018 through September 30, 2018)	$	166,689
2019		333,771
2020		333,448
2021		271,771
2022		246,363
Thereafter		481,805
Total estimated amortization expense	$	1,833,847

6. FAIR VALUE MEASUREMENTS

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

Level 1: Inputs are based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2: Inputs include quoted prices for similar assets or liabilities in active markets and/or quoted prices for identical or similar assets or liabilities in markets that are not active near the measurement date.

Level 3: Inputs include management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The fair value of the Company’s cash equivalents and marketable securities was determined based on Level 1 and Level 2 inputs. The Company did not have any marketable securities in the Level 3 category as of March 31, 2018 or September 30, 2017. 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.

10

Instruments Measured at Fair Value

The following tables present the Company’s cash equivalents and marketable securities’ costs, gross unrealized gains and losses, and fair value by major security type recorded as cash equivalents or short-term or long-term marketable securities as of March 31, 2018 and September 30, 2017.

	March 31, 2018
			Unrealized			Fair		Cash		Short-term		Long-term
	Cost Basis		Losses			Value		Equivalents		Securities		Securities
Level 1:
Money Market Funds	$	98,539	$	-		$	98,539	$	98,539	$	-	$	-
Level 2:
Certificates of deposit	$	936,952	$	-		$	936,952	$	-	$	437,952	$	499,000
Municipal securities		85,626		(168	)		85,459		-		85,459		-
Corporate bonds		4,049,846		(17,970	)		4,031,876		-		3,539,698		492,178
Subtotal		5,072,424		(18,138	)		5,054,287		-		4,063,109		991,178
Total	$	5,170,963	$	(18,138	)	$	5,152,826	$	98,539	$	4,063,109	$	991,178

	September 30, 2017
			Unrealized			Fair		Cash		Short-term		Long-term
	Cost Basis		Losses			Value		Equivalents		Securities		Securities
Level 1:
Money Market Funds	$	55,257	$	-		$	55,257	$	55,257	$	-	$	-
Level 2:
Certificates of deposit		2,436,647		-			2,436,647		-		1,937,647		499,000
Municipal securities		25,315		(12	)		25,303		-		25,303		-
Corporate bonds		2,609,973		(1,257	)		2,608,716		-		2,396,592		212,124
Subtotal		5,071,935		(1,269	)		5,070,666		-		4,359,542		711,124
Total	$	5,127,192	$	(1,269	)	$	5,125,923	$	55,257	$	4,359,542	$	711,124

7. INVENTORIES

Inventories consisted of the following:

	March 31,			September 30,
	2018			2017
Raw materials	$	5,135,966		$	3,784,935
Finished goods		417,587			1,742,960
Work in process		393,756			147,871
Inventories, gross		5,947,309			5,675,766
Reserve for obsolescence		(503,967	)		(418,532	)
Inventories, net	$	5,443,342		$	5,257,234

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8. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	March 31,			September 30,
	2018			2017
Office furniture and equipment	$	1,296,249		$	1,093,502
Machinery and equipment		1,067,802			994,157
Leasehold improvements		76,138			76,138
Property and equipment, gross		2,440,189			2,163,797
Accumulated depreciation		(1,956,722	)		(1,654,194	)
Property and equipment, net	$	483,467		$	509,603

	Six months ended
	March 31,
	2018		2017
Depreciation expense	$	121,967	$	59,153

9. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	March 31,		September 30,
	2018		2017
Payroll and related	$	1,214,039	$	1,870,579
Deferred revenue		1,028,497		268,580
Accrued contract costs		474,068		197,034
Severance		327,937		-
Acquisition escrow liability		185,250		-
Warranty reserve		169,204		179,101
Deferred rent		15,367		46,101
Total	$	3,414,362	$	2,561,395

Payroll and related

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

Deferred Revenue

Deferred revenue consists primarily of prepayments from customers in advance of product shipment.

12

Warranty Reserve

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

	Three months ended						Six months ended
	March 31,						March 31,
	2018			2017			2018			2017
Beginning balance	$	188,308		$	353,938		$	179,101		$	356,984
Warranty provision		-			101,673			12,361			111,369
Warranty settlements		(19,104	)		(6,470	)		(22,258	)		(19,212	)
Ending balance	$	169,204		$	449,141		$	169,204		$	449,141

Accrued contract costs

The Company has contracted with a third-party service provider to administer the required services under the terms of a repair and maintenance agreement with a foreign military. This payment is made in arrears for each contract year ended March 26.

10. INCOME TAXES

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017.  The Act reduces the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018.  Subsequently, the SEC issued Staff Accounting Bulletin (“SAB”) 118, which allows for the recording of provisional amounts related to U.S. tax reform and subsequent adjustments related to U.S. tax reform during a measurement period not to exceed one year from the enactment date.  Accordingly, the Company remeasured its deferred tax assets on a provisional basis based on the rates at which they are expected to be realized in the future, which is generally 21%, resulting in a decrease to the Company’s net deferred tax assets of $2,474,000 during the quarter ended December 31, 2017. The Company will continue to analyze certain aspects of the Act and refine its calculations as appropriate during the measurement period, which could affect the measurement of these balances. 

For the six months ended March 31, 2018, the Company recorded income tax expense of $393,339 reflecting an effective tax rate of 25.1% and an additional discrete tax expense of $2,474,000 due to the remeasurement of its deferred tax assets as a result of tax reform. For the six months ended March 31, 2017, the Company recorded an income tax benefit of $317,243 reflecting an effective tax rate of 38.1%.  For the six months ended March 31, 2018, when compared to the same period in 2017, the decrease in the effective tax rate was primarily attributable to the decrease in Federal statutory tax rate due to tax reform. The Company continues to maintain a partial valuation allowance against its deferred tax assets as the Company believes that the negative evidence that it will be able to recover these net deferred tax assets outweighs the positive evidence.

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

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11. DEBT

In connection with the acquisition of Genasys, as described in Note 4, the Company acquired certain debts of Genasys. The carrying value of the acquired debt approximates fair value. The components of the acquired debt consisted of the following as of March 31, 2018:

Loans with Governmental Agencies (1)	$	847,215
Revolving Credit Facilities (2)		198,850
Term Loans (3)		119,483
Total debt		1,165,548
Less current portion		(896,317	)
Total long-term debt	$	269,231

(1) Loans with governmental agencies represents debt granted by ministries within Spain and the European Union for the purpose of stimulating economic development and promoting research and development. Loans with governmental agencies as of March 31, 2018 are as follows:

Agency	Due Date	Interest Rate	Principal
Ministry of Industry, Tourism, and Commerce	December 31, 2018	0.53%	$	73,865	a
Ministry of Industry, Tourism, and Commerce	December 31, 2019	0.51%		107,933	b
Ministry of Industry, Tourism, and Commerce	January 31, 2020	3.95%		94,634	c
Ministry of Science and Innovation	February 2, 2022	0.00%		74,136
Ministry of Science and Innovation	February 2, 2024	0.00%		296,440	d
Center for Development of Industrial Technology	March 31, 2021	0.00%		94,306
European Union Agency for Network and Information Security	October 28, 2018	2.95%		105,902
			$	847,215

a. This loan is secured by $26,113 of cash pledged as collateral by Genasys. This amount is included in restricted cash at March 31, 2018. The cash will be released upon repayment of the loan.

b. This loan is secured by $40,373 of cash pledged as collateral by Genasys, which represents 25% of the original principal received. This amount is included in restricted cash at March 31, 2018. The cash will be released upon repayment of the loan.

c. This loan is secured by $63,774 of cash pledged as collateral by Genasys, which represents 35% of the original principal received. This amount is included in restricted cash at March 31, 2018. The cash will be released upon repayment of the loan.

d. This loan is secured by $296,440 of cash pledged as collateral by Genasys, which is the current balance of the loan. This amount represents 66.6% of the original principal received. This amount is included in restricted cash at March 31, 2018. The Company expects the Ministry of Science and Innovation to declare the terms of the loan satisfied within fiscal year 2018, and that the outstanding balance of the loan will be paid in full during fiscal year 2018. Accordingly, this has been included in the current portion of notes payable as of March 31, 2018.

(2) Revolving credit facilities were used by Genasys to meet short-term operating needs. Revolving credit facilities as of March 31, 2018 are as follows:

Description	Interest Rate	Principal
Revolving Credit Facility A	3.50%	$	58,092
Revolving Credit Facility B	3.95%		60,811
Revolving Credit Facility C	3.00%		60,199
Other Revolving Credit Facilities	4.20%		19,748
		$	198,850

Borrowing under Revolving Credit Facilities A, B, and C are up to a maximum of €50,000 (approximately $61,600). These revolving credit facilities mature during the three months ended June 30, 2018. The Other Revolving Credit Facilities were used by Genasys to fund local tax payments and mature during the three months ended June 30, 2018.

14

(3) Term Loans as of March 31, 2018 are as follows:

Description	Due Date	Interest Rate	Principal
Term Loan A	October 20, 2018	4.80%	$	12,681
Term Loan B	May 27, 2019	Variable		18,549
Term Loan C	June 20, 2019	4.29%		39,951
Term Loan D	July 12, 2020	Variable		48,302
			$	119,483

Term Loan A is an unsecured 4.80% fixed rate loan due in October 2018 issued to fund the working capital needs of Genasys. There is a prepayment penalty of 3% of the outstanding balance. Principal and interest payments are payable on the 20^th of each month.

Term Loan B is an unsecured variable rate loan due in May 2019 issued to fund the working capital needs of Genasys. The interest rate is Euribor +3.5%. There are no prepayment penalties. Principal and interest payments are payable on the 27^th of each month.

Term Loan C is an unsecured fixed rate loan due in June 2019 issued to fund the working capital needs of Genasys. There is no prepayment penalty. Principal and interest payments are due on the 20^th of each month.

Term Loan D is an unsecured variable rate loan due in July 2020 issued to fund the working capital needs of Genasys. There is a prepayment penalty of 0.5% of the outstanding balance. The interest rate is fixed at 2.44% until July 2018 at which point the interest rate becomes Euribor +2.44%. Principal and interest payments are due on the 12^th of each month.

The following is a schedule of future annual payments as of March 31, 2018:

April 2018-March 2019	$	896,317
April 2019-March 2020		173,035
April 2020-March 2021		48,796
April 2021-March 2022		47,400
April 2022-March 2023		-
Thereafter		-
Total	$	1,165,548

The Company has pledged $428,425 of cash as collateral against debt. This restricted cash amount is included in restricted cash and long-term restricted cash as of March 31, 2018.

The Company recorded $9,815 in interest expense for the three months and six months ended March 31, 2018 in the condensed consolidated statements of income in connection with the above referenced debt.

12. COMMITMENTS AND CONTINGENCIES

Litigation

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

Bonus Plan

The Company has incentive bonus plans for fiscal year 2018 designed to motivate its key employees to achieve the Company’s financial objectives. All of the Company’s key employees are entitled to participate in the incentive plans. Target Bonus Amounts (“Target”) vary based on a percentage of the employee’s base salary which range from 25% to 75% of base salary and a bonus payment may be made at three levels, including at 50% of Target, at 100% of Target and at 200% of Target, depending upon the achievement by the Company of specified performance goals. Performance targets include certain fiscal 2018 metrics, including product bookings, net revenues, operating income and operating cash flow. Included in such calculation is the cost of the incentive plan. During the six months ended March 31, 2018 and 2017, the Company accrued $738,543 and $379,080, respectively, for bonuses and related payroll tax expenses in connection with the bonus plans.

Acquisition Escrow Liability

In connection with the acquisition of Genasys the Company recorded an escrow liability of $185,250, as described in Note 4.  This liability is based on a working capital target and may be payable to the former shareholders of Genasys.  The Company has not completed its final evaluation of this measurement as of March 31, 2018.  The Company expects this analysis to be completed by June 30, 2018.    

13. SHARE-BASED COMPENSATION

Equity Incentive Plans

At March 31, 2018, the Company had two equity incentive plans. The 2005 Equity Incentive Plan (“2005 Equity Plan”) was terminated with respect to new grants in March 2015, but remains in effect for grants issued prior to that time. The Amended and Restated 2015 Equity Incentive Plan (“2015 Equity Plan”) was approved by the Company’s Board of Directors on December 6, 2016 and by the Company’s stockholders on March 14, 2017. The 2015 Equity Plan authorizes for issuance as stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards, an aggregate of 5,000,000 new shares of common stock to employees, directors, advisors or consultants. At March 31, 2018, there were options outstanding covering 2,193,502 and 2,279,315 shares of common stock under the 2005 Equity Plan and 2015 Equity Plan, respectively.

15

Stock Option Activity

The following table summarizes information about stock option activity during the six months ended March 31, 2018:

	Number			Weighted Average
	of Shares			Exercise Price
Outstanding October 1, 2017		4,663,502		$	2.16
Granted		3,500		$	2.21
Forfeited/expired		(83,333	)	$	2.84
Exercised		(110,852	)	$	1.68
Outstanding March 31, 2018		4,472,817		$	2.15
Exercisable March 31, 2018		3,298,533		$	2.23

Options outstanding are exercisable at prices ranging from $0.93 to $3.17 and expire over the period from 2018 to 2024 with an average life of 3.0 years. The aggregate intrinsic value of options outstanding and exercisable at March 31, 2018 was $1,242,236 and $990,806, respectively.

During the six months ended March 31, 2017, the Company incurred non-cash share-based compensation expense of $307,324 resulting from the modification of stock options in accordance with a Separation Agreement and General Release related to the June 30, 2016 departure of the Company’s prior chief executive officer (“CEO”). As per the agreement, all unvested options became fully vested on December 31, 2016 and shall remain exercisable for a period of 24 months following the December 31, 2016 separation date as defined in the agreement. The expense is measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before its terms are modified as per ASC 718-20-35.

Performance-Based Stock Options

On August 1, 2016, the Company awarded a performance-based stock option (PVO) to purchase 750,000 shares of the Company’s common stock to a key executive, with a contractual term of seven years. Vesting is based upon the achievement of certain performance criteria for each of fiscal 2019 and 2020 (375,000 shares for each year) including minimum free cash flow margin and net revenue targets at four different target levels for each of the years. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial targets.

The Company has made the assumption that the lowest performance target level for each of the years will be met, and therefore 187,500 shares of the PVO are assumed to vest. The weighted average grant date fair value for the PVO was $0.81 per share, which was estimated on the date of grant using the Black-Scholes option pricing model. Non-cash share-based compensation expense related to this award is recognized on a straight-line basis over the requisite service periods. The Company will continue to review these targets each quarter and will adjust the expected outcome as needed, recognizing compensation expense cumulatively in such period for the difference in expense.

Restricted Stock Units

During the quarter ended December 31, 2016, the Board of Directors approved the grant of 25,000 restricted stock units (“RSUs”) to each of the Company’s non-employee directors, subject to stockholder approval of the Amended and Restated 2015 Equity Incentive Plan at the 2017 Annual Meeting of Stockholders. These RSUs were granted as replacements for 20,000 stock options that would have been granted on the date of the 2016 Annual Meeting of Stockholders and vested on the first anniversary of the 2016 Annual Meeting of Stockholders, which was May 17, 2017. As a result of the stockholders approval of the Amended and Restated 2015 Equity Incentive Plan at the 2017 Annual Meeting of Stockholders on March 14, 2017, the RSUs previously granted were made effective at a market value of $197,500 and were expensed on a straight line basis through the May 17, 2017 vest date.

On March 14, 2017, the Board of Directors approved an additional grant of 25,000 RSUs to each of the Company’s non-employee directors that will vest on the first anniversary of the grant date. These were also issued at a market value of $197,500, which will be expensed on a straight line basis through the March 14, 2018 vest date.

On March 20, 2018, the Board of Directors approved an additional grant of 25,000 RSUs to each of the Company’s non-employee directors that will vest on the first anniversary of the grant date. These were issued at a market value of $278,750, which will be expensed on a straight line basis through the March 20, 2019 vest date. Also during the quarter, 93,330 RSUs were granted to employees that will vest over three years on the anniversary date of the grant. These were issued at a market value of $210,176, which will be expensed on a straight line basis over the three year life of the grants.

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Share-Based Compensation

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

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018		2017
Cost of revenues	$	5,047	$	5,874	$	11,256	$	11,751
Selling, general and administrative		120,133		148,600		229,455		584,097
Research and development		20,609		22,928		43,539		46,303
Total	$	145,789	$	177,402	$	284,250	$	642,151

The employee stock options granted in the six months ended March 31, 2018 and 2017 had a weighted-average estimated fair value of $0.89 per share and $0.71 per share, respectively, using the Black-Scholes option pricing model with the following weighted-average assumptions (annualized percentages):

	Six months ended
	March 31,
	2018	2017
Volatility	45.4%	47.5%	-	53.7%
Risk-free interest rate	2.2%	1.7%	-	2.0%
Forfeiture rate	10.0%		10.0%
Dividend yield	0.0%		0.0%
Expected life in years	4.6	3.8	-	4.6

The Company did not declare a dividend for the six-month periods ended March 31, 2018 and 2017. Expected volatility is based on the historical volatility of the Company’s common stock over the period commensurate with the expected life of the options. The risk-free interest rate is based on rates published by the Federal Reserve Board. The expected life is based on observed and expected time to post-vesting exercise. The expected forfeiture rate is based on past experience and employee retention data. Forfeitures are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from those estimates or if the Company updates its estimated forfeiture rate. Such amounts will be recorded as a cumulative adjustment in the period in which the estimate is changed.

As of March 31, 2018, there was approximately $900,000 of total unrecognized compensation cost related to non-vested share-based employee compensation arrangements. The cost is expected to be recognized over a weighted-average period of 1.9 years.

14. STOCKHOLDERS’ EQUITY

Summary

The following table summarizes changes in the components of stockholders’ equity during the six months ended March 31, 2018:

										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in		Accumulated			Comprehensive			Stockholders'
	Shares		Amount		Capital		Deficit			Loss			Equity
Balances, September 30, 2017		32,158,436	$	322	$	87,956,839	$	(52,771,853	)	$	(1,269	)	$	35,184,039
Share-based compensation expense		-		-		284,250		-			-			284,250
Issuance of common stock upon exercise of stock options, net		110,852		-		185,718								185,718
Issuance of common stock upon vesting of restricted stock units		125,000		-		-		-			-			-
Other comprehensive loss		-		-		-		-			(12,513	)		(12,513	)
Net loss		-		-		-		(1,222,344	)					(1,222,344	)
Balances, March 31, 2018		32,394,288	$	322	$	88,426,807	$	(53,994,197	)	$	(13,782	)	$	34,419,150

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Share Buyback Program

The Board of Directors approved a share buyback program in 2015 under which the Company was authorized to repurchase up to $4 million of its outstanding common shares. There were no shares repurchased during the six-month periods ended March 31, 2018 and 2017 respectively. At March 31, 2018, all repurchased shares were retired. In December 2017, the Board of Directors extended the program through December 31, 2018. At March 31, 2018, $3.9 million is available for share repurchase under this program.

Dividends

There were no dividends declared in the six months ended March 31, 2018 and 2017.

15. NET LOSS PER SHARE

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

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018			2017
Numerator:
Net income (loss)	$	460,908	$	298,350	$	(1,222,344	)	$	(514,329	)
Denominator:
Weighted average common shares outstanding - basic and diluted		32,275,647		31,800,103		32,212,286			31,800,103
Assumed exercise of dilutive options and warrants		1,023,559		63,799		-			-
Weighted average dilutive shares outstanding		33,299,206		31,863,902		32,212,286			31,800,103
Basic income (loss) per common share - basic and diluted	$	0.01	$	0.01	$	(0.04	)	$	(0.02	)
Diluted income (loss) per common share	$	0.01	$	0.01	$	(0.04	)	$	(0.02	)
Potentially dilutive securities outstanding at period end excluded from the diluted computation as the inclusion would have been antidilutive:
Options		1,766,250		3,061,836		2,706,567			2,989,836
Restricted stock units		218,330		250,000		218,330			250,000
Total		1,984,580		3,311,836		2,924,897			3,239,836

16. 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 solutions for emergency warning and workforce management. The Company operates in two business segments: Hardware and Software and its principle markets are North and South America, Europe, Middle East and Asia. As reviewed by the Company’s chief operating decision maker, the Company evaluates the performance of each segment based on sales and operating income. Cash and cash equivalents, marketable securities, accounts receivable, inventory, property and equipment, deferred tax assets, goodwill and intangible assets are primary assets identified by segment. The accounting policies for segment reporting are the same for the Company as a whole and transactions between the two operating segments are not material.

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The following table presents the Company’s segment disclosures:

	Three Months Ended			Six Months Ended
	March 31, 2018			March 31, 2018
Revenues from external customers
LRAD	$	7,453,794		$	15,082,361
Genasys		414,654			414,654
	$	7,868,448		$	15,497,015
Intercompany revenues
LRAD	$	-		$	-
Genasys		89,818			89,818
	$	89,818		$	89,818
Segment Operating Income
LRAD	$	579,498		$	1,570,604
Genasys		24,656			24,656
	$	604,154		$	1,595,260
Other expenses:
Depreciation and amortization expense
LRAD	$	(64,660	)	$	(124,765	)
Genasys		(69,044	)		(69,044	)
	$	(133,704	)	$	(193,809	)
Interest expense
LRAD	$	-		$	-
Genasys		(9,815	)		(9,815	)
	$	(9,815	)	$	(9,815	)
Income tax expense
LRAD	$	(158,451	)	$	(2,867,339	)
Genasys		-			-
	$	(158,451	)	$	(2,867,339	)

	March 31, 2018		September 30, 2017
Long-lived assets:
LRAD	$	527,872	$	565,292
Genasys		4,393,129		-
Total	$	4,921,001	$	565,292
Total Assets
LRAD	$	35,471,343	$	38,857,800
Genasys		5,418,144		-
Total	$	40,889,487	$	38,857,800

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17. MAJOR CUSTOMERS

For the three months ended March 31, 2018, revenues from three customers accounted for 40%, 15% and 14% of total revenues, and for the six months ended March 31, 2018 revenues from two customers accounted for 33% and 16% of total revenues, with no other single customer accounting for more than 10% of revenues. At March 31, 2018, accounts receivable from one customer accounted for 56% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

For the three months ended March 31, 2017, revenues from two customers accounted for 23% and 11% of total revenues, and for the six months ended March 31, 2017 revenues from two customers accounted for 15% and 10% of total revenues, with no other single customer accounting for more than 10% of revenues. At March 31, 2017, accounts receivable from three customers accounted for 41%, 24% and 14% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

The following table summarizes revenues by geographic region. Revenues are attributed to countries based on customer’s delivery location.

	Three months ended March 31,				Six months ended March 31,
	2018		2017		2018		2017
Americas	$	5,051,072	$	2,099,151	$	11,104,110	$	3,721,509
Asia Pacific		2,255,856		2,923,825		3,277,762		3,908,425
Europe, Middle East and Africa		561,520		719,415		1,115,143		1,053,792
Total Revenues	$	7,868,448	$	5,742,391	$	15,497,015	$	8,683,726

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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, 2017.

Forward Looking Statements

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

Overview

Our Company is a leading innovator and manufacturer of acoustic communication systems that control sound from 30° - 360° over short and long distances. By broadcasting audible voice messages and tones with exceptional clarity and only where needed, we offer novel sound applications that conventional bullhorns, loudspeakers, and public address and emergency warning systems cannot achieve. We have developed two LRAD^® product lines using our proprietary technologies:

• Acoustic Hailing Devices (“AHDs”), which project audible broadcasts with exceptional intelligibility in a 30° beam from close range out to 5,500 meters, and;

• ONE VOICE^® Mass Notification Systems(“MN systems”), which project 60° - 360° audible broadcasts with industry-leading vocal intelligibility from close range to over 14 square kilometers from a single installation.

LRAD systems are a technological breakthrough in broadcasting audible, highly intelligible voice messages and tones over long distances and high ambient noise using minimal power. Our AHDs meet stringent military requirements and are packaged in several form factors, from portable, hand held units to permanently installed, remotely operated systems. Through the use of powerful voice commands, prerecorded messages in multiple languages, and warning tones, our AHDs are designed to create large safety zones while determining the intent and influencing the behavior of security threats. We continue to enhance our acoustic communication technologies and product lines to provide a complete range of systems and accessories, including our recently patented XL driver technology, which generates higher audio output in a smaller and lighter form factor, is being incorporated into our AHD and ONE VOICE products.

Building on the success of our AHDs, we launched our multidirectional product line. Unlike most siren-based mass notification systems on the market, our ONE VOICE systems broadcast both emergency warning sirens and highly intelligible voice messages with uniform 60° - 360° coverage over local and wide areas. We believe our ability to shape the broadcast coverage area, our industry-leading speech intelligibility, and our multiple system activation and control options, make us more competitive in the large and growing mass notification market. 

Our products are designed to meet a broad range of diverse applications including emergency warning and mass notification, fixed and mobile military deployments, maritime, critical infrastructure, perimeter, commercial, border, and homeland security, law enforcement, emergency responder and fire rescue communications, asset protection, and wildlife preservation and control. By selling our industry-leading AHDs and advanced ONE VOICE MN systems into over 70 countries, we have created a new worldwide market and a recognized global brand. We continue to develop new acoustic innovations and believe we have established a significant competitive advantage in our principal markets. 

Business developments in the fiscal quarter ended March 31, 2018:

● Received $895,000 in follow-on AHD orders for public safety in the Asia Pacific region.

● Announced over $1.0 million in AHD orders for defense, public safety, and off-shore security from Southeast Asia.

● Acquired Genasys Holding S.L., a location-based mass messaging and mobile alert solutions provider for emergency warning and workforce management.

● Received a $1.0 million AHD order from an international defense department.

● Announced $1.0 million in orders for AHDs, accessories, and spare parts from the U.S. Military and U.S. State Department.

21

On January 18, 2018, the Company completed its acquisition of Genasys Holdings, S.L. and its subsidiaries (“Genasys”) for approximately $3.0 million (€2.4 million) paid or payable in cash and the assumption of approximately $1.5 million (€1.2 million) of debt. Genasys, headquartered in Madrid, Spain, is a leading software provider of advanced, location-based mass messaging solutions for emergency warning systems and workforce management. Genasys had sales of approximately $2.1 million (€1.9 million) for its year ended December 31, 2017 and has approximately 16 employees based primarily in Spain.

The Company believes the combination of Genasys’ mass messaging solutions and software development capabilities will enable the Company to enhance existing product offerings through integrated mass messaging solutions as well as provide growth opportunities in new markets. The results of Genasys’ operations were included in the Company’s consolidated financial statements beginning January 18, 2018.

Revenues in the second fiscal quarter ended March 31, 2018, were $7.9 million, an increase from $5.7 million in the second fiscal quarter of 2017. The increase in revenues was driven by a significant increase in AHD revenue and the addition of Genasys in 2018, offset by a decrease in mass notification revenues. AHD revenues increased $3,515,640, or 97%, and Genasys contributed $414,654 in revenue, however, mass notification revenue decreased $1,804,237, or 85%, compared to the second fiscal quarter of 2017. Based on the timing of budget cycles, as well as financial issues and military conflict in certain areas of the world, delays in awarding contracts often occur, resulting in uneven quarterly revenues. Gross profit increased compared to the same quarter in the prior year as a result of higher sales and higher fixed overhead absorption. Operating expenses increased 37.4% from $2.5 million to $3.4 million in the quarter ended March 31, 2018, primarily due to the addition of Genasys operating expenses, acquisition related expenses, increased payroll related expenses for additional engineering and sales personnel, higher incentive expense accrual based on the Company’s expectation for meeting current year financial goals, travel and related expenses, and computer related expenses. The second quarter of fiscal 2018 results, reflect a $158,000 income tax expense which is a non-cash charge that reduces the balance of the deferred tax asset. We reported net income of $460,908 for the quarter, or $0.01 per share, compared to net income of $298,350, or $0.01 per share for the same quarter in the prior year.

Overall Business Outlook

Our product line-up continues to gain worldwide awareness and recognition through media exposure, trade show participations, product demonstrations and word of mouth as a result of positive responses and increased acceptance of our products. We believe we have a solid global brand, technology and product foundation with our AHD and MN systems product lines, which we have expanded over the years to service new markets and customers for greater business growth.  We believe that we have strong market opportunities for our directional and multidirectional product offerings within the mass notification, defense, law enforcement, fire rescue, public safety, maritime, homeland security, critical infrastructure security, asset protection, and wildlife control and protection business sectors. We intend to continue expanding our international mass notification business, particularly in the Middle East, Europe and Asia where we believe there are greater market opportunities for our multidirectional products. Our selling network has expanded through the addition of sales consultants as well as continuing to improve and increase our relationships with key integrators and sales representatives within the United States and in a number of worldwide locations. However, we may continue to face challenges in fiscal 2018 due to continuing economic and geopolitical conditions in some international regions. We anticipate that the new U.S. government administration will support U.S. military spending, which we believe could benefit us, although there is uncertainty as to priorities and timing. We continue to pursue large business opportunities, but it is difficult to anticipate how long it will take to close these opportunities, or if they will ever ultimately come to fruition. It is also difficult to determine whether our multidirectional product will be accepted as a viable solution in the mass notification market, which includes a number of large, well-known competitors.

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, 2017. The impact and any associated risks related to these policies on our business operations is discussed below and throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results.

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

22

Comparison of Results of Operations for the Three Months Ended March 31, 2018 and 2017

Revenues

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

	Three months ended
	March 31, 2018					March 31, 2017
			% of Total					% of Total			Fav(Unfav)
	Amount		Revenue			Amount		Revenue			Amount			%
Revenues:
Product sales	$	7,125,258		90.6	%	$	5,471,613		95.3	%	$	1,653,645			30.2	%
Contract and other		743,190		9.4	%		270,778		4.7	%		472,412			174.5	%
Total revenues		7,868,448		100.0	%		5,742,391		100.0	%		2,126,057			37.0	%
Cost of revenues		3,832,468		48.7	%		2,808,546		48.9	%		(1,023,922	)		(36.5	%)
Gross profit		4,035,980		51.3	%		2,933,845		51.1	%		1,102,135			37.6	%
Operating Expenses:
Selling, general and administrative		2,517,891		32.0	%		1,893,045		33.0	%		(624,846	)		(33.0	%)
Research and development		913,935		11.6	%		605,239		10.5	%		(308,696	)		(51.0	%)
Total operating expenses		3,431,826		43.6	%		2,498,284		43.5	%		(933,542	)		(37.4	%)
Income from operations		604,154		7.7	%		435,561		7.6	%		168,593			38.7	%
Other Income		15,205		0.2	%		32,074		0.6	%		(16,869	)		(52.6	%)
Income before income taxes		619,359		7.9	%		467,635		8.2	%		151,724			32.4	%
Income tax expense		158,451		2.0	%		169,285		2.9	%		10,834			6.4	%
Net income	$	460,908		5.9	%	$	298,350		5.2	%	$	162,558			54.5	%

Revenues increased in the current quarter compared to the prior year due to the larger backlog at December 31, 2017 compared to December 31, 2016 and the addition of $414,654 of Genasys sales in the 2018 fiscal quarter. Sales improved in the current quarter for the AHD product line (up $3,515,640 or 97%) but were lower for the MN systems product line (down $1,804,237, or 85%) compared to the prior year quarter. The receipt of orders will often be uneven due to the timing of approvals or budgets. At March 31, 2018, we had aggregate deferred revenue of $1,028,497 for prepayments from customers in advance of product shipment and software support agreements.

Gross Profit

The increase in gross profit in the current quarter compared to the prior year was primarily due to the higher level of sales, partially offset by an increase in manufacturing overhead expenses to support the increased sales.

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $624,846 over the prior year quarter. This reflects increases of $285,200 from Genasys operations, $169,199 for salaries/benefits/consultants, $130,137 higher professional services (largely acquisition related), $124,835 for information technology related expenses and $102,362 in travel and related expenses. This was offset by a $221,829 decrease in commission expense.

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the three-months ended March 31, 2018 and 2017 of $120,133 and $148,600, respectively.

23

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 increased $308,696 compared to the prior year primarily due to $159,479 for salaries and benefits due to increased engineering staff compared to the prior year quarter and $142,898 for increased product development and product testing.

Included in research and development expenses for the three months ended March 31, 2018 and 2017 was $20,609 and $22,928 of non-cash share-based compensation costs, respectively.

Research and development costs vary period to period due to the timing of projects, and the timing and extent of the use of outside consulting, design and development firms. We continually improve our product offerings and we expect to continue to expand our product line in 2018 with new products, customizations and enhancements. Based on current plans, we may expend additional resources on research and development in the current year compared to the prior year.

Net Income

The $162,558 increase in net income in the fiscal year 2018 second quarter was primarily due to the higher gross profits realized from increased sales in the 2018 quarter and a lower effective tax rate in 2018. Non-cash income tax expense of $158,451 and $169,285 was recognized in the three months ended March 31, 2018 and 2017, respectively.

Comparison of Results of Operations for the Six Months Ended March 31, 2018 and 2017

Revenues

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

	Six months ended
	March 31, 2018						March 31, 2017
				% of Total						% of Total			Fav(Unfav)
	Amount			Revenues			Amount			Revenues			Amount			%
Revenues:
Product sales	$	14,461,283			93.3	%	$	8,173,572			94.1	%	$	6,287,711			76.9	%
Contract and other		1,035,732			6.7	%		510,154			5.9	%		525,578			103.0	%
Total revenues		15,497,015			100.0	%		8,683,726			100.0	%		6,813,289			78.5	%
Cost of revenues		7,503,494			48.4	%		4,525,370			52.1	%		(2,978,124	)		(65.8	%)
Gross profit		7,993,521			51.6	%		4,158,356			47.9	%		3,835,165			92.2	%
Operating expenses:
Selling, general and administrative		4,706,289			30.4	%		3,859,480			44.5	%		(846,809	)		(21.9	%)
Research and development		1,691,972			10.9	%		1,192,650			13.6	%		(499,322	)		(41.9	%)
Total operating expenses		6,398,261			41.3	%		5,052,130			58.1	%		(1,346,131	)		(26.6	%)
Income (loss) from operations		1,595,260			10.4	%		(893,774	)		(10.3	%)		2,489,034			278.5	%
Other income		49,735			0.3	%		62,202			0.7	%		(12,467	)		(20.0	%)
Income (loss) before income taxes		1,644,995			10.6	%		(831,572	)		(9.6	%)		2,476,567			297.8	%
Income tax expense (benefit)		2,867,339			18.5	%		(317,243	)		(3.7	%)		(3,184,582	)		(1003.8	%)
Net loss	$	(1,222,344	)		(7.9	%)	$	(514,329	)		(5.9	%)	$	(708,015	)		(137.7	%)

24

Revenues increased 79% for the year-to-date period ended March 31, 2018 compared to the prior year, due to the larger backlog at September 30, 2017 compared to September 30, 2016 and the addition of $414,654 of Genasys sales in the first six months of fiscal 2018. Sales increased in the current year six months for both AHD (up $6,103,098 or 104%) and MN systems (up $295,659, or 10%) product lines compared to the prior year. The receipt of orders will often be uneven due to the timing of approvals or budgets. At March 31, 2018, we had aggregate deferred revenue of $1,028,497 for prepayments from customers in advance of product shipment and software support agreements.

Gross Profit

The increase in gross profit in the six months ended March 31, 2018 was primarily due to increased sales volume and better product mix, partially offset by an increase in manufacturing overhead expenses, primarily due to increased freight, salaries and benefits, computer related expenses and depreciation expense.

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $846,809 in the six months ended March 31, 2018 compared to the prior year period. As a percentage of sales, however, selling, general and administrative expense decreased to 30.4% for the six months ended March 31, 2018 compared to 44.5% in the prior year period. The increase in selling, general and administrative expenses is primarily due to $334,073 for information technology related expenses, $250,170 in higher incentive compensation, acquisition related costs of $196,330, $162,246 in higher travel and related expenses and $285,200 of Genasys expenses for selling and administrative purposes. This was partially offset by $215,144 in lower commissions and a $354,642 decrease in non-cash share-based compensation expense, primarily due to non-recurring expense for separation costs related to the departure of the Company’s prior chief executive officer.

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the six months ended March 31, 2018 and 2017 of $229,455 and $584,097, 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 increased $499,322 compared to the prior year, primarily due to $278,494 for salaries and benefits for additional engineers hired since March 31, 2017 and $218,467 for product development and product testing activities.

Included in research and development expenses for the six months ended March 31, 2018 and 2017 was $43,539 and $46,303 of non-cash share-based compensation costs, respectively.

Research and development costs vary period to period due to the timing of projects, and the timing and extent of the use of outside consulting, design and development firms. We continually improve our product offerings and we expect to continue to expand our product line in 2018 with new products, customizations and enhancements. Based on current plans, we may expend additional resources on research and development in the current year compared to the prior year.

Net Loss

The increase in net loss compared to the prior year was due to income tax expense for the six months ended March 31, 2018, related to a reduction to the deferred tax asset resulting from the change to the U.S. Corporate income tax rates effective for the calendar year ended December 31, 2018. This was partially offset by the larger revenue and gross margin for the six months ended March 31, 2018 compared to prior year period.

Liquidity and Capital Resources

Cash and cash equivalents at March 31, 2018 was $12,732,882, compared to $12,764,421 at September 30, 2017 primarily as a result of cash generated from operations offset by cash used to complete the acquisition of Genasys. Other than cash and expected future cash flows from operating activities in subsequent periods, we have no unused sources of liquidity at this time.

25

Principal factors that could affect our liquidity include:

• ability to meet sales projections;

• government spending levels;

• introduction of competing technologies;

• product mix and effect on margins;

• ability to reduce current inventory levels;

• product acceptance in new markets;

• value of shares repurchased; and

• value of dividends declared.

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

• volatility in the capital markets; and

• 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.

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:

	Six Months Ended
	March 31,
	2018			2017
Cash provided by (used in):
Operating activities	$	2,899,336		$	1,057,567
Investing activities		(2,337,170	)		39,534
Financing activities		(165,280	)		-

Operating Activities

Net loss of $1,222,344 for the six months ended March 31, 2018 was decreased by $3,443,194 of non-cash items that included a reduction to deferred income taxes primarily resulting from enactment of the “Act”, share-based compensation, depreciation and amortization, warranty provision, and inventory obsolescence. Cash provided by operating activities in the current year reflected an increase in accounts payable of $502,933 due to the timing of payments, decreases in prepaid expenses and other of $174,589, and a decrease in accounts receivable of $389,434. Cash used in operating activities included an increase in inventory of $271,543, an increase in other assets of $60,614, and a decrease in accrued and other liabilities of $56,313.

Net loss of $514,329 for the six months ended March 31, 2017 was decreased by $317,625 of non-cash items that included deferred income taxes, share-based compensation, depreciation and amortization, warranty provision, and inventory obsolescence. Cash provided by operating activities in the current year reflected an increase in accounts payable of $707,549 due to the timing of payments, an increase in accrued and other liabilities of $521,375 primarily for accrued bonuses and commissions, a decrease in accounts receivable of $168,183, and a decrease in other assets of $133,188. Cash used in operating activities included an increase in inventory of $174,720 and an increase in prepaid expenses and other of $101,304.

We had accounts receivable of $5,718,396 at March 31, 2018, compared to $5,681,882 at September 30, 2017. The level of trade accounts receivable at March 31, 2018 represented approximately 65 days of revenues compared to 70 days of revenues at September 30, 2017 due to the timing of shipments and related collections in this quarter compared to the fourth fiscal quarter of 2017. Terms with individual customers vary greatly. We typically require thirty-day terms from our customers if credit is approved. Our receivables can vary dramatically due to overall sales volume, quarterly variations in sales, timing of shipments to and receipts from large customers, payment terms, and the timing of contract payments.

At March 31, 2018 and September 30, 2017, our working capital was $22,966,199 and $25,412,106 respectively. The decrease in working capital was primarily due to the purchase price paid and debt assumed in the acquisition of Genasys.

26

Investing Activities

Our net cash used in investing activities was $2,337,170 for the six months ended March 31, 2018, compared to cash provided by investing activities of $39,534 for the six months ended March 31, 2017. The 2018 amount includes $2,246,545 for the acquisition of Genasys. See the Overview section in this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding the Genasys acquisition. We also use cash for the purchase of tooling and computer equipment and software. Cash used in investing activities for tooling, computer equipment and software was $90,135 and $57,473 for the six months ended March 31,2018 and 2017, respectively. In the six months ended March 31, 2018, we increased our holdings of short and long-term marketable securities by $490, compared to sales of $101,293 in the six months ended March 31, 2017. We anticipate some additional expenditures for tooling and equipment during the balance of fiscal year 2018.

Financing Activities

In the six months ended March 31, 2018, we used $165,615 for financing activities, compared to no cash used, nor proceeds from, financing activities for the six months ended March 31, 2017. The first six months of 2018 included net payments of $414,477 to pay down debt assumed in the Genasys acquisition. Proceeds from the exercise of stock options were $185,718 and zero for the six months ended March 31, 2018 and 2017, respectively. Total debt at March 31, 2018 was $1,165,548.

The Board of Directors approved a share buyback program in 2013 under which the Company was authorized to repurchase up to $4 million of its outstanding common shares. There were no shares repurchased during the quarters ended March 31, 2018 and 2017, respectively. At March 31, 2018, all repurchased shares were retired. In December 2017, the Board of Directors extended the program through December 31, 2018. At March 31, 2018, $3.9 million is available for share repurchase under this program.

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, 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.

The Company has not filed an amendment of the Current Report on Form 8-K that was filed on January 22, 2018 reporting the acquisition of Genasys. The Company has been unable to file the financial statements required thereby because Genasys’ historical financial statements have not been prepared using International Financial Reporting Standards, nor U.S. generally accepted accounting principles, nor were they audited in accordance with U.S auditing standards as required by SEC regulations. Accordingly, the Company is not deemed a timely filer. An audit in accordance with United States generally accepted auditing practices will be conducted and the Company intends to file the required amended Current Report on Form 8-K to include the required pre-acquisition financial statement of Genasys as well as the required pro forma financial information.

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) and 15d-15(e) promulgated under the Securities Exchange Act of 1934. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2018.

27

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our fiscal quarter ended March 31, 2018, 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.

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

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.

None.

Item 6. Exhibits.  

10.1	Stock Purchase Agreement, dated January 18, 2018, by and among LRAD Corporation, Genasys Holding S.L., the stockholders of Genasys Holdings S.L. and the representative of the stockholders. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on January 22, 2018.
31.1	Certification of Richard S. Danforth, Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Dennis D. Klahn, Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Richard S. Danforth, Principal Executive Officer and Dennis D. Klahn, Principal Financial Officer.*
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

* Filed concurrently herewith.

28

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.

	LRAD CORPORATION
Date: May 18, 2018	By:	/s/    DENNIS D. KLAHN
		Dennis D. Klahn, Chief Financial Officer
		(Principal Financial Officer)

29

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Richard S. Danforth, certify that:

1. I have reviewed this quarterly report on Form 10-Q of LRAD Corporation;

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:

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;

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;

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

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):

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

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: May 18, 2018

/s/ Richard S. Danforth

Richard S. Danforth

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Dennis D. Klahn, certify that:

1. I have reviewed this quarterly report on Form 10-Q of LRAD Corporation;

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:

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;

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;

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

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):

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

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: May 18, 2018

/s/ Dennis D. Klahn

Dennis D. Klahn

(Principal Financial Officer)

EX-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 LRAD Corporation (the “Company”), that, to his or her knowledge, the Quarterly Report of the Company on Form 10-Q for the quarter ended March 31, 2018 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: May 18, 2018

/s/ Richard S. Danforth

Richard S. Danforth

President and Chief Executive Officer

(Principal Executive Officer)

/s/ Dennis D. Klahn

Dennis D. Klahn

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.

XML

Document And Entity Information - shares	6 Months Ended
	Mar. 31, 2018	May 11, 2018
Document Information [Line Items]
Entity Registrant Name	LRAD Corp
Entity Central Index Key	0000924383
Trading Symbol	lrad
Current Fiscal Year End Date	--09-30
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		32,394,288
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2018	Sep. 30, 2017
Current assets:
Cash and cash equivalents	$ 12,732,882	$ 12,764,421
Short-term marketable securities	4,063,109	4,359,542
Restricted cash	363,745	39,466
Accounts receivable, net	5,718,396	5,681,882
Inventories, net	5,443,342	5,257,234
Prepaid expenses and other	845,831	983,322
Total current assets	29,167,305	29,085,867
Long-term marketable securities	991,178	711,124
Deferred tax assets, net	5,463,661	8,331,000
Long-term restricted cash	104,146
Property and equipment, net	483,467	509,603
Goodwill	2,603,687
Intangible assets, net	1,833,847	55,689
Other assets	242,196	164,517
Total assets	40,889,487	38,857,800
Current liabilities:
Accounts payable	1,890,427	1,112,366
Accrued liabilities	3,414,362	2,561,395
Notes payable, current portion	896,317
Total current liabilities	6,201,106	3,673,761
Notes payable, less current portion	269,231
Total liabilities	6,470,337	3,673,761
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.00001 par value; 5,000,000 shares authorized; none issued and outstanding	0	0
Common stock, $0.00001 par value; 50,000,000 shares authorized; 32,394,288 and 32,158,436 shares issued and outstanding, respectively	322	322
Additional paid-in capital	88,426,807	87,956,839
Accumulated deficit	(53,994,197)	(52,771,853)
Accumulated other comprehensive loss	(13,782)	(1,269)
Total stockholders' equity	34,419,150	35,184,039
Total liabilities and stockholders' equity	$ 40,889,487	$ 38,857,800

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2018	Sep. 30, 2017
Preferred stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Common stock, authorized (in shares)	50,000,000	50,000,000
Common stock, issued (in shares)	32,394,288	32,158,436
Common stock, outstanding (in shares)	32,394,288	32,158,436

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Revenues:
Revenues	$ 7,868,448	$ 5,742,391	$ 15,497,015	$ 8,683,726
Cost of revenues	3,832,468	2,808,546	7,503,494	4,525,370
Gross profit	4,035,980	2,933,845	7,993,521	4,158,356
Operating expenses:
Selling, general and administrative	2,517,891	1,893,045	4,706,289	3,859,480
Research and development	913,935	605,239	1,691,972	1,192,650
Total operating expenses	3,431,826	2,498,284	6,398,261	5,052,130
Income (loss) from operations	604,154	435,561	1,595,260	(893,774)
Other income	15,205	32,074	49,735	62,202
Income (loss) before income taxes	619,359	467,635	1,644,995	(831,572)
Income tax expense (benefit)	158,451	169,285	2,867,339	(317,243)
Net income (loss)	$ 460,908	$ 298,350	$ (1,222,344)	$ (514,329)
Net income (loss) per common share - basic and diluted (in dollars per share)	$ 0.01	$ 0.01	$ (0.04)	$ (0.02)
Weighted average common shares outstanding: - basic and diluted
Basic (in shares)	32,275,647	31,800,103	32,212,286	31,800,103
Diluted (in shares)	33,299,206	31,863,902	32,212,286	31,800,103
Product [Member]
Revenues:
Revenues	$ 7,125,258	$ 5,471,613	$ 14,461,283	$ 8,173,572
Service [Member]
Revenues:
Revenues	$ 743,190	$ 270,778	$ 1,035,732	$ 510,154

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Net income (loss)	$ 460,908	$ 298,350	$ (1,222,344)	$ (514,329)
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on marketable securities, net of tax	(8,837)	4,332	(16,868)	(1,978)
Unrealized foreign currency gain, net of tax	4,355		4,355
Comprehensive income (loss)	$ 456,426	$ 302,682	$ (1,234,857)	$ (516,307)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Operating Activities:
Net (loss)	$ (1,222,344)	$ (514,329)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	193,809	62,834
Warranty provision	12,361	111,369
Inventory obsolescence	85,435	(181,486)
Share-based compensation	284,250	642,151
Deferred income taxes	2,867,339	(317,243)
Changes in operating assets and liabilities:
Accounts receivable, net	389,434	168,183
Inventories, net	(271,543)	(174,720)
Prepaid expenses and other	174,589	(101,304)
Other assets	(60,614)	133,188
Accounts payable	502,933	707,549
Accrued and other liabilities	(56,313)	521,375
Net cash provided by operating activities	2,899,336	1,057,567
Investing Activities:
Purchases of marketable securities	(2,402,346)	(1,773,530)
Proceeds from maturities of marketable securities	2,401,856	1,874,823
Capital expenditures	(90,135)	(57,473)
Patent costs paid		(4,286)
Purchase of Genasys, net of cash and restricted cash acquired	(2,246,545)
Net cash (used in) provided by investing activities	(2,337,170)	39,534
Financing Activities:
Proceeds from exercise of stock options	185,718
Proceeds from issuance of unsecured promissory notes	63,144
Payments on unsecured promissory notes	(414,477)
Net cash used in financing activities	(165,615)
Effect of foreign exchange rate on cash	335
Net increase in cash, cash equivalents and restricted cash	396,886	1,097,101
Cash, cash equivalents and restricted cash, beginning of period	12,803,887	13,466,711
Cash, cash equivalents and restricted cash, end of period	13,200,773	14,563,812
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	12,803,887	13,466,711
Supplemental disclosures of cash flow information:
Interest paid	9,186
Noncash investing and financing activities:
Change in unrealized loss on marketable securities	(16,868)	(1,978)
Business combinations accounted for as a purchase:
Fair value of assets acquired	5,520,504
Cash paid or payable	(3,011,439)
Liabilities assumed	$ 2,509,065

XML

Note 1 - Operations

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Nature of Operations [Text Block]

1.

OPERATIONS

LRAD

®

Corporation, a Delaware corporation (the “Company”), is engaged in the design, development and commercialization of directed and multidirectional sound technologies, voice broadcast products, and location-based mass messaging solutions for emergency warning and workforce management. The principal markets for the Company’s proprietary sound reproduction technologies, voice broadcast products and mass messaging solutions are in North and South America, Europe, Middle East and Asia.

On

January 18, 2018,

the Company acquired all of the issued and outstanding shares of capital stock of Genasys Holdings, S.L. and its subsidiaries (“Genasys”), pursuant to a Stock Purchase Agreement, dated

January 18, 2018.

Genasys is a leading software provider of advanced location-based mass messaging solutions for emergency warning systems and workforce management. See Note

4

for additional information about this transaction.

XML

Note 2 - Basis of Presentation and Significant Accounting Policies

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Basis of Presentation and Significant Accounting Policies [Text Block]

2.

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

General

The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to Form

10

-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 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,

2017

included in the Company’s Annual Report on Form

10

-K, as filed with the SEC on

December 13, 2017.

The accompanying condensed consolidated balance sheet at

September 30, 2017

has been derived from the audited consolidated balance sheet at

September 30, 2017

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.

Principles of Consolidation

The Company has

four

wholly owned subsidiaries, Genasys Holding, S.L. and Genasys II Spain, S.A.U. and

two

 currently inactive subsidiaries, Genasys America de CV and LRAD International Corporation. The condensed consolidated financial statements include the accounts of these subsidiaries after elimination of intercompany transactions and accounts.

Reclassifications

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

XML

Note 3 - Recent Accounting Pronouncements

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

3.

RECENT ACCOUNTING PRONOUNCEMENTS

In

November 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update

No.

2016

-

18,

 

Statement of Cash Flows (Topic

230

), Restricted Cash 

("ASU

2016

-

18"

), which amends Topic

230

to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The provisions of this guidance are to be applied using a retrospective transition method to each period presented. ASU

2016

-

18

is effective for annual reporting periods beginning after

December 15, 2017,

and interim periods within those years, with early adoption permitted. The Company adopted ASU

2016

-

18

effective

January 1, 2018.

For the

six

months ended

March 31, 2018, 

the increase in restricted cash resulted primarily from restricted cash balances included in the assets acquired in the acquisition of Genasys, as described in Note

4.

The adoption did

not

have a material impact on the Company's consolidated financial position, results of operations and cash flows, other than the impact discussed above.

In

March 2016,

the FASB issued ASU

No.

2016

-

09,

Compensation – Stock Compensation (Topic

718

): Improvements to Employee Share-Based Payment Accounting

. This guidance changes how companies account for certain aspects of share-based payments to employees. Among other things, under the new guidance, companies will

no

longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital (“APIC”), but will instead record such items as income tax expense or benefit in the income statement, and APIC pools will be eliminated. Companies will apply this guidance prospectively. Another component of the new guidance allows companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards, whereby forfeitures can be estimated, as required today, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. The guidance was effective for the Company in the

first

quarter of fiscal

2018.

The adoption of this standard resulted in the recognition of

$1.1

million of gross deferred tax assets related to the historical excess tax benefits from stock-based compensation that was

not

previously included in deferred tax assets and a corresponding increase in the Company’s valuation allowance.

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842

)

, which issued new guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than

12

 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company in the fiscal year beginning

October 1, 2019.

Early adoption is permitted. The Company is currently evaluating the impact of this guidance, if any, on its consolidated financial statements and related disclosures.

In

May 2014,

the FASB issued ASU

No.

2014

-

09,

Revenue from Contracts with Customers

(“ASU

2014

-

09”

), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU

2014

-

09

will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective. In

July 2015,

the FASB deferred the effective date of the standard by an additional year; however, it provided companies the option to adopt

one

year earlier, commensurate with the original effective date. Accordingly, the standard will be effective for the Company in the fiscal year beginning

October 1, 2018.

The Company is currently evaluating the impact of this guidance, if any, on its consolidated financial statements and related disclosures.

XML

Note 4 - Acquisitions

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Business Combination Disclosure [Text Block]

4

.

ACQUISITIONS

On

January 18, 2018,

the Company completed its acquisition of Genasys pursuant to a Stock Purchase Agreement. Genasys, headquartered in Madrid, Spain, is a leading software provider of advanced, location-based mass messaging solutions for emergency warning systems and workforce management. Genasys has 

16

employees based primarily in Spain.

The Company believes the combination of Genasys’ mass messaging solutions and software development capabilities will enable the Company to enhance existing product offerings through integrated mass messaging solutions as well as provide growth opportunities in new markets. Genasys’ operating results were included in the Company’s consolidated financial statements beginning

January 18, 2018

and include

$415,000

in net sales and net operating income of

$25,000,

through

March 31, 2018.

The preliminary acquisition consideration consisted of the following:

Cash paid	$	2,826,189
Acquisition escrow liability		185,250
Total consideration	$	3,011,439

As of

March 31, 2018,

the acquisition consideration is subject to change upon finalization of net working capital and other adjustments. Net working capital adjustments will be settled during the

three

months ended

June 30, 2018.

The cash portion of the purchase price was funded from cash on hand. The Company incurred

$237,345

in acquisition expenses related to this transaction, through

March 31, 2018.

These expenses were recorded in selling, general, and administrative expenses in the consolidated statement of operations as follows:

$151,313

in the

second

quarter of fiscal

2018,

$45,016

in the

first

quarter of fiscal

2018

and

$41,016

in the

fourth

quarter of fiscal

2017.

Purchase Price Allocation and Other Items

The determination of the purchase price allocation to specific assets acquired and liabilities assumed is preliminary as of

March 31, 2018.

The purchase price allocation is subject to change based upon the final determination of fair value estimates of certain assets acquired and liabilities assumed. Based on the fair value estimates, the purchase price for Genasys has been allocated to individual assets acquired and liabilities assumed as follows:

Assets Acquired
Cash and restricted cash acquired	$	579,644
Accounts receivable		426,940
Fixed assets		5,712
Intangible assets		1,850,000
Goodwill		2,603,688
Other assets		54,520
Total assets acquired		5,520,504
Liabilities assumed
Accounts payable		275,653
Accrued expenses and other liabilities		315,817
Severance obligation		397,558
Debt		1,520,037
Total liabilities assumed		2,509,065
Net assets acquired	$	3,011,439

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

	Fair Value		Useful Lives (in years)
Technology	$	690,000	7
Customer relationships		660,000	7
Trade name portfolio		240,000	5
Non-compete agreements		260,000	3
	$	1,850,000

Identifiable intangible assets are amortized over their useful lives based upon a number of assumptions including the estimated period of economic benefit and utilization. The weighted average amortization period for identifiable intangible assets acquired is

6

years.

The goodwill for Genasys is attributable to combining the mass messaging solutions and software development capabilities with existing LRAD products for enhanced offerings and the skill level of the acquired workforce. The Company will continue to analyze the transaction and refine its calculations, as appropriate during the measurement period, which could affect the value of goodwill. Goodwill from the Genasys acquisition will

not

be deductible for tax purposes.

Pro Forma Information

The following table provides the unaudited pro forma results of operations for the

three

and

six

months ended

March 31, 2018

and

2017,

respectively, as if Genasys had been acquired as of the beginning of fiscal year

2017.

Pro forma results do

not

include any anticipated synergies from the combination of the companies, and accordingly, are

not

necessarily indicative of the results that would have occurred if the acquisition had occurred on the dates indicated or that

may

result in the future.

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018			2017
Net revenues	$	8,042,879	$	6,034,248	$	16,222,894		$	9,474,427
Net income		529,094		276,048		(1,081,478	)		(788,438	)
Basic and diluted earnings per share	$	0.02	$	0.01	$	(0.03	)	$	(0.02	)

The following is a reconciliation of actual net revenue and net income to pro forma net revenue and net income:

	Three months ended March 31,
	2018				2017
	Net revenues		Net income		Net revenues		Net income
LRAD actual results	$	7,453,794	$	384,516	$	5,742,391	$	298,350
Genasys actual results		589,085		89,727		291,857		79,067
Pro Forma adjustments		-		54,851		-		(101,369	)
Pro forma results	$	8,042,879	$	529,094	$	6,034,248	$	276,048

	Six months ended March 31,
	2018					2017
	Net revenues		Net income			Net revenues		Net income
LRAD actual results	$	15,082,361	$	(1,298,736	)	$	8,683,726	$	(514,329	)
Genasys actual results		1,140,533		126,844			790,701		(172,740	)
Pro Forma adjustments		-		90,414			-		(101,369	)
Pro forma results	$	16,222,894	$	(1,081,478	)	$	9,474,427	$	(788,438	)

The following table identifies the pro forma adjustments:

	Three months ended						Six months ended
	March 31,						March 31,
	2018			2017			2018			2017
Acquisition costs	$	151,313		$	-		$	196,329		$	-
Depreciation and amortization costs		(81,881	)		(163,762	)		(81,881	)		(163,762	)
Tax effect of adjustments		(14,581	)		62,393			(24,034	)		62,393
Pro forma adjustmenst	$	54,851		$	(101,369	)	$	90,414		$	(101,369	)

XML

Note 5 - Goodwill and Intangible Assets

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

5.

G

OODWILL AND INTANGIBLE ASSETS

During the

three

months ended

March 31, 2018,

the Company recorded intangible assets of

$1,850,000

and goodwill of

$2,603,687

in connection with the acquisition of Genasys, as described in Note

4.

Identifiable intangible assets are amortized over their useful lives based upon a number of assumptions including the estimated period of economic benefit and utilization. The Company will assess the impairment of identifiable amortized intangible assets when events and circumstances indicate the carrying value of the assets might

not

be recoverable.

The goodwill attributable to the acquisition of Genasys is due to combining the mass messaging solutions and software development capabilities with existing LRAD products for enhanced offerings and the skill level of the acquired workforce. The Company will continue to analyze the transaction and refine its calculations, as appropriate during the measurement period, which could affect the value of goodwill. Subsequent to the measurement period, the Company will periodically review goodwill for impairment in accordance with ASC Topic

350

“

I

ntangibles – Goodwill and Other – Testing Indefinite-Lived Assets for Impairment

”.

The Company’s intangible assets consist of the following:

	March 31, 2018							September 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Technology	$	690,000	$	(20,536	)	$	669,464	$	-	$	-		$	-
Customer relationships		660,000		(19,642	)		640,358		-		-			-
Trade name portfolio		240,000		(10,000	)		230,000		-		-			-
Non-compete agreements		260,000		(18,056	)		241,944		-		-			-
Patents		108,247		(56,166	)		52,081		108,247		(52,558	)		55,689
	$	1,958,247	$	(124,400	)	$	1,833,847	$	108,247	$	(52,558	)	$	55,689

The amortization expense for the

three

months ended

March 31, 2018

and

2017

was

$70,038

and

$1,859,

respectively. The amortization expense for the

six

months ended

March 31, 2018

and

2017

was

$71,842

and

$3,681,

respectively.

Estimated Future Amortization Expense Years Ended September 30,
2018 (April 1, 2018 through September 30, 2018)	$	166,689
2019		333,771
2020		333,448
2021		271,771
2022		246,363
Thereafter		481,805
Total estimated amortization expense	$	1,833,847

XML

Note 6 - Fair Value Measurements

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

6.

FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist principally of cash equivalents, short and long-term marketable securities, accounts receivable and accounts payable. The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. Assets and liabilities measured at fair value are categorized based on whether or

not

the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into

three

levels (with Level

3

being the lowest) defined as follows:

Level

1:

Inputs are based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level

2:

Inputs include quoted prices for similar assets or liabilities in active markets and/or quoted prices for identical or similar assets or liabilities in markets that are

not

active near the measurement date.

Level

3:

Inputs include management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The fair value of the Company’s cash equivalents and marketable securities was determined based on Level

1

and Level

2

inputs. The Company did

not

have any marketable securities in the Level

3

category as of

March 31, 2018

or

September 30, 2017.

The Company believes that the recorded values of its other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

Instruments Measured at Fair Value

The following tables present the Company’s cash equivalents and marketable securities’ costs, gross unrealized gains and losses, and fair value by major security type recorded as cash equivalents or short-term or long-term marketable securities as of

March 31, 2018

and

September 30, 2017.

	March 31, 2018
			Unrealized			Fair		Cash		Short-term		Long-term
	Cost Basis		Losses			Value		Equivalents		Securities		Securities
Level 1:
Money Market Funds	$	98,539	$	-		$	98,539	$	98,539	$	-	$	-
Level 2:
Certificates of deposit	$	936,952	$	-		$	936,952	$	-	$	437,952	$	499,000
Municipal securities		85,626		(168	)		85,459		-		85,459		-
Corporate bonds		4,049,846		(17,970	)		4,031,876		-		3,539,698		492,178
Subtotal		5,072,424		(18,138	)		5,054,287		-		4,063,109		991,178
Total	$	5,170,963	$	(18,138	)	$	5,152,826	$	98,539	$	4,063,109	$	991,178

	September 30, 2017
			Unrealized			Fair		Cash		Short-term		Long-term
	Cost Basis		Losses			Value		Equivalents		Securities		Securities
Level 1:
Money Market Funds	$	55,257	$	-		$	55,257	$	55,257	$	-	$	-
Level 2:
Certificates of deposit		2,436,647		-			2,436,647		-		1,937,647		499,000
Municipal securities		25,315		(12	)		25,303		-		25,303		-
Corporate bonds		2,609,973		(1,257	)		2,608,716		-		2,396,592		212,124
Subtotal		5,071,935		(1,269	)		5,070,666		-		4,359,542		711,124
Total	$	5,127,192	$	(1,269	)	$	5,125,923	$	55,257	$	4,359,542	$	711,124

XML

Note 7 - Inventories

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Inventory Disclosure [Text Block]

7

. INVENTORIES

Inventories consisted of the following:

	March 31,			September 30,
	2018			2017
Raw materials	$	5,135,966		$	3,784,935
Finished goods		417,587			1,742,960
Work in process		393,756			147,871
Inventories, gross		5,947,309			5,675,766
Reserve for obsolescence		(503,967	)		(418,532	)
Inventories, net	$	5,443,342		$	5,257,234

XML

Note 8 - Property and Equipment

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

8

. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	March 31,			September 30,
	2018			2017
Office furniture and equipment	$	1,296,249		$	1,093,502
Machinery and equipment		1,067,802			994,157
Leasehold improvements		76,138			76,138
Property and equipment, gross		2,440,189			2,163,797
Accumulated depreciation		(1,956,722	)		(1,654,194	)
Property and equipment, net	$	483,467		$	509,603

	Six months ended
	March 31,
	2018		2017
Depreciation expense	$	121,967	$	59,153

XML

Note 9 - Accrued Liabilities

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Current and Noncurrent Accrued Liabilities [Text Block]

9.

ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	March 31,		September 30,
	2018		2017
Payroll and related	$	1,214,039	$	1,870,579
Deferred revenue		1,028,497		268,580
Accrued contract costs		474,068		197,034
Severance		327,937		-
Acquisition escrow liability		185,250		-
Warranty reserve		169,204		179,101
Deferred rent		15,367		46,101
Total	$	3,414,362	$	2,561,395

Payroll and related

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

Deferred Revenue

Deferred revenue consists primarily of prepayments from customers in advance of product shipment.

Warranty Reserve

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

	Three months ended						Six months ended
	March 31,						March 31,
	2018			2017			2018			2017
Beginning balance	$	188,308		$	353,938		$	179,101		$	356,984
Warranty provision		-			101,673			12,361			111,369
Warranty settlements		(19,104	)		(6,470	)		(22,258	)		(19,212	)
Ending balance	$	169,204		$	449,141		$	169,204		$	449,141

Accrued contract costs

The Company has contracted with a

third

-party service provider to administer the required services under the terms of a repair and maintenance agreement with a foreign military. This payment is made in arrears for each contract year ended

March 26.

XML

Note 10 - Income Taxes

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10

. INCOME TAXES

The Tax Cuts and Jobs Act (the “Act”) was enacted on

December 22, 2017. 

The Act reduces the U.S. federal corporate tax rate from

35%

to

21%

effective

January 1, 2018. 

Subsequently, the SEC issued Staff Accounting Bulletin (“SAB”)

118,

which allows for the recording of provisional amounts related to U.S. tax reform and subsequent adjustments related to U.S. tax reform during a measurement period

not

to exceed

one

year from the enactment date.  Accordingly, the Company remeasured its deferred tax assets on a provisional basis based on the rates at which they are expected to be realized in the future, which is generally

21%,

resulting in a decrease to the Company’s net deferred tax assets of

$2,474,000

during the quarter ended

December 31, 2017.

The Company will continue to analyze certain aspects of the Act and refine its calculations as appropriate during the measurement period, which could affect the measurement of these balances. 

For the

six

months ended

March 31, 2018,

the Company recorded income tax expense of

$393,339

reflecting an effective tax rate of

25.1%

and an additional discrete tax expense of

$2,474,000

due to the remeasurement of its deferred tax assets as a result of tax reform. For the

six

months ended

March 31, 2017,

the Company recorded an income tax benefit of

$317,243

reflecting an effective tax rate of

38.1%.

  For the

six

months ended

March 31, 2018,

when compared to the same period in

2017,

the decrease in the effective tax rate was primarily attributable to the decrease in Federal statutory tax rate due to tax reform. The Company continues to maintain a partial valuation allowance against its deferred tax assets as the Company believes that the negative evidence that it will be able to recover these net deferred tax assets outweighs the positive evidence.

Accounting Standards Codification (“ASC”)

740,

Accounting for Uncertainty in Income Taxes

, requires the Company to recognize in its consolidated financial statements uncertainties in tax positions taken that

may

not

be sustained upon examination by the taxing authorities. If interest or penalties are assessed, the Company would recognize these charges as income tax expense. The Company has

not

recorded any income tax expense or benefit for uncertain tax positions.

XML

Note 11 - Debt

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

11

.

D

EBT

In connection with the acquisition of Genasys, as described in Note

4,

the Company acquired certain debts of Genasys. The carrying value of the acquired debt approximates fair value. The components of the acquired debt consisted of the following as of

March 31, 2018:

Loans with Governmental Agencies (1)	$	847,215
Revolving Credit Facilities (2)		198,850
Term Loans (3)		119,483
Total debt		1,165,548
Less current portion		(896,317	)
Total long-term debt	$	269,231

( 1 ) Loans with governmental agencies represents debt granted by ministries within Spain and the European Union for the purpose of stimulating economic development and promoting research and development. Loans with governmental agencies as of March 31, 2018 are as follows:

Agency	Due Date	Interest Rate	Principal
Ministry of Industry, Tourism, and Commerce	December 31, 2018	0.53%	$	73,865	a
Ministry of Industry, Tourism, and Commerce	December 31, 2019	0.51%		107,933	b
Ministry of Industry, Tourism, and Commerce	January 31, 2020	3.95%		94,634	c
Ministry of Science and Innovation	February 2, 2022	0.00%		74,136
Ministry of Science and Innovation	February 2, 2024	0.00%		296,440	d
Center for Development of Industrial Technology	March 31, 2021	0.00%		94,306
European Union Agency for Network and Information Security	October 28, 2018	2.95%		105,902
			$	847,215

a. This loan is secured by $26,113 of cash pledged as collateral by Genasys. This amount is included in restricted cash at March 31, 2018. The cash will be released upon repayment of the loan.

b. This loan is secured by $40,373 of cash pledged as collateral by Genasys, which represents 25% of the original principal received. This amount is included in restricted cash at March 31, 2018. The cash will be released upon repayment of the loan.

c. This loan is secured by $63,774 of cash pledged as collateral by Genasys, which represents 35% of the original principal received. This amount is included in restricted cash at March 31, 2018. The cash will be released upon repayment of the loan.

d. This loan is secured by $296,440 of cash pledged as collateral by Genasys, which is the current balance of the loan. This amount represents 66.6% of the original principal received. This amount is included in restricted cash at March 31, 2018. The Company expects the Ministry of Science and Innovation to declare the terms of the loan satisfied within fiscal year 2018, and that the outstanding balance of the loan will be paid in full during fiscal year 2018. Accordingly, this has been included in the current portion of notes payable as of March 31, 2018.

( 2 ) Revolving credit facilities were used by Genasys to meet short-term operating needs. Revolving credit facilities as of March 31, 2018 are as follows:

Description	Interest Rate	Principal
Revolving Credit Facility A	3.50%	$	58,092
Revolving Credit Facility B	3.95%		60,811
Revolving Credit Facility C	3.00%		60,199
Other Revolving Credit Facilities	4.20%		19,748
		$	198,850

Borrowing under Revolving Credit Facilities A, B, and C are up to a maximum of

€50,000

(approximately

$61,600

). These revolving credit facilities mature during the

three

months ended

June 30, 2018.

The Other Revolving Credit Facilities were used by Genasys to fund local tax payments and mature during the

three

months ended

June 30, 2018.

( 3 ) Term Loans as of March 31, 2018 are as follows:

Description	Due Date	Interest Rate	Principal
Term Loan A	October 20, 2018	4.80%	$	12,681
Term Loan B	May 27, 2019	Variable		18,549
Term Loan C	June 20, 2019	4.29%		39,951
Term Loan D	July 12, 2020	Variable		48,302
			$	119,483

Term Loan A

is an unsecured

4.80%

fixed rate loan due in

October 2018

issued to fund the working capital needs of Genasys. There is a prepayment penalty of

3%

of the outstanding balance. Principal and interest payments are payable on the

20

th

of each month.

Term Loan B

is an unsecured variable rate loan due in

May 2019

issued to fund the working capital needs of Genasys. The interest rate is Euribor +

3.5%.

There are

no

prepayment penalties. Principal and interest payments are payable on the

27

th

of each month.

Term

L

oan C

is an unsecured fixed rate loan due in

June 2019

issued to fund the working capital needs of Genasys. There is

no

prepayment penalty. Principal and interest payments are due on the

20

th

of each month.

Term

L

oan D

is an unsecured variable rate loan due in

July 2020

issued to fund the working capital needs of Genasys. There is a prepayment penalty of

0.5%

of the outstanding balance. The interest rate is fixed at

2.44%

until

July 2018

at which point the interest rate becomes Euribor +

2.44%.

Principal and interest payments are due on the

12

th

of each month.

The following is a schedule of future annual payments as of

March 31, 2018:

April 2018-March 2019	$	896,317
April 2019-March 2020		173,035
April 2020-March 2021		48,796
April 2021-March 2022		47,400
April 2022-March 2023		-
Thereafter		-
Total	$	1,165,548

The Company has pledged

$428,425

of cash as collateral against debt. This restricted cash amount is included in restricted cash and long-term restricted cash as of

March 31, 2018.

The Company recorded

$9,815

in interest expense for the

three

months and

six

months ended

March 31, 2018

in the condensed consolidated statements of income in connection with the above referenced debt.

XML

Note 12 - Commitments and Contingencies

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

1

2

. COMMITMENTS AND CONTINGENCIES

Litigation

The Company

may

at times be involved in litigation in the ordinary course of business. The Company will, from time to time, when appropriate in management’s estimation, record adequate reserves in the Company’s consolidated financial statements for pending litigation. Currently, there are

no

pending material legal proceedings to which the Company is a party or to which any of its property is subject.

Bonus Plan

The Company has incentive bonus plans for fiscal year

2018

designed to motivate its key employees to achieve the Company’s financial objectives. All of the Company’s key employees are entitled to participate in the incentive plans. Target Bonus Amounts (“Target”) vary based on a percentage of the employee’s base salary which range from

25%

to

75%

of base salary and a bonus payment

may

be made at

three

levels, including at

50%

of Target, at

100%

of Target and at

200%

of Target, depending upon the achievement by the Company of specified performance goals. Performance targets include certain fiscal

2018

metrics, including product bookings, net revenues, operating income and operating cash flow. Included in such calculation is the cost of the incentive plan. During the

six

months ended

March 31, 2018

and

2017,

the Company accrued

$738,543

and

$379,080,

respectively, for bonuses and related payroll tax expenses in connection with the bonus plans.

Acquisition

Escrow

Liability

In connection with the acquisition of Genasys the Company recorded an escrow liability of

$185,250,

as described in Note

4.

  This liability is based on a working capital target and

may

be payable to the former shareholders of Genasys.  The Company has

not

completed its final evaluation of this measurement as of

March 31, 2018. 

The Company expects this analysis to be completed by

June 30, 2018.    

XML

Note 13 - Share-based Compensation

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

1

3

. SHARE-BASED COMPENSATION

Equity Incentive

Plans

At

March 31, 2018,

the Company had

two

equity incentive plans. The

2005

Equity Incentive Plan (

“2005

Equity Plan”) was terminated with respect to new grants in

March 2015,

but remains in effect for grants issued prior to that time. The Amended and Restated

2015

Equity Incentive Plan (

“2015

Equity Plan”) was approved by the Company’s Board of Directors on

December 6, 2016

and by the Company’s stockholders on

March 14, 2017.

The

2015

Equity Plan authorizes for issuance as stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards, an aggregate of

5,000,000

new shares of common stock to employees, directors, advisors or consultants. At

March 31, 2018,

there were options outstanding covering

2,193,502

and

2,279,315

shares of common stock under the

2005

Equity Plan and

2015

Equity Plan, respectively.

Stock Option Activity

The following table summarizes information about stock option activity during the

six

months ended

March 31, 2018:

	Number			Weighted Average
	of Shares			Exercise Price
Outstanding October 1, 2017		4,663,502		$	2.16
Granted		3,500		$	2.21
Forfeited/expired		(83,333	)	$	2.84
Exercised		(110,852	)	$	1.68
Outstanding March 31, 2018		4,472,817		$	2.15
Exercisable March 31, 2018		3,298,533		$	2.23

Options outstanding are exercisable at prices ranging from

$0.93

to

$3.17

and expire over the period from

2018

to

2024

with an average life of

3.0

years. The aggregate intrinsic value of options outstanding and exercisable at

March 31, 2018

was

$1,242,236

and

$990,806,

respectively.

During the

six

months ended

March 31, 2017,

the Company incurred non-cash share-based compensation expense of

$307,324

resulting from the modification of stock options in accordance with a Separation Agreement and General Release related to the

June 30, 2016

departure of the Company’s prior chief executive officer (“CEO”). As per the agreement, all unvested options became fully vested on

December 31, 2016

and shall remain exercisable for a period of

24

months following the

December 31, 2016

separation date as defined in the agreement. The expense is measured as the excess of the fair value of the modified awards over the fair value of the original awards immediately before its terms are modified as per ASC

718

-

20

-

35.

Performance-Based Stock Options

On

August 1, 2016,

the Company awarded a performance-based stock option (PVO) to purchase

750,000

shares of the Company’s common stock to a key executive, with a contractual term of

seven

years. Vesting is based upon the achievement of certain performance criteria for each of fiscal

2019

and

2020

(

375,000

shares for each year) including minimum free cash flow margin and net revenue targets at

four

different target levels for each of the years. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial targets.

The Company has made the assumption that the lowest performance target level for each of the years will be met, and therefore

187,500

shares of the PVO are assumed to vest. The weighted average grant date fair value for the PVO was

$0.81

per share, which was estimated on the date of grant using the Black-Scholes option pricing model. Non-cash share-based compensation expense related to this award is recognized on a straight-line basis over the requisite service periods. The Company will continue to review these targets each quarter and will adjust the expected outcome as needed, recognizing compensation expense cumulatively in such period for the difference in expense.

Restricted Stock Units

During the quarter ended

December 31, 2016,

the Board of Directors approved the grant of

25,000

restricted stock units (“RSUs”) to each of the Company’s non-employee directors, subject to stockholder approval of the Amended and Restated

2015

Equity Incentive Plan at the

2017

Annual Meeting of Stockholders. These RSUs were granted as replacements for

20,000

stock options that would have been granted on the date of the

2016

Annual Meeting of Stockholders and vested on the

first

anniversary of the

2016

Annual Meeting of Stockholders, which was

May 17, 2017.

As a result of the stockholders approval of the Amended and Restated

2015

Equity Incentive Plan at the

2017

Annual Meeting of Stockholders on

March 14, 2017,

the RSUs previously granted were made effective at a market value of

$197,500

and were expensed on a straight line basis through the

May 17, 2017

vest date.

On

March 14, 2017,

the Board of Directors approved an additional grant of

25,000

RSUs to each of the Company’s non-employee directors that will vest on the

first

anniversary of the grant date. These were also issued at a market value of

$197,500,

which will be expensed on a straight line basis through the

March 14, 2018

vest date.

On

March 20, 2018,

the Board of Directors approved an additional grant of

25,000

RSUs to each of the Company’s non-employee directors that will vest on the

first

anniversary of the grant date. These were issued at a market value of

$278,750,

which will be expensed on a straight line basis through the

March 20, 2019

vest date. Also during the quarter,

93,330

RSUs were granted to employees that will vest over

three

years on the anniversary date of the grant. These were issued at a market value of

$210,176,

which will be expensed on a straight line basis over the

three

year life of the grants.

Share-Based Compensation

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

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018		2017
Cost of revenues	$	5,047	$	5,874	$	11,256	$	11,751
Selling, general and administrative		120,133		148,600		229,455		584,097
Research and development		20,609		22,928		43,539		46,303
Total	$	145,789	$	177,402	$	284,250	$	642,151

The employee stock options granted in the

six

months ended

March 31, 2018

and

2017

had a weighted-average estimated fair value of

$0.89

per share and

$0.71

per share, respectively, using the Black-Scholes option pricing model with the following weighted-average assumptions (annualized percentages):

	Six months ended
	March 31,
	2018	2017
Volatility	45.4%	47.5%	-	53.7%
Risk-free interest rate	2.2%	1.7%	-	2.0%
Forfeiture rate	10.0%		10.0%
Dividend yield	0.0%		0.0%
Expected life in years	4.6	3.8	-	4.6

The Company did

not

declare a dividend for the

six

-month periods ended

March 31, 2018

and

2017.

Expected volatility is based on the historical volatility of the Company’s common stock over the period commensurate with the expected life of the options. The risk-free interest rate is based on rates published by the Federal Reserve Board. The expected life is based on observed and expected time to post-vesting exercise. The expected forfeiture rate is based on past experience and employee retention data. Forfeitures are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from those estimates or if the Company updates its estimated forfeiture rate. Such amounts will be recorded as a cumulative adjustment in the period in which the estimate is changed.

As of

March 31, 2018,

there was approximately

$900,000

of total unrecognized compensation cost related to non-vested share-based employee compensation arrangements. The cost is expected to be recognized over a weighted-average period of

1.9

years.

XML

Note 14 - Stockholders' Equity

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

1

4

. STOCKHOLDERS’ EQUITY

Summary

The following table summarizes changes in the components of stockholders’ equity during the

six

months ended

March 31, 2018:

										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in		Accumulated			Comprehensive			Stockholders'
	Shares		Amount		Capital		Deficit			Loss			Equity
Balances, September 30, 2017		32,158,436	$	322	$	87,956,839	$	(52,771,853	)	$	(1,269	)	$	35,184,039
Share-based compensation expense		-		-		284,250		-			-			284,250
Issuance of common stock upon exercise of stock options, net		110,852		-		185,718								185,718
Issuance of common stock upon vesting of restricted stock units		125,000		-		-		-			-			-
Other comprehensive loss		-		-		-		-			(12,513	)		(12,513	)
Net loss		-		-		-		(1,222,344	)					(1,222,344	)
Balances, March 31, 2018		32,394,288	$	322	$	88,426,807	$	(53,994,197	)	$	(13,782	)	$	34,419,150

Share Buyback Program

The Board of Directors approved a share buyback program in

2015

under which the Company was authorized to repurchase up to

$4

million of its outstanding common shares. There were

no

shares repurchased during the

six

-month periods ended

March 31, 2018

and

2017

respectively. At

March 31, 2018,

all repurchased shares were retired. In

December 2017,

the Board of Directors extended the program through

December 31, 2018.

At

March 31, 2018,

$3.9

million is available for share repurchase under this program.

Dividends

There were

no

dividends declared in the

six

months ended

March 31, 2018

and

2017.

XML

Note 15 - Net Loss Per Share

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

1

5

.

NET

LOSS

PER SHARE

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

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018			2017
Numerator:
Net income (loss)	$	460,908	$	298,350	$	(1,222,344	)	$	(514,329	)
Denominator:
Weighted average common shares outstanding - basic and diluted		32,275,647		31,800,103		32,212,286			31,800,103
Assumed exercise of dilutive options and warrants		1,023,559		63,799		-			-
Weighted average dilutive shares outstanding		33,299,206		31,863,902		32,212,286			31,800,103
Basic income (loss) per common share - basic and diluted	$	0.01	$	0.01	$	(0.04	)	$	(0.02	)
Diluted income (loss) per common share	$	0.01	$	0.01	$	(0.04	)	$	(0.02	)
Potentially dilutive securities outstanding at period end excluded from the diluted computation as the inclusion would have been antidilutive:
Options		1,766,250		3,061,836		2,706,567			2,989,836
Restricted stock units		218,330		250,000		218,330			250,000
Total		1,984,580		3,311,836		2,924,897			3,239,836

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Note 16 - Segment Information

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

16.

S

EGMENT 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 solutions for emergency warning and workforce management. The Company operates in

two

business segments: Hardware and Software and its principle markets are North and South America, Europe, Middle East and Asia. As reviewed by the Company’s chief operating decision maker, the Company evaluates the performance of each segment based on sales and operating income. Cash and cash equivalents, marketable securities, accounts receivable, inventory, property and equipment, deferred tax assets, goodwill and intangible assets are primary assets identified by segment. The accounting policies for segment reporting are the same for the Company as a whole and transactions between the

two

operating segments are

not

material.

The following table presents the Company’s segment disclosures:

	Three Months Ended			Six Months Ended
	March 31, 2018			March 31, 2018
Revenues from external customers
LRAD	$	7,453,794		$	15,082,361
Genasys		414,654			414,654
	$	7,868,448		$	15,497,015
Intercompany revenues
LRAD	$	-		$	-
Genasys		89,818			89,818
	$	89,818		$	89,818
Segment Operating Income
LRAD	$	579,498		$	1,570,604
Genasys		24,656			24,656
	$	604,154		$	1,595,260
Other expenses:
Depreciation and amortization expense
LRAD	$	(64,660	)	$	(124,765	)
Genasys		(69,044	)		(69,044	)
	$	(133,704	)	$	(193,809	)
Interest expense
LRAD	$	-		$	-
Genasys		(9,815	)		(9,815	)
	$	(9,815	)	$	(9,815	)
Income tax expense
LRAD	$	(158,451	)	$	(2,867,339	)
Genasys		-			-
	$	(158,451	)	$	(2,867,339	)

	March 31, 2018		September 30, 2017
Long-lived assets:
LRAD	$	527,872	$	565,292
Genasys		4,393,129		-
Total	$	4,921,001	$	565,292
Total Assets
LRAD	$	35,471,343	$	38,857,800
Genasys		5,418,144		-
Total	$	40,889,487	$	38,857,800

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Note 17 - Major Customers

6 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

1

7

. MAJOR CUSTOMERS

For the

three

months ended

March 31, 2018,

revenues from

three

customers accounted for

40%,

15%

and

14%

of total revenues, and for the

six

months ended

March 31, 2018

revenues from

two

customers accounted for

33%

and

16%

of total revenues, with

no

other single customer accounting for more than

10%

of revenues. At

March 31, 2018,

accounts receivable from

one

customer accounted for

56%

of total accounts receivable, with

no

other single customer accounting for more than

10%

of the accounts receivable balance.

For the

three

months ended

March 31, 2017,

revenues from

two

customers accounted for

23%

and

11%

of total revenues, and for the

six

months ended

March 31, 2017

revenues from

two

customers accounted for

15%

and

10%

of total revenues, with

no

other single customer accounting for more than

10%

of revenues. At

March 31, 2017,

accounts receivable from

three

customers accounted for

41%,

24%

and

14%

of total accounts receivable, with

no

other single customer accounting for more than

10%

of the accounts receivable balance.

The following table summarizes revenues by geographic region. Revenues are attributed to countries based on customer’s delivery location.

	Three months ended March 31,				Six months ended March 31,
	2018		2017		2018		2017
Americas	$	5,051,072	$	2,099,151	$	11,104,110	$	3,721,509
Asia Pacific		2,255,856		2,923,825		3,277,762		3,908,425
Europe, Middle East and Africa		561,520		719,415		1,115,143		1,053,792
Total Revenues	$	7,868,448	$	5,742,391	$	15,497,015	$	8,683,726

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Significant Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

General

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 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,

2017

included in the Company’s Annual Report on Form

10

-K, as filed with the SEC on

December 13, 2017.

The accompanying condensed consolidated balance sheet at

September 30, 2017

has been derived from the audited consolidated balance sheet at

September 30, 2017

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.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The Company has

four

wholly owned subsidiaries, Genasys Holding, S.L. and Genasys II Spain, S.A.U. and

two

 currently inactive subsidiaries, Genasys America de CV and LRAD International Corporation. The condensed consolidated financial statements include the accounts of these subsidiaries after elimination of intercompany transactions and accounts.

Reclassification, Policy [Policy Text Block]

Reclassifications

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

New Accounting Pronouncements, Policy [Policy Text Block]

In

November 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update

No.

2016

-

18,

 

Statement of Cash Flows (Topic

230

), Restricted Cash 

("ASU

2016

-

18"

), which amends Topic

230

to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The provisions of this guidance are to be applied using a retrospective transition method to each period presented. ASU

2016

-

18

is effective for annual reporting periods beginning after

December 15, 2017,

and interim periods within those years, with early adoption permitted. The Company adopted ASU

2016

-

18

effective

January 1, 2018.

For the

six

months ended

March 31, 2018, 

the increase in restricted cash resulted primarily from restricted cash balances included in the assets acquired in the acquisition of Genasys, as described in Note

4.

The adoption did

not

have a material impact on the Company's consolidated financial position, results of operations and cash flows, other than the impact discussed above.

In

March 2016,

the FASB issued ASU

No.

2016

-

09,

Compensation – Stock Compensation (Topic

718

): Improvements to Employee Share-Based Payment Accounting

. This guidance changes how companies account for certain aspects of share-based payments to employees. Among other things, under the new guidance, companies will

no

longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital (“APIC”), but will instead record such items as income tax expense or benefit in the income statement, and APIC pools will be eliminated. Companies will apply this guidance prospectively. Another component of the new guidance allows companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards, whereby forfeitures can be estimated, as required today, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. The guidance was effective for the Company in the

first

quarter of fiscal

2018.

The adoption of this standard resulted in the recognition of

$1.1

million of gross deferred tax assets related to the historical excess tax benefits from stock-based compensation that was

not

previously included in deferred tax assets and a corresponding increase in the Company’s valuation allowance.

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842

)

, which issued new guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than

12

 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company in the fiscal year beginning

October 1, 2019.

Early adoption is permitted. The Company is currently evaluating the impact of this guidance, if any, on its consolidated financial statements and related disclosures.

In

May 2014,

the FASB issued ASU

No.

2014

-

09,

Revenue from Contracts with Customers

(“ASU

2014

-

09”

), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU

2014

-

09

will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective. In

July 2015,

the FASB deferred the effective date of the standard by an additional year; however, it provided companies the option to adopt

one

year earlier, commensurate with the original effective date. Accordingly, the standard will be effective for the Company in the fiscal year beginning

October 1, 2018.

The Company is currently evaluating the impact of this guidance, if any, on its consolidated financial statements and related disclosures.

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Note 4 - Acquisitions (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

Cash paid	$	2,826,189
Acquisition escrow liability		185,250
Total consideration	$	3,011,439

Assets Acquired
Cash and restricted cash acquired	$	579,644
Accounts receivable		426,940
Fixed assets		5,712
Intangible assets		1,850,000
Goodwill		2,603,688
Other assets		54,520
Total assets acquired		5,520,504
Liabilities assumed
Accounts payable		275,653
Accrued expenses and other liabilities		315,817
Severance obligation		397,558
Debt		1,520,037
Total liabilities assumed		2,509,065
Net assets acquired	$	3,011,439

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

	Fair Value		Useful Lives (in years)
Technology	$	690,000	7
Customer relationships		660,000	7
Trade name portfolio		240,000	5
Non-compete agreements		260,000	3
	$	1,850,000

Business Acquisition, Pro Forma Information [Table Text Block]

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018			2017
Net revenues	$	8,042,879	$	6,034,248	$	16,222,894		$	9,474,427
Net income		529,094		276,048		(1,081,478	)		(788,438	)
Basic and diluted earnings per share	$	0.02	$	0.01	$	(0.03	)	$	(0.02	)

Business Acquisition, Reconciliation of Actual Net Revenue and Net Income to Pro Forma Net Revenue and Net Income [Table Text Block]

	Three months ended March 31,
	2018				2017
	Net revenues		Net income		Net revenues		Net income
LRAD actual results	$	7,453,794	$	384,516	$	5,742,391	$	298,350
Genasys actual results		589,085		89,727		291,857		79,067
Pro Forma adjustments		-		54,851		-		(101,369	)
Pro forma results	$	8,042,879	$	529,094	$	6,034,248	$	276,048

	Six months ended March 31,
	2018					2017
	Net revenues		Net income			Net revenues		Net income
LRAD actual results	$	15,082,361	$	(1,298,736	)	$	8,683,726	$	(514,329	)
Genasys actual results		1,140,533		126,844			790,701		(172,740	)
Pro Forma adjustments		-		90,414			-		(101,369	)
Pro forma results	$	16,222,894	$	(1,081,478	)	$	9,474,427	$	(788,438	)

Business Acquisition, Pro Forma Information, Nonrecurring Adjustments [Table Text Block]

	Three months ended						Six months ended
	March 31,						March 31,
	2018			2017			2018			2017
Acquisition costs	$	151,313		$	-		$	196,329		$	-
Depreciation and amortization costs		(81,881	)		(163,762	)		(81,881	)		(163,762	)
Tax effect of adjustments		(14,581	)		62,393			(24,034	)		62,393
Pro forma adjustmenst	$	54,851		$	(101,369	)	$	90,414		$	(101,369	)

XML

Note 5 - Goodwill and Intangible Assets (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	March 31, 2018							September 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Technology	$	690,000	$	(20,536	)	$	669,464	$	-	$	-		$	-
Customer relationships		660,000		(19,642	)		640,358		-		-			-
Trade name portfolio		240,000		(10,000	)		230,000		-		-			-
Non-compete agreements		260,000		(18,056	)		241,944		-		-			-
Patents		108,247		(56,166	)		52,081		108,247		(52,558	)		55,689
	$	1,958,247	$	(124,400	)	$	1,833,847	$	108,247	$	(52,558	)	$	55,689

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Estimated Future Amortization Expense Years Ended September 30,
2018 (April 1, 2018 through September 30, 2018)	$	166,689
2019		333,771
2020		333,448
2021		271,771
2022		246,363
Thereafter		481,805
Total estimated amortization expense	$	1,833,847

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Note 6 - Fair Value Measurements (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Fair Value Measurements, Nonrecurring [Table Text Block]

	March 31, 2018
			Unrealized			Fair		Cash		Short-term		Long-term
	Cost Basis		Losses			Value		Equivalents		Securities		Securities
Level 1:
Money Market Funds	$	98,539	$	-		$	98,539	$	98,539	$	-	$	-
Level 2:
Certificates of deposit	$	936,952	$	-		$	936,952	$	-	$	437,952	$	499,000
Municipal securities		85,626		(168	)		85,459		-		85,459		-
Corporate bonds		4,049,846		(17,970	)		4,031,876		-		3,539,698		492,178
Subtotal		5,072,424		(18,138	)		5,054,287		-		4,063,109		991,178
Total	$	5,170,963	$	(18,138	)	$	5,152,826	$	98,539	$	4,063,109	$	991,178

	September 30, 2017
			Unrealized			Fair		Cash		Short-term		Long-term
	Cost Basis		Losses			Value		Equivalents		Securities		Securities
Level 1:
Money Market Funds	$	55,257	$	-		$	55,257	$	55,257	$	-	$	-
Level 2:
Certificates of deposit		2,436,647		-			2,436,647		-		1,937,647		499,000
Municipal securities		25,315		(12	)		25,303		-		25,303		-
Corporate bonds		2,609,973		(1,257	)		2,608,716		-		2,396,592		212,124
Subtotal		5,071,935		(1,269	)		5,070,666		-		4,359,542		711,124
Total	$	5,127,192	$	(1,269	)	$	5,125,923	$	55,257	$	4,359,542	$	711,124

XML

Note 7 - Inventories (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31,			September 30,
	2018			2017
Raw materials	$	5,135,966		$	3,784,935
Finished goods		417,587			1,742,960
Work in process		393,756			147,871
Inventories, gross		5,947,309			5,675,766
Reserve for obsolescence		(503,967	)		(418,532	)
Inventories, net	$	5,443,342		$	5,257,234

XML

Note 8 - Property and Equipment (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Property, Plant and Equipment [Table Text Block]

	March 31,			September 30,
	2018			2017
Office furniture and equipment	$	1,296,249		$	1,093,502
Machinery and equipment		1,067,802			994,157
Leasehold improvements		76,138			76,138
Property and equipment, gross		2,440,189			2,163,797
Accumulated depreciation		(1,956,722	)		(1,654,194	)
Property and equipment, net	$	483,467		$	509,603

Depreciation Expense [Member]

Notes Tables

Property, Plant and Equipment [Table Text Block]

	Six months ended
	March 31,
	2018		2017
Depreciation expense	$	121,967	$	59,153

XML

Note 9 - Accrued Liabilities (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	March 31,		September 30,
	2018		2017
Payroll and related	$	1,214,039	$	1,870,579
Deferred revenue		1,028,497		268,580
Accrued contract costs		474,068		197,034
Severance		327,937		-
Acquisition escrow liability		185,250		-
Warranty reserve		169,204		179,101
Deferred rent		15,367		46,101
Total	$	3,414,362	$	2,561,395

Schedule of Product Warranty Liability [Table Text Block]

	Three months ended						Six months ended
	March 31,						March 31,
	2018			2017			2018			2017
Beginning balance	$	188,308		$	353,938		$	179,101		$	356,984
Warranty provision		-			101,673			12,361			111,369
Warranty settlements		(19,104	)		(6,470	)		(22,258	)		(19,212	)
Ending balance	$	169,204		$	449,141		$	169,204		$	449,141

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Note 11 - Debt (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Debt [Table Text Block]

Loans with Governmental Agencies (1)	$	847,215
Revolving Credit Facilities (2)		198,850
Term Loans (3)		119,483
Total debt		1,165,548
Less current portion		(896,317	)
Total long-term debt	$	269,231

Loans With Governmental Agencies [Table Text Block]

Agency	Due Date	Interest Rate	Principal
Ministry of Industry, Tourism, and Commerce	December 31, 2018	0.53%	$	73,865	a
Ministry of Industry, Tourism, and Commerce	December 31, 2019	0.51%		107,933	b
Ministry of Industry, Tourism, and Commerce	January 31, 2020	3.95%		94,634	c
Ministry of Science and Innovation	February 2, 2022	0.00%		74,136
Ministry of Science and Innovation	February 2, 2024	0.00%		296,440	d
Center for Development of Industrial Technology	March 31, 2021	0.00%		94,306
European Union Agency for Network and Information Security	October 28, 2018	2.95%		105,902
			$	847,215

Schedule of Line of Credit Facilities [Table Text Block]

Description	Interest Rate	Principal
Revolving Credit Facility A	3.50%	$	58,092
Revolving Credit Facility B	3.95%		60,811
Revolving Credit Facility C	3.00%		60,199
Other Revolving Credit Facilities	4.20%		19,748
		$	198,850

Term Loans [Table Text Block]

Description	Due Date	Interest Rate	Principal
Term Loan A	October 20, 2018	4.80%	$	12,681
Term Loan B	May 27, 2019	Variable		18,549
Term Loan C	June 20, 2019	4.29%		39,951
Term Loan D	July 12, 2020	Variable		48,302
			$	119,483

Schedule of Maturities of Long-term Debt [Table Text Block]

April 2018-March 2019	$	896,317
April 2019-March 2020		173,035
April 2020-March 2021		48,796
April 2021-March 2022		47,400
April 2022-March 2023		-
Thereafter		-
Total	$	1,165,548

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Note 13 - Share-based Compensation (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number			Weighted Average
	of Shares			Exercise Price
Outstanding October 1, 2017		4,663,502		$	2.16
Granted		3,500		$	2.21
Forfeited/expired		(83,333	)	$	2.84
Exercised		(110,852	)	$	1.68
Outstanding March 31, 2018		4,472,817		$	2.15
Exercisable March 31, 2018		3,298,533		$	2.23

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018		2017
Cost of revenues	$	5,047	$	5,874	$	11,256	$	11,751
Selling, general and administrative		120,133		148,600		229,455		584,097
Research and development		20,609		22,928		43,539		46,303
Total	$	145,789	$	177,402	$	284,250	$	642,151

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Six months ended
	March 31,
	2018	2017
Volatility	45.4%	47.5%	-	53.7%
Risk-free interest rate	2.2%	1.7%	-	2.0%
Forfeiture rate	10.0%		10.0%
Dividend yield	0.0%		0.0%
Expected life in years	4.6	3.8	-	4.6

XML

Note 14 - Stockholders' Equity (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Stockholders Equity [Table Text Block]

										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in		Accumulated			Comprehensive			Stockholders'
	Shares		Amount		Capital		Deficit			Loss			Equity
Balances, September 30, 2017		32,158,436	$	322	$	87,956,839	$	(52,771,853	)	$	(1,269	)	$	35,184,039
Share-based compensation expense		-		-		284,250		-			-			284,250
Issuance of common stock upon exercise of stock options, net		110,852		-		185,718								185,718
Issuance of common stock upon vesting of restricted stock units		125,000		-		-		-			-			-
Other comprehensive loss		-		-		-		-			(12,513	)		(12,513	)
Net loss		-		-		-		(1,222,344	)					(1,222,344	)
Balances, March 31, 2018		32,394,288	$	322	$	88,426,807	$	(53,994,197	)	$	(13,782	)	$	34,419,150

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Note 15 - Net Loss Per Share (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended				Six months ended
	March 31,				March 31,
	2018		2017		2018			2017
Numerator:
Net income (loss)	$	460,908	$	298,350	$	(1,222,344	)	$	(514,329	)
Denominator:
Weighted average common shares outstanding - basic and diluted		32,275,647		31,800,103		32,212,286			31,800,103
Assumed exercise of dilutive options and warrants		1,023,559		63,799		-			-
Weighted average dilutive shares outstanding		33,299,206		31,863,902		32,212,286			31,800,103
Basic income (loss) per common share - basic and diluted	$	0.01	$	0.01	$	(0.04	)	$	(0.02	)
Diluted income (loss) per common share	$	0.01	$	0.01	$	(0.04	)	$	(0.02	)
Potentially dilutive securities outstanding at period end excluded from the diluted computation as the inclusion would have been antidilutive:
Options		1,766,250		3,061,836		2,706,567			2,989,836
Restricted stock units		218,330		250,000		218,330			250,000
Total		1,984,580		3,311,836		2,924,897			3,239,836

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Note 16 - Segment Information (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended			Six Months Ended
	March 31, 2018			March 31, 2018
Revenues from external customers
LRAD	$	7,453,794		$	15,082,361
Genasys		414,654			414,654
	$	7,868,448		$	15,497,015
Intercompany revenues
LRAD	$	-		$	-
Genasys		89,818			89,818
	$	89,818		$	89,818
Segment Operating Income
LRAD	$	579,498		$	1,570,604
Genasys		24,656			24,656
	$	604,154		$	1,595,260
Other expenses:
Depreciation and amortization expense
LRAD	$	(64,660	)	$	(124,765	)
Genasys		(69,044	)		(69,044	)
	$	(133,704	)	$	(193,809	)
Interest expense
LRAD	$	-		$	-
Genasys		(9,815	)		(9,815	)
	$	(9,815	)	$	(9,815	)
Income tax expense
LRAD	$	(158,451	)	$	(2,867,339	)
Genasys		-			-
	$	(158,451	)	$	(2,867,339	)

	March 31, 2018		September 30, 2017
Long-lived assets:
LRAD	$	527,872	$	565,292
Genasys		4,393,129		-
Total	$	4,921,001	$	565,292
Total Assets
LRAD	$	35,471,343	$	38,857,800
Genasys		5,418,144		-
Total	$	40,889,487	$	38,857,800

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Note 17 - Major Customers (Tables)

6 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Three months ended March 31,				Six months ended March 31,
	2018		2017		2018		2017
Americas	$	5,051,072	$	2,099,151	$	11,104,110	$	3,721,509
Asia Pacific		2,255,856		2,923,825		3,277,762		3,908,425
Europe, Middle East and Africa		561,520		719,415		1,115,143		1,053,792
Total Revenues	$	7,868,448	$	5,742,391	$	15,497,015	$	8,683,726

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Note 2 - Basis of Presentation and Significant Accounting Policies (Details Textual)	Mar. 31, 2018
Number of Wholly Owned Subsidiaries	4
Number of Additional Inactive Subsidiaries	2

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Note 3 - Recent Accounting Pronouncements (Details Textual) - Accounting Standards Update 2016-09 [Member] $ in Millions	Jan. 01, 2018 USD ($)
Deferred Tax Assets, Valuation Allowance, Total	$ 1.1
Deferred Tax Assets, Gross, Total	$ 1.1

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Note 4 - Acquisitions (Details Textual)		2 Months Ended	3 Months Ended			9 Months Ended
	Jan. 18, 2018	Mar. 31, 2018 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Sep. 30, 2017 USD ($)	Mar. 31, 2018 USD ($)
Genasys Acquisition [Member]
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual		$ 415,000
Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual		$ 25,000
Finite-Lived Intangible Asset, Useful Life			6 years
Genasys Acquisition [Member] | Selling, General and Administrative Expenses [Member]
Business Combination, Acquisition Related Costs			$ 151,313	$ 45,016	$ 41,016	$ 237,345
Genasys [Member]
Entity Number of Employees		16	16			16

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Note 4 - Acquisitions - Preliminary Acquisition Consideration (Details) - USD ($)		6 Months Ended
	Jan. 18, 2018	Mar. 31, 2018	Mar. 31, 2017	Sep. 30, 2017
Cash paid		$ 2,246,545
Goodwill		2,603,687
Genasys Acquisition [Member]
Cash paid	$ 2,826,189
Acquisition escrow liability	185,250
Total consideration	$ 3,011,439
Cash and restricted cash acquired		579,644
Accounts receivable		426,940
Fixed assets		5,712
Intangible assets		1,850,000
Goodwill		2,603,688
Other assets		54,520
Total assets acquired		5,520,504
Accounts payable		275,653
Accrued expenses and other liabilities		315,817
Severance obligation		397,558
Debt		1,520,037
Total liabilities assumed		2,509,065
Net assets acquired		$ 3,011,439

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Note 4 - Acquisitions - Estimated Fair Value and Estimated Useful Lives of Identifiable Intangible Assets Acquired (Details) - Genasys Acquisition [Member] - USD ($)		3 Months Ended
	Jan. 18, 2018	Mar. 31, 2018
Intangible assets acquired, fair value	$ 1,850,000
Intangible assets acquired, useful lives (Year)		6 years
Technology-Based Intangible Assets [Member]
Intangible assets acquired, fair value	$ 690,000
Intangible assets acquired, useful lives (Year)	7 years
Customer Relationships [Member]
Intangible assets acquired, fair value	$ 660,000
Intangible assets acquired, useful lives (Year)	7 years
Trade Names [Member]
Intangible assets acquired, fair value	$ 240,000
Intangible assets acquired, useful lives (Year)	5 years
Noncompete Agreements [Member]
Intangible assets acquired, fair value	$ 260,000
Intangible assets acquired, useful lives (Year)	3 years

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Note 4 - Acquisitions - Unaudited Pro Forma Results of Operations (Details) - Genasys Acquisition [Member] - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Net revenues	$ 8,042,879	$ 6,034,248	$ 16,222,894	$ 9,474,427
Net income	$ 529,094	$ 276,048	$ (1,081,478)	$ (788,438)
Basic and diluted earnings per share (in dollars per share)	$ 0.02	$ 0.01	$ (0.03)	$ (0.02)

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Note 4 - Acquisitions - Reconciliation of Actual Net Revenue and Net Income to Pro Forma Net Revenue and Net Income (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Pro Forma adjustments, net income	$ 54,851	$ (101,369)	$ 90,414	$ (101,369)
Genasys Acquisition [Member]
LRAD actual results, net revenues	7,453,794	5,742,391	15,082,361	8,683,726
LRAD actual results, net income	384,516	298,350	(1,298,736)	(514,329)
Genasys actual results, net revenues	589,085	291,857	1,140,533	790,701
Genasys actual results, net income	89,727	79,067	126,844	(172,740)
Pro Forma adjustments, net revenues
Pro Forma adjustments, net income	54,851	(101,369)	90,414	(101,369)
Pro forma results, net revenues	8,042,879	6,034,248	16,222,894	9,474,427
Pro forma results, net income	$ 529,094	$ 276,048	$ (1,081,478)	$ (788,438)

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Note 4 - Acquisitions - Summary of Pro Forma Adjustments (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Pro forma adjustments, net income	$ 54,851	$ (101,369)	$ 90,414	$ (101,369)
Acquisition-related Costs [Member]
Pro forma adjustments, net income	151,313		196,329
Depreciation and Amortization Costs [Member]
Pro forma adjustments, net income	(81,881)	(163,762)	(81,881)	(163,762)
Tax Effect of Adjustments [Member]
Pro forma adjustments, net income	$ (14,581)	$ 62,393	$ (24,034)	$ 62,393

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Note 5 - Goodwill and Intangible Assets (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Amortization of Intangible Assets, Total	$ 70,038	$ 1,859	$ 71,842	$ 3,681
Genasys [Member]
Finite-lived Intangible Assets Acquired	1,850,000
Goodwill, Acquired During Period	$ 2,603,687

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Note 5 - Goodwill and Intangible Assets - Summary of Intangible Assets (Details) - USD ($)	Mar. 31, 2018	Sep. 30, 2017
Intangible assets, gross carrying amount	$ 1,958,247	$ 108,247
Intangible assets, accumulated amortization	(124,400)	(52,558)
Intangible assets, net	1,833,847	55,689
Technology-Based Intangible Assets [Member]
Intangible assets, gross carrying amount	690,000
Intangible assets, accumulated amortization	(20,536)
Intangible assets, net	669,464
Customer Relationships [Member]
Intangible assets, gross carrying amount	660,000
Intangible assets, accumulated amortization	(19,642)
Intangible assets, net	640,358
Trade Names [Member]
Intangible assets, gross carrying amount	240,000
Intangible assets, accumulated amortization	(10,000)
Intangible assets, net	230,000
Noncompete Agreements [Member]
Intangible assets, gross carrying amount	260,000
Intangible assets, accumulated amortization	(18,056)
Intangible assets, net	241,944
Patents [Member]
Intangible assets, gross carrying amount	108,247	108,247
Intangible assets, accumulated amortization	(56,166)	(52,558)
Intangible assets, net	$ 52,081	$ 55,689

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Note 5 - Goodwill and Intangible Assets - Estimated Future Amortization Expense (Details)	Mar. 31, 2018 USD ($)
2018 (April 1, 2018 through September 30, 2018)	$ 166,689
2019	333,771
2020	333,448
2021	271,771
2022	246,363
Thereafter	481,805
Total estimated amortization expense	$ 1,833,847

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Note 6 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2018	Sep. 30, 2017
Fair Value, Inputs, Level 3 [Member]
Marketable Securities, Total	$ 0	$ 0

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Note 6 - Fair Value Measurements - Fair Value by Major Security Type (Details) - USD ($)	Mar. 31, 2018	Sep. 30, 2017
Short-term marketable securities	$ 4,063,109	$ 4,359,542
Long-term marketable securities	991,178	711,124
Fair Value, Measurements, Nonrecurring [Member]
Cost Basis	5,170,963	5,127,192
Unrealized Gains (Losses)	(18,138)	(1,269)
Fair Value	5,152,826	5,125,923
Cash Equivalents	98,539	55,257
Short-term marketable securities	4,063,109	4,359,542
Long-term marketable securities	991,178	711,124
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Cost Basis	98,539	55,257
Unrealized Gains (Losses)
Fair Value	98,539	55,257
Cash Equivalents	98,539	55,257
Short-term marketable securities
Long-term marketable securities
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Cost Basis	5,072,424	5,071,935
Unrealized Gains (Losses)	(18,138)	(1,269)
Fair Value	5,054,287	5,070,666
Cash Equivalents
Short-term marketable securities	4,063,109	4,359,542
Long-term marketable securities	991,178	711,124
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member] | Certificates of Deposit [Member]
Cost Basis	936,952	2,436,647
Unrealized Gains (Losses)
Fair Value	936,952	2,436,647
Cash Equivalents
Short-term marketable securities	437,952	1,937,647
Long-term marketable securities	499,000	499,000
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Cost Basis	85,626	25,315
Unrealized Gains (Losses)	(168)	(12)
Fair Value	85,459	25,303
Cash Equivalents
Short-term marketable securities	85,459	25,303
Long-term marketable securities
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Cost Basis	4,049,846	2,609,973
Unrealized Gains (Losses)	(17,970)	(1,257)
Fair Value	4,031,876	2,608,716
Cash Equivalents
Short-term marketable securities	3,539,698	2,396,592
Long-term marketable securities	$ 492,178	$ 212,124

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Note 7 - Inventories - Schedule of Inventory (Details) - USD ($)	Mar. 31, 2018	Sep. 30, 2017
Raw materials	$ 5,135,966	$ 3,784,935
Finished goods	417,587	1,742,960
Work in process	393,756	147,871
Inventories, gross	5,947,309	5,675,766
Reserve for obsolescence	(503,967)	(418,532)
Inventories, net	$ 5,443,342	$ 5,257,234

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Note 8 - Property and Equipment - Property and Equipment (Details) - USD ($)	Mar. 31, 2018	Sep. 30, 2017
Property and equipment	$ 2,440,189	$ 2,163,797
Accumulated depreciation	(1,956,722)	(1,654,194)
Property and equipment, net	483,467	509,603
Furniture and Fixtures [Member]
Property and equipment	1,296,249	1,093,502
Machinery and Equipment [Member]
Property and equipment	1,067,802	994,157
Leasehold Improvements [Member]
Property and equipment	$ 76,138	$ 76,138

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Note 8 - Property and Equipment - Property and Equipment, Depreciation Expense (Details) - USD ($)	6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Depreciation expense	$ 121,967	$ 59,153

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Note 9 - Accrued Liabilities - Summary of Accrued Liabilities (Details) - USD ($)	Mar. 31, 2018	Sep. 30, 2017
Payroll and related	$ 1,214,039	$ 1,870,579
Deferred revenue	1,028,497	268,580
Accrued contract costs	474,068	197,034
Severance	327,937
Business Combination, Contingent Consideration, Liability, Current	185,250
Warranty reserve	169,204	179,101
Deferred rent	15,367	46,101
Total	$ 3,414,362	$ 2,561,395

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Note 9 - Accrued Liabilities - Changes in Warranty Reserve (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Beginning balance	$ 188,308	$ 353,938	$ 179,101	$ 356,984
Warranty provision		101,673	12,361	111,369
Warranty settlements	(19,104)	(6,470)	(22,258)	(19,212)
Ending balance	$ 169,204	$ 449,141	$ 169,204	$ 449,141

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Note 10 - Income Taxes (Details Textual) - USD ($)	3 Months Ended			6 Months Ended		12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Sep. 30, 2019
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		$ 2,474,000
Income Tax Expense (Benefit), Excluding Adjustment of Deferred Tax (Asset) Liability				$ 393,339
Effective Income Tax Rate Reconciliation, Percent, Total				25.10%	38.10%
Income Tax Expense (Benefit), Total	$ 158,451		$ 169,285	$ 2,867,339	$ (317,243)
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense, Total				$ 0
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent						21.00%

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Note 11 - Debt (Details Textual)	1 Months Ended	3 Months Ended	6 Months Ended
	Jul. 30, 2018	Mar. 31, 2018 USD ($)	Mar. 31, 2018 USD ($)	Jun. 30, 2018	Mar. 31, 2018 EUR (€)
Term Loans [Member]
Interest Expense, Debt, Total		$ 9,815	$ 9,815
Revolving Credit Facility A [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 61,600	$ 61,600		€ 50,000
Debt Instrument, Interest Rate, Stated Percentage		3.50%	3.50%		3.50%
Term Loan A [Member] | Term Loans [Member]
Debt Instrument, Interest Rate, Stated Percentage		4.80%	4.80%		4.80%
Debt Instrument, Prepayment Penalty, Percentage		3.00%	3.00%		3.00%
Term Loan B [Member] | Term Loans [Member]
Debt Instrument, Interest Rate, Stated Percentage
Debt Instrument, Prepayment Penalty, Percentage		0.00%	0.00%		0.00%
Term Loan B [Member] | Term Loans [Member] | Euribor [Member]
Debt Instrument, Basis Spread on Variable Rate		3.50%
Term Loan C [Member] | Term Loans [Member]
Debt Instrument, Interest Rate, Stated Percentage		4.29%	4.29%		4.29%
Debt Instrument, Prepayment Penalty, Percentage		0.00%	0.00%		0.00%
Term Loan D [Member] | Term Loans [Member]
Debt Instrument, Interest Rate, Stated Percentage
Term Loan D [Member] | Term Loan C [Member]
Debt Instrument, Prepayment Penalty, Percentage		0.50%	0.50%		0.50%
Term Loan D [Member] | Term Loan C [Member] | Scenario, Forecast [Member]
Debt Instrument, Interest Rate, Stated Percentage				2.44%
Term Loan D [Member] | Term Loan C [Member] | Euribor [Member] | Scenario, Forecast [Member]
Debt Instrument, Basis Spread on Variable Rate	2.44%
Revolving Credit Facility B [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 61,600	$ 61,600		€ 50,000
Debt Instrument, Interest Rate, Stated Percentage		3.95%	3.95%		3.95%
Revolving Credit Facility C [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 61,600	$ 61,600		€ 50,000
Debt Instrument, Interest Rate, Stated Percentage		3.00%	3.00%		3.00%
Collateral Pledged [Member] | Term Loans [Member]
Restricted Cash, Total		$ 428,425	$ 428,425
Collateral Pledged [Member] | Loan with Ministry of Industry, Tourism, and Commerce, Due December 31, 2018 [Member] | Genasys Acquisition [Member] | Loans With Governmental Agencies [Member]
Restricted Cash, Total		26,113	26,113
Collateral Pledged [Member] | Loan with Ministry of Industry, Tourism, and Commerce, Due December 31, 2019 [Member] | Genasys Acquisition [Member] | Loans With Governmental Agencies [Member]
Restricted Cash, Total		$ 40,373	$ 40,373
Cash Pledged as Collateral, Percentage of the Original Principal Received		25.00%	25.00%		25.00%
Collateral Pledged [Member] | Loan with Ministry of Industry, Tourism, and Commerce, Due January 31, 2020 [Member] | Genasys Acquisition [Member] | Loans With Governmental Agencies [Member]
Restricted Cash, Total		$ 63,774	$ 63,774
Cash Pledged as Collateral, Percentage of the Original Principal Received		35.00%	35.00%		35.00%
Collateral Pledged [Member] | Loan with Ministry of Science and Innovation, Due February 2, 2024 [Member] | Genasys Acquisition [Member] | Loans With Governmental Agencies [Member]
Restricted Cash, Total		$ 296,440	$ 296,440
Cash Pledged as Collateral, Percentage of the Original Principal Received		66.60%	66.60%		66.60%

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Note 11 - Debt - Debt From Acquisition (Details)	Mar. 31, 2018 USD ($)
Debt	$ 1,165,548
Debt	1,165,548
Revolving Credit Facility [Member]
Revolving Credit Facilities (2)	198,850
Loans With Governmental Agencies [Member]
Debt	847,215
Debt	847,215
Term Loans [Member]
Debt	119,483
Debt	119,483
Genasys Acquisition [Member]
Debt	1,165,548
Debt	1,165,548
Less current portion	(896,317)
Total long-term debt	269,231
Genasys Acquisition [Member] | Revolving Credit Facility [Member]
Revolving Credit Facilities (2)	198,850	[1]
Genasys Acquisition [Member] | Loans With Governmental Agencies [Member]
Debt	847,215	[2]
Debt	847,215	[2]
Genasys Acquisition [Member] | Term Loans [Member]
Debt	119,483	[3]
Debt	$ 119,483	[3]

[1] Revolving credit facilities were used by Genasys to meet short-term operating needs. Revolving credit facilities as of March 31, 2018 are as follows:

[2] Loans with governmental agencies represents debt granted by ministries within Spain and the European Union for the purpose of stimulating economic development and promoting research and development. Loans with governmental agencies as of March 31, 2018 are as follows:

[3] Term Loans as of March 31, 2018 are as follows:

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Note 11 - Debt - Loans With Governmental Agencies (Details)	6 Months Ended
	Mar. 31, 2018 USD ($)
Principal, loans with governmental agencies	$ 1,165,548
Loans With Governmental Agencies [Member]
Principal, loans with governmental agencies	$ 847,215
Loans With Governmental Agencies [Member] | Ministry of Industry, Tourism, and Commerce, Debt, Due December 31, 2018 [Member]
Due date, loans with governmental agencies	Dec. 31, 2018	[1]
Interest rate, loans with governmental agencies	0.53%	[1]
Principal, loans with governmental agencies	$ 73,865	[1]
Loans With Governmental Agencies [Member] | Ministry of Industry, Tourism, and Commerce, Debt, Due December 31, 2019 [Member]
Due date, loans with governmental agencies	Dec. 31, 2019	[2]
Interest rate, loans with governmental agencies	0.51%	[2]
Principal, loans with governmental agencies	$ 107,933	[2]
Loans With Governmental Agencies [Member] | Ministry of Industry, Tourism, and Commerce, Debt, Due January 31, 2020 [Member]
Due date, loans with governmental agencies	Jan. 31, 2020	[3]
Interest rate, loans with governmental agencies	3.95%	[3]
Principal, loans with governmental agencies	$ 94,634	[3]
Loans With Governmental Agencies [Member] | Ministry of Science and Innovation, Debt, Due February 2, 2022 [Member]
Due date, loans with governmental agencies	Feb. 02, 2022
Interest rate, loans with governmental agencies	0.00%
Principal, loans with governmental agencies	$ 74,136
Loans With Governmental Agencies [Member] | Ministry of Science and Innovation, Debt, Due February 2, 2024 [Member]
Due date, loans with governmental agencies	Feb. 02, 2024	[4]
Interest rate, loans with governmental agencies	0.00%	[4]
Principal, loans with governmental agencies	$ 296,440	[4]
Loans With Governmental Agencies [Member] | Center for Development of Industrial Technology, Debt, Due March 31, 2021 [Member]
Due date, loans with governmental agencies	Mar. 31, 2021
Interest rate, loans with governmental agencies	0.00%
Principal, loans with governmental agencies	$ 94,306
Loans With Governmental Agencies [Member] | European Union Agency for Network and Information Security, Debt, Due October 28, 2018 [Member]
Due date, loans with governmental agencies	Oct. 28, 2018
Interest rate, loans with governmental agencies	2.95%
Principal, loans with governmental agencies	$ 105,902

[1] This loan is secured by $26,113 of cash pledged as collateral by Genasys. This amount is included in restricted cash at March 31, 2018. The cash will be released upon repayment of the loan.

[2] This loan is secured by $40,373 of cash pledged as collateral by Genasys, which represents 25% of the original principal received. This amount is included in restricted cash at March 31, 2018. The cash will be released upon repayment of the loan.

[3] This loan is secured by $63,774 of cash pledged as collateral by Genasys, which represents 35% of the original principal received. This amount is included in restricted cash at March 31, 2018. The cash will be released upon repayment of the loan.

[4] This loan is secured by $296,440 of cash pledged as collateral by Genasys, which is the current balance of the loan. This amount represents 66.6% of the original principal received. This amount is included in restricted cash at March 31, 2018. The Company expects the Ministry of Science and Innovation to declare the terms of the loan satisfied within fiscal year 2018, accordingly, this has been included in the current portion of notes payable as of March 31, 2018.

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Note 11 - Debt - Revolving Credit Facilities (Details) - Revolving Credit Facility [Member]	Mar. 31, 2018 USD ($)
Principal, credit facility	$ 198,850
Revolving Credit Facility A [Member]
Interest rate, loans with governmental agencies	3.50%
Principal, credit facility	$ 58,092
Revolving Credit Facility B [Member]
Interest rate, loans with governmental agencies	3.95%
Principal, credit facility	$ 60,811
Revolving Credit Facility C [Member]
Interest rate, loans with governmental agencies	3.00%
Principal, credit facility	$ 60,199
Other Revolving Credit Facilities [Member]
Interest rate, loans with governmental agencies	4.20%
Principal, credit facility	$ 19,748

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Note 11 - Debt - Term Loans (Details)	6 Months Ended
	Mar. 31, 2018 USD ($)
Principal, loans with governmental agencies	$ 1,165,548
Term Loans [Member]
Principal, loans with governmental agencies	$ 119,483
Term Loans [Member] | Term Loan A [Member]
Due date, loans with governmental agencies	Oct. 20, 2018
Interest rate, loans with governmental agencies	4.80%
Principal, loans with governmental agencies	$ 12,681
Term Loans [Member] | Term Loan B [Member]
Due date, loans with governmental agencies	May 27, 2019
Interest rate, loans with governmental agencies
Principal, loans with governmental agencies	$ 18,549
Term Loans [Member] | Term Loan C [Member]
Due date, loans with governmental agencies	Jun. 20, 2019
Interest rate, loans with governmental agencies	4.29%
Principal, loans with governmental agencies	$ 39,951
Term Loans [Member] | Term Loan D [Member]
Due date, loans with governmental agencies	Jul. 12, 2020
Interest rate, loans with governmental agencies
Principal, loans with governmental agencies	$ 48,302

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Note 11 - Debt - Future Annual Payments (Details)	Mar. 31, 2018 USD ($)
April 2018-March 2019	$ 896,317
April 2019-March 2020	173,035
April 2020-March 2021	48,796
April 2021-March 2022	47,400
April 2022-March 2023
Thereafter
Debt	$ 1,165,548

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Note 12 - Commitments and Contingencies (Details Textual) - USD ($)	6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Jan. 18, 2018	Sep. 30, 2017
Target Bonus Amounts of Percentage of Employee Base Salary, Minimum	25.00%
Target Bonus Amounts of Percentage of Employee Base Salary Maximum	75.00%
Payment of Bonus as Percentage, Level 1	50.00%
Payment of Bonus as Percentage, Level 2	100.00%
Payment of Bonus as Percentage, Level 3	200.00%
Business Combination, Contingent Consideration, Liability, Current	$ 185,250
Genasys [Member]
Business Combination, Contingent Consideration, Liability, Current			$ 185,250
Bonuses and Related Payroll Tax Expense [Member]
Increase (Decrease) in Other Employee-Related Liabilities	$ 738,543	$ 379,080

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Note 13 - Share-based Compensation (Details Textual) - USD ($)				3 Months Ended			6 Months Ended
	Mar. 20, 2018	Mar. 14, 2017	Aug. 01, 2016	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2018	Mar. 31, 2017	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance				4,472,817			4,472,817		4,663,502
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance				$ 2.15			$ 2.15		$ 2.16
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term							3 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value				$ 1,242,236			$ 1,242,236
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value				990,806			990,806
Allocated Share-based Compensation Expense, Total				145,789	$ 177,402		284,250	$ 642,151
Share-based Compensation, Total							$ 284,250	$ 642,151
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value							$ 0.89	$ 0.71
Dividends, Total							$ 0	$ 0
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total				900,000			$ 900,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition							1 year 328 days
Employee Stock Option [Member]
Allocated Share-based Compensation Expense, Total							$ 307,324
Performance Shares [Member] | Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			750,000
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			7 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Performance Criteria, Maximum Vested Per Year, Number			375,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number			187,500
Share-based Compensation Arrangement by Share-based Payment Award, Option, Nonvested, Weighted Average Exercise Price, Ending Balance			$ 0.81
Restricted Stock Units (RSUs) [Member]
Share-based Compensation, Total				$ 210,176
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period				93,330
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period				3 years
Restricted Stock Units (RSUs) [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Per Person	25,000	25,000				25,000
Share-based Compensation, Total	$ 278,750	$ 197,500
Non-employee Stock Option [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, that Would Have Been Granted in Period						20,000
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance				$ 0.93			$ 0.93
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance				$ 3.17			$ 3.17
2015 Equity Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized							5,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance				2,279,315			2,279,315
2005 Equity Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance				2,193,502			2,193,502

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Note 13 - Share-based Compensation - Stock Option Activity (Details)	6 Months Ended
	Mar. 31, 2018 $ / shares shares
Number of Shares Outstanding, Beginning Balance (in shares) | shares	4,663,502
Weighted Average Exercise Price, Shares Outstanding, Beginning Balance (in dollars per share) | $ / shares	$ 2.16
Number of Shares Granted (in shares) | shares	3,500
Weighted Average Exercise Price, Shares Granted (in dollars per share) | $ / shares	$ 2.21
Number of Shares Forfeited/expired (in shares) | shares	(83,333)
Weighted Average Exercise Price, Shares Forfeited/expired (in dollars per share) | $ / shares	$ 2.84
Number of Shares Exercised (in shares) | shares	(110,852)
Weighted Average Exercise Price, Exercised (in dollars per share) | $ / shares	$ 1.68
Number of Shares Outstanding, Ending Balance (in shares) | shares	4,472,817
Weighted Average Exercise Price, Shares Outstanding, Ending Balance (in dollars per share) | $ / shares	$ 2.15
Number of Shares Exercisable (in shares) | shares	3,298,533
Weighted Average Exercise Price, Shares Exercisable (in dollars per share) | $ / shares	$ 2.23

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Note 13 - Share-based Compensation - Summary of Share-based Compensation Expense (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Allocated Share-based Compensation Expense, Total	$ 145,789	$ 177,402	$ 284,250	$ 642,151
Cost of Sales [Member]
Allocated Share-based Compensation Expense, Total	5,047	5,874	11,256	11,751
Selling, General and Administrative Expenses [Member]
Allocated Share-based Compensation Expense, Total	120,133	148,600	229,455	584,097
Research and Development Expense [Member]
Allocated Share-based Compensation Expense, Total	$ 20,609	$ 22,928	$ 43,539	$ 46,303

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Note 13 - Share-based Compensation - Weighted-average Assumptions (Details)	6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Volatility	45.40%
Risk-free interest rate	2.20%
Forfeiture rate	10.00%	10.00%
Dividend yield	0.00%	0.00%
Expected life in years (Year)	4 years 219 days
Minimum [Member]
Volatility		47.50%
Risk-free interest rate		1.70%
Expected life in years (Year)		3 years 292 days
Maximum [Member]
Volatility		53.70%
Risk-free interest rate		2.00%
Expected life in years (Year)		4 years 219 days

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Note 14 - Stockholders' Equity (Details Textual) - USD ($) shares in Thousands, $ / shares in Thousands, $ in Millions	6 Months Ended
	Mar. 31, 2018	Mar. 30, 2018	Mar. 31, 2017	Dec. 31, 2017
Common Stock, Dividends, Per Share, Declared		$ 0	$ 0
Share Buyback Program [Member]
Stock Repurchase Program, Authorized Amount				$ 4.0
Stock Repurchased and Retired During Period, Shares	0		0
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 3.9

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Note 14 - Stockholders' Equity - Summary of Changes in Stockholders' Equity (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Balances			$ 35,184,039
Share-based compensation expense			$ 284,250
Issuance of common stock upon exercise of stock options, net (in shares)			110,852
Issuance of common stock upon exercise of stock options, net			$ 185,718
Issuance of common stock upon vesting of restricted stock units
Other comprehensive loss			(12,513)
Net (loss)	$ 460,908	$ 298,350	(1,222,344)	$ (514,329)
Balances	$ 34,419,150		$ 34,419,150
Common Stock [Member]
Balances (in shares)			32,158,436
Balances			$ 322
Issuance of common stock upon exercise of stock options, net (in shares)			110,852
Issuance of common stock upon vesting of restricted stock units (in shares)			125,000
Issuance of common stock upon vesting of restricted stock units
Balances (in shares)	32,394,288		32,394,288
Balances	$ 322		$ 322
Additional Paid-in Capital [Member]
Balances			87,956,839
Share-based compensation expense			284,250
Issuance of common stock upon exercise of stock options, net			185,718
Issuance of common stock upon vesting of restricted stock units
Balances	88,426,807		88,426,807
Retained Earnings [Member]
Balances			(52,771,853)
Issuance of common stock upon vesting of restricted stock units
Net (loss)			(1,222,344)
Balances	(53,994,197)		(53,994,197)
AOCI Attributable to Parent [Member]
Balances			(1,269)
Issuance of common stock upon vesting of restricted stock units
Other comprehensive loss			(12,513)
Balances	$ (13,782)		$ (13,782)

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Note 15 - Net Loss Per Share - Basic and Diluted Loss Per Share (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Numerator:
Net income (loss)	$ 460,908	$ 298,350	$ (1,222,344)	$ (514,329)
Denominator:
Weighted average common shares outstanding - basic and diluted (in shares)	32,275,647	31,800,103	32,212,286	31,800,103
Assumed exercise of dilutive options and warrants (in shares)	1,023,559	63,799
Diluted (in shares)	33,299,206	31,863,902	32,212,286	31,800,103
Net income (loss) per common share - basic and diluted (in dollars per share)	$ 0.01	$ 0.01	$ (0.04)	$ (0.02)
Diluted income (loss) per common share (in dollars per share)	$ 0.01	$ 0.01	$ (0.04)	$ (0.02)
Antidilutive securities (in shares)	1,984,580	3,311,836	2,924,897	3,239,836
Employee Stock Option [Member]
Denominator:
Antidilutive securities (in shares)	1,766,250	3,061,836	2,706,567	2,989,836
Restricted Stock Units (RSUs) [Member]
Denominator:
Antidilutive securities (in shares)	218,330	250,000	218,330	250,000

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Note 16 - Segment Information (Details Textual)	6 Months Ended
	Mar. 31, 2018
Number of Reportable Segments	2
Number of Operating Segments	2

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Note 16 - Segment Information - Segment Disclosures (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Sep. 30, 2017
Revenues	$ 7,868,448	$ 5,742,391	$ 15,497,015	$ 8,683,726
Operating Income	604,154	435,561	1,595,260	(893,774)
Depreciation and amortization	(133,704)		(193,809)
Interest expense	(9,815)		(9,815)
Income tax expense	(158,451)	$ (169,285)	(2,867,339)	$ 317,243
Long-lived assets	4,921,001		4,921,001		$ 565,292
Total assets	40,889,487		40,889,487		38,857,800
Intersegment Eliminations [Member]
Revenues	89,818		89,818
LRAD Segment [Member]
Revenues	7,453,794		15,082,361
Operating Income	579,498		1,570,604
Depreciation and amortization	(64,660)		(124,765)
Interest expense
Income tax expense	(158,451)		(2,867,339)
Long-lived assets	527,872		527,872		565,292
Total assets	35,471,343		35,471,343		38,857,800
LRAD Segment [Member] | Intersegment Eliminations [Member]
Revenues
Genasys Segment [Member]
Revenues	414,654		414,654
Operating Income	24,656		24,656
Depreciation and amortization	(69,044)		(69,044)
Interest expense	(9,815)		(9,815)
Income tax expense
Long-lived assets	4,393,129		4,393,129
Total assets	5,418,144		5,418,144
Genasys Segment [Member] | Intersegment Eliminations [Member]
Revenues	$ 89,818		$ 89,818

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Note 17 - Major Customers (Details Textual) - Customer Concentration Risk [Member]	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Sales Revenue, Net [Member] | Customer 1 [Member]
Concentration Risk, Percentage	40.00%	23.00%	33.00%	15.00%
Sales Revenue, Net [Member] | Customer 2 [Member]
Concentration Risk, Percentage	15.00%	11.00%	16.00%	10.00%
Sales Revenue, Net [Member] | Customer 3 [Member]
Concentration Risk, Percentage	14.00%
Accounts Receivable [Member] | Customer 1 [Member]
Concentration Risk, Percentage				41.00%
Accounts Receivable [Member] | Customer 2 [Member]
Concentration Risk, Percentage				24.00%
Accounts Receivable [Member] | Customer 3 [Member]
Concentration Risk, Percentage	56.00%			14.00%

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Note 17 - Major Customers - Schedule of Major Customers (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Revenues	$ 7,868,448	$ 5,742,391	$ 15,497,015	$ 8,683,726
Americas [Member]
Revenues	5,051,072	2,099,151	11,104,110	3,721,509
Asia Pacific [Member]
Revenues	2,255,856	2,923,825	3,277,762	3,908,425
Europe, Middle East and Africa [Member]
Revenues	$ 561,520	$ 719,415	$ 1,115,143	$ 1,053,792

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Label	Element	Value
us-gaap_RestrictedCashAndCashEquivalentsAtCarryingValue	us-gaap_RestrictedCashAndCashEquivalentsAtCarryingValue	$ 363,745
us-gaap_RestrictedCashAndCashEquivalentsAtCarryingValue	us-gaap_RestrictedCashAndCashEquivalentsAtCarryingValue	39,466
us-gaap_RestrictedCashAndCashEquivalentsNoncurrent	us-gaap_RestrictedCashAndCashEquivalentsNoncurrent	104,146
us-gaap_RestrictedCashAndCashEquivalentsNoncurrent	us-gaap_RestrictedCashAndCashEquivalentsNoncurrent