Genasys Inc. (GNSS) boosts revenue yet turns to stockholders’ deficit and adds high-cost debt
Rhea-AI Filing Summary
Genasys Inc. reported higher year-to-date revenue but remains loss-making and now in a stockholders’ deficit position. For the nine months ended June 30, 2026, revenue rose to $39.9 million from $23.7 million a year earlier, driven mainly by Hardware sales of $32.5 million and Software revenue of $7.3 million. Gross profit increased to $22.2 million, and the company narrowed its net loss to $4.8 million from $16.7 million, with basic and diluted loss per share improving to $0.11 from $0.37.
For the quarter, revenue was $7.3 million versus $9.9 million in the prior-year period, and the net loss was $4.7 million versus $6.5 million. Operating cash use improved to $5.0 million year-to-date from $11.3 million. Cash, cash equivalents and restricted cash fell to $3.7 million, while total liabilities were $59.6 million versus total assets of $58.3 million, resulting in stockholders’ deficit of $1.3 million. The company relies on Term Loans and a new $4.3 million June 2026 loan at 18% interest for liquidity but also reports contract liabilities and remaining performance obligations totaling $21.4 million, most expected to convert to revenue within 12 months, including significant work on the Puerto Rico Early Warning System project.
Positive
- Revenue for the nine months ended June 30, 2026 increased to $39.9 million from $23.7 million in 2025, reflecting strong growth in Hardware sales to $32.5 million and Software revenue of $7.3 million.
- Net loss for the nine months narrowed to $4.8 million from $16.7 million, and operating cash outflow improved to $5.0 million from $11.3 million, indicating better operating performance and cash efficiency.
- Remaining performance obligations totaled $21.4 million as of June 30, 2026, with about $20.1 million, or 94%, expected to be recognized as revenue within 12 months, providing near-term revenue visibility.
Negative
- Total liabilities of $59.6 million exceeded total assets of $58.3 million, resulting in a stockholders’ deficit of $1.3 million compared with positive equity of $2.2 million at September 30, 2025.
- Cash, cash equivalents and restricted cash declined to $3.7 million from $8.6 million, while the company continues to report net losses, highlighting liquidity pressure.
- Term debt remains significant and expensive, including a $15.0 million Close Date Term Loan under fair value accounting and a new $4.3 million June 2026 loan bearing 18% annual interest plus an exit fee.
- The company breached a minimum cash covenant on March 18, 2026 and required a lender waiver, which increased principal by $56, underscoring dependence on lender forbearance.
Filing Explained
Existing holders face potential dilution from 7,813,858 outstanding options, RSUs, and warrants; the filing does not report those shares as newly issued.
This Form 10-Q is an unaudited quarterly report covering the period ended
Options, RSUs, and warrants covering 7,813,858 shares were outstanding at that date, creating potential dilution for existing common holders if those instruments produce additional shares.
The filing separately reports 45,542,009 common shares outstanding at June 30, including shares issued through option exercises and RSU vesting during the nine-month period.
The June Term Loan remained outstanding with
On the same balance sheet, cash and cash equivalents were
Future holder exposure should be tracked through the 2025 Equity Plan, which had 4,745,676 shares subject to outstanding awards and 4,542,151 shares available for grant at June 30; warrant exercises are a separate potential source of additional shares.
Key Figures
Key Terms
fair value option financial
Term Loans financial
warrant liabilities financial
remaining performance obligations financial
Puerto Rico EWS Project financial
Earnings Snapshot
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did Genasys Inc. (GNSS) perform financially for the nine months ended June 30, 2026?
What was Genasys Inc. (GNSS) revenue and net loss for the quarter ended June 30, 2026?
What is Genasys Inc. (GNSS) current liquidity and debt position?
Why does Genasys Inc. (GNSS) show a stockholders’ deficit as of June 30, 2026?
What near-term revenue visibility does Genasys Inc. (GNSS) have from existing contracts?
How significant is the Puerto Rico EWS Project to Genasys Inc. (GNSS)?
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
|
|
(Address of principal executive offices) |
(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which securities are registered |
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. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
☒ |
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
The number of shares of Common Stock, $0.00001 par value, outstanding on August 7, 2026 was
Table of Contents
|
|
Page |
|
|
|
PART I. |
FINANCIAL INFORMATION |
1 |
|
|
|
Item 1. |
Financial Statements (Unaudited) |
1 |
|
Condensed Consolidated Balance Sheets |
1 |
|
Condensed Consolidated Statements of Operations |
2 |
|
Condensed Consolidated Statements of Comprehensive Loss |
3 |
|
Condensed Consolidated Statements of Cash Flows |
4 |
|
Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
40 |
Item 4. |
Controls and Procedures |
40 |
|
|
|
PART II. |
OTHER INFORMATION |
41 |
|
|
|
Item 1. |
Legal Proceedings |
41 |
Item 1A. |
Risk Factors |
41 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
41 |
Item 3. |
Defaults Upon Senior Securities |
41 |
Item 4. |
Mine Safety Disclosures |
41 |
Item 5. |
Other Information |
42 |
Item 6. |
Exhibits |
43 |
Signatures |
44 |
|
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Genasys Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
|
|
June 30, |
|
|
September 30, |
|
||
|
|
(Unaudited) |
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Short-term marketable securities |
|
|
|
|
|
|
||
Accounts receivable, net of allowance for credit losses of $ |
|
|
|
|
|
|
||
Contract assets |
|
|
|
|
|
|
||
Inventories, net |
|
|
|
|
|
|
||
Prepaid expenses and other |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Long-term restricted cash |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Operating lease right of use assets, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Customer deposit |
|
|
|
|
|
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Operating lease liabilities, current portion |
|
|
|
|
|
|
||
Short-term debt payable |
|
|
|
|
|
|
||
Notes payable, at fair value - short-term |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Notes payable, at fair value - long-term |
|
|
|
|
|
|
||
Warrant liability |
|
|
|
|
|
|
||
Deferred revenue, noncurrent |
|
|
|
|
|
|
||
Operating lease liabilities, noncurrent |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Stockholders' (deficit) equity: |
|
|
|
|
|
|
||
Preferred stock, $ |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive income |
|
|
|
|
|
|
||
Total stockholders' (deficit) equity |
|
|
( |
) |
|
|
|
|
Total liabilities and stockholders' (deficit) equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements
1
Genasys Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share and share amounts)
(Unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contract and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in fair value of Term Loans and Warrants |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Other |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other (expense) income, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share - basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements
2
Genasys Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(Unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Unrealized foreign currency gain (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Change in fair value of Term Loans related to credit risk |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements
3
Genasys Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
|
|
Nine Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Operating Activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Warranty provision (settlement) |
|
|
|
|
|
( |
) |
|
Inventory obsolescence |
|
|
|
|
|
|
||
Loss on disposition of fixed assets |
|
|
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
|
||
Gain on change in fair value of Warrants |
|
|
( |
) |
|
|
( |
) |
Loss on change in fair value of Term Loans |
|
|
|
|
|
|
||
Loss on issuance of First Amendment Term Loan |
|
|
|
|
|
|
||
Amortization of operating lease right of use asset |
|
|
|
|
|
|
||
Accretion of investment of marketable securities |
|
|
|
|
|
( |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Contract assets |
|
|
|
|
|
( |
) |
|
Inventories, net |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
|
||
Customer deposit |
|
|
( |
) |
|
|
|
|
Accrued and other liabilities |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Investing Activities: |
|
|
|
|
|
|
||
Purchases of marketable securities |
|
|
|
|
|
( |
) |
|
Proceeds from maturities of marketable securities |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Net cash provided by investing activities |
|
|
|
|
|
|
||
Financing Activities: |
|
|
|
|
|
|
||
Proceeds from issuance of June Term Loan, net of $ |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Proceeds from issuance of First Amendment Term Loan |
|
|
|
|
|
|
||
Repayment of First Amendment Term Loan principal |
|
|
( |
) |
|
|
|
|
Shares retained for payment of taxes in connection with exercise of stock options |
|
|
( |
) |
|
|
|
|
Shares retained for payment of taxes in connection with settlement of restricted stock units |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of foreign exchange rate on cash |
|
|
( |
) |
|
|
|
|
Net (decrease) increase in cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash, current portion |
|
|
|
|
|
|
||
Long-term restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash shown in the consolidated balance sheets |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements
4
Genasys Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(Unaudited)
|
|
Nine Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Noncash investing and financing activities: |
|
|
|
|
|
|
||
Change in unrealized loss on marketable securities |
|
$ |
|
|
$ |
( |
) |
|
Purchases of property and equipment included in accounts payable and |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid for taxes |
|
$ |
|
|
$ |
|
||
5
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
1. OPERATIONS
Genasys Inc. (“Genasys” or the “Company”) is a global provider of Protective Communications™ solutions including its Genasys Protect™ software platform and Genasys Long Range Acoustic Devices (“LRAD”). Genasys’ unified platform receives information from a wide variety of sensors and Internet-of-Things (“IoT”) inputs to collect real-time information on developing and active emergency situations. The Company’s customers can use this information to create and disseminate alerts, warnings, notifications, and instructions through multiple channels before, during, and after public safety and enterprise threats, critical events, and other crisis situations.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
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 financial statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended September 30, 2025, included in the Company’s Annual Report on Form 10-K, as filed with the SEC on December 15, 2025. The accompanying condensed consolidated balance sheet as of September 30, 2025, has been derived from the audited consolidated balance sheet as of September 30, 2025, 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
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions (e.g., share-based compensation valuation, allowance for doubtful accounts for expected credit losses, fair value of term loans and warrant liabilities, valuation of inventory, goodwill and intangible assets, warranty reserve, valuation of operating lease right of use assets and operating lease liabilities, accrued bonus and valuation allowance related to deferred tax assets) that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and that affect the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.
Cash, cash equivalents and restricted cash
The Company considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. As of June 30, 2026, the amount of cash and cash equivalents was $
The Company considers any amounts pledged as collateral or otherwise restricted for use in current operations to be restricted cash. In addition, the Company excludes from cash and cash equivalents cash required to fund specific future contractual obligations related to business combinations. Restricted cash is classified as a current asset unless amounts are not expected to be released and available for use in operations within one year. As of June 30, 2026 and September 30, 2025, restricted cash was $
Accounts receivable and allowance for credit losses
The Company maintains an allowance for credit losses primarily for estimated losses resulting from the inability or failure of individual customers to make required payments. The Company maintains an allowance under Accounting Standards Codification (“ASC”) Topic 326, based on historical losses, changes in payment history, customer-specific information, current economic conditions, and reasonable and supportable forecasts of future economic conditions. The allowance under ASC 326 is updated as additional losses are incurred or information becomes available related to the customer or economic conditions.
6
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
The Company’s allowance for credit losses was $
The Company writes off accounts receivable based on the age of the receivable and the facts and circumstances surrounding the customer and reasons for non-payment. Actual write-offs might differ from the recorded allowance. The Company’s historical credit losses have not been significant due to this dispersion and the financial stability of the Company’s customers. The Company considers its historical credit losses to be immaterial to its business and, therefore, has not provided all the disclosures otherwise required by the standard.
Term Loans
The Company determined that it is eligible for the fair value option (“FVO”) election in connection with the Term Loans (as defined below). The Term Loans meet the definition of a “recognized financial liability” which is an acceptable financial instrument eligible for the FVO under ASC 825-10-15-4 and do not meet the definition of any of the financial instruments found within ASC 825-10-15-5 that are not eligible for the FVO. The FVO election was made to enhance the relevance and transparency of information presented related to the features embedded in the Term Loan. At the date of issuance, the fair value of the Term Loans was estimated using a discounted cash flow method. Changes in the fair value of the Term Loan, other than changes associated with the Company's own credit risk, are recorded as gains or losses in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period. Changes in fair value attributable to the Company’s own credit risk are recorded in other comprehensive income or loss in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period. Under the FVO, debt issuance costs are expensed as incurred and recorded in other expenses in the Company’s condensed consolidated statements of operations and comprehensive loss.
Warrants
The warrants issued in conjunction with the Close Date Term Loan are classified as liabilities under ASC 815-40 due to not being indexed to the Company’s stock. The warrants are measured at fair value using a Monte Carlo simulation to capture the down-round provision in the warrant agreement. Changes in fair value of the warrants, are recorded as gains or losses in other income in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Recently adopted pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, which means that it will be
Accounting pronouncements not yet adopted
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as disaggregated information on income tax paid. The standard is effective for fiscal years beginning after December 15, 2024, which means it will be effective for the Company’s fiscal year beginning October 1, 2025. The Company expects to adopt the standard in its consolidated financial statements for the fiscal year ending September 30, 2026 and is currently evaluating the impact of the adoption; however, the Company does not expect the adoption to have a material effect on its consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires public business entities to disclose, in tabular form, the disaggregation of relevant income statement expense captions into specified natural expense categories. In addition, in January 2025, the FASB issued ASU No. 2025-01 “ Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Interim Disclosure Effective Date Clarification” (“ASU 2025-01”). ASU 2025-01 clarifies that the new disaggregation disclosure requirements are effective for annual reporting periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027,which means it will be effective for the Company’s annual periods beginning October 1, 2027, and interim periods beginning October 1, 2028. The Company is currently evaluating the impact these updated standards will have on its disclosures within the consolidated financial statements.
In February 2025, the FASB issued ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” The ASU provides clarifications and targeted improvements related to the application of the CECL model to trade receivables and contract assets. ASU 2025-05 is effective for fiscal years beginning after
7
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
December 15, 2025, including interim periods within those years. For the Company, this standard will be effective beginning October 1, 2026. The Company is currently evaluating the impact of this ASU, but does not expect it to have a material effect on its consolidated financial statements.
4. REVENUE RECOGNITION
ASC 606, Revenue from Contracts with Customers (“ASC 606”), outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized:
ASC 606 requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services.
The Company derives its revenue from the sale of products to customers, contracts, software license fees, other services and freight. The Company sells its products through its direct sales force and through authorized resellers and system integrators. The Company recognizes revenue for goods, including software, when all the significant risks and rewards have been transferred to the customer, no continuing managerial involvement usually associated with ownership of the goods is retained, no effective control over the goods sold is retained, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transactions will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Software license revenue, maintenance and/or software development service fees may be bundled in one arrangement or may be sold separately.
Product revenue
Product revenue is recognized as a distinct single performance obligation when products are tendered to a carrier for delivery, which represents the point in time that the Company’s customer obtains control of the products. A smaller portion of product revenue is recognized when the customer receives delivery of the products. A portion of products are sold through resellers and system integrators based on firm commitments from an end user, and as a result, resellers and system integrators carry little or no inventory. The Company’s customers do not have a right to return product unless the product is found defective and therefore the Company’s estimate for returns has historically been insignificant.
Long-term contracts - over-time revenue recognition using input cost measures
We recognize revenue for our Puerto Rico Early Warning System (EWS) project (the “Puerto Rico EWS Project”) over time in accordance with ASC 606-10-25-27(c), using a cost-to-cost input method that includes a zero-margin approach for uninstalled materials. As hardware costs are incurred, we record an equal amount of revenue, resulting in zero margin. We then measure overall project progress by comparing labor costs incurred to total estimated labor costs, excluding hardware from the calculation. This labor-based percentage of completion is applied to determine both the portion of hardware margin to be recognized on previously recorded zero-margin hardware and the amount of non-hardware revenue to record for the period.
Time-based licensed software
The time-based license agreements include the use of a software license for a fixed term, generally one-year, and maintenance and support services during the same period. The Company does not sell time-based licenses without maintenance and support services and therefore revenues for the entire arrangements are recognized on a straight-line basis over the term.
Warranty, maintenance and services
The Company offers extended warranty, maintenance and other services. Extended warranty and maintenance contracts are offered with terms ranging from one to several years, which provide repair and maintenance services after expiration of the original one-year warranty term. Revenues from separately priced extended warranty and maintenance contracts are recognized based on time elapsed over the service period and classified as contract and other revenues. Revenue from other services such as training or installation is recognized when the service is completed.
8
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
Multiple performance obligation arrangements
The Company has entered into a number of arrangements that contain multiple performance obligations, such as the sale of a product or perpetual software licenses that may include maintenance and support (included in price of perpetual licenses) and time-based software licenses (that include embedded maintenance and support, both of which may be sold with software development services, training, and other product sales). In some cases, the Company delivers software development services bundled with the sale of the software. In an arrangement with multiple performance obligations, the Company allocates the fair value of each element within the arrangement, including software and software-related services such as maintenance and support, using the known stand-alone selling price, or if unknown, an expected cost-plus margin approach to determine the stand-alone selling price. In general, elements in such arrangements are also sold on a stand-alone basis and stand-alone selling prices are observable.
Revenue is allocated to each deliverable based on the fair value of each individual element and is recognized when the revenue recognition criteria described above are met, except for time-based licenses which are not unbundled. When software development services are performed and are considered essential to the functionality of the software, the Company recognizes revenue from the software development services on a stage of completion basis, and the revenue from the software when the related development services have been completed.
The Company disaggregates revenue by reporting segment (Hardware and Software) and geographically to depict the nature of revenue in a manner consistent with its business operations and to be consistent with other communications and public filings. Refer to “Note 18. Segment Information” and “Note 19. Major Customers, Suppliers and Related Information” for additional details of revenues by reporting segment and disaggregation of revenue.
Variable consideration
The transaction price may include variable consideration, such as rebates, discounts, and returns, estimated using the expected value or most likely amount method. These estimates are based on historical experience and contractual terms and are constrained to avoid significant revenue reversals. Adjustments are recognized when new information becomes available, and variable consideration is allocated to performance obligations as applicable.
Contract assets and liabilities
The Company enters into contracts to sell products and provide services and recognizes contract assets and liabilities that arise from these transactions. The Company recognizes revenue and corresponding accounts receivable according to ASC 606 and, at times, recognizes revenue in advance of the time when contracts give the Company the right to invoice a customer. Sales commissions are considered incremental and recoverable costs of obtaining a contract with a customer. Subscription related commission costs are deferred and then amortized on a straight-line basis over the period of benefit. The Company may also receive consideration, per terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as a contract liability. Additionally, the Company may receive payments, most typically for service and warranty contracts, at the onset of the contract and before the services have been performed. In such instances, a deferred revenue liability is recorded. The Company recognizes these contract liabilities as revenue after all revenue recognition criteria are met. The table below reflects the balances of contract liabilities as of June 30, 2026 and September 30, 2025, including the change between the periods. The current portion of contract liabilities and the noncurrent portion are included in “Accrued liabilities” and “Other liabilities, noncurrent”, respectively, on the accompanying condensed consolidated balance sheets. Refer to “Note 9. Accrued and Other Liabilities” for additional details. Contract asset balance was $
The Company’s contract liabilities were as follows:
|
|
Customer |
|
|
Deferred |
|
|
Total |
|
|||
Balance as of September 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
New performance obligations |
|
|
|
|
|
|
|
|
|
|||
Recognition of revenue as a result of satisfying performance obligations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Less: non-current portion |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Current portion as of June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
9
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
Remaining performance obligations
Remaining performance obligations related to ASC 606 represent the aggregate transaction price allocated to performance obligations under an original contract with a term greater than one year, which are fully or partially unsatisfied at the end of the period.
As of June 30, 2026, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $
For the nine months ended June 30, 2026, the Company recognized $
Practical expedients
In cases where the Company is responsible for shipping after the customer has obtained control of the goods, the Company has elected to treat these activities as fulfillment activities rather than as a separate performance obligation. Additionally, the Company has elected to capitalize the cost to obtain a contract only if the period of amortization would be longer than one year. The Company only gives consideration to whether a customer agreement has a financing component if the period of time between transfer of goods and services and customer payment is greater than one year. The Company also utilizes the “as invoiced” practical expedient in certain cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value provided to the customer.
5. FAIR VALUE MEASUREMENTS
The Company’s financial instruments consist principally of cash equivalents, short and long-term marketable securities, accounts receivable, accounts payable, Term Loans, and warrant liabilities. The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:
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 were determined based on Level 1 and Level 2 inputs. The valuation techniques used to measure the fair value of the “Level 2” instruments were based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. The valuation techniques used to measure the Term Loans and warrant liabilities were determined based on Level 3 inputs not observable in the market and significant to the instruments’ valuations. Refer to “Note 11. Term Loans and Warrant Liabilities”, for additional information regarding the valuation techniques and significant inputs used.
Other than the Term Loans and the warrant liabilities, the Company did not have any financial instruments in the Level 3 category as of June 30, 2026 or September 30, 2025. The Company believes that the recorded values of its other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations. There have been no changes in Level 1, Level 2, and Level 3 and no changes in valuation techniques for financial instruments measured at fair value on a recurring basis for the periods ended June 30, 2026 and September 30, 2025.
Instruments measured at fair value on a recurring basis
Cash equivalents and marketable securities:
10
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
|
|
June 30, 2026 |
|
|||||||||||||||||||||||||
|
|
Cost |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
|
Cash |
|
|
Short-term |
|
|
Long-term |
|
|||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
September 30, 2025 |
|
|||||||||||||||||||||||||
|
|
Cost |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
|
Cash |
|
|
Short-term |
|
|
Long-term |
|
|||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
The Company manages debt investments as a single portfolio of highly marketable securities that is intended to be available to meet current cash requirements. Historically, the gross unrealized losses related to the Company’s portfolio of available-for-sale debt securities were immaterial, and primarily due to normal market fluctuations and not due to increased credit risk or other valuation concerns. There were
As of June 30, 2026 and September 30, 2025, there were
Instruments measured at fair value on a non-recurring basis
Nonfinancial assets: Nonfinancial assets such as goodwill, other intangible assets, long-lived assets held and used, and right-of-use (“ROU”) assets are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized or for a business combination.
Goodwill and intangible assets are recognized at fair value during the period in which an acquisition is completed, from updated estimates during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for intangible assets acquired, were based on Level 3 inputs. The Company estimates the fair value of these long-lived assets on a non-recurring basis based on a market valuation approach, engaging independent valuation experts to assist in the determination of fair value. There were
The following table presents nonfinancial assets that were subject to fair value measurement during the twelve months ended September 30, 2025. Certain intangible assets, operating lease ROU assets and goodwill are subject to foreign currency translation adjustments.
|
|
|
|
|
Fair Value Measurements at September 30, 2025 |
|
||||||||||||||
Carrying Value |
|
Carrying Value |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Gain (Loss) |
|
|||||
Operating Lease ROU Asset |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
11
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
6. INVENTORIES, NET
Inventories, net consisted of the following:
|
|
June 30, |
|
|
September 30, |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Finished goods |
|
|
|
|
|
|
||
Work in process |
|
|
|
|
|
|
||
Inventories, gross |
|
|
|
|
|
|
||
Reserve for obsolescence |
|
|
( |
) |
|
|
( |
) |
Inventories, net |
|
$ |
|
|
$ |
|
||
7. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
|
|
June 30, |
|
|
September 30, |
|
||
Office furniture and equipment |
|
$ |
|
|
$ |
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Vehicles |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation and amortization expense for property and equipment was $
8. GOODWILL AND INTANGIBLE ASSETS
Goodwill is attributable to the acquisitions of Genasys Spain, Zonehaven, Evertel, and the Amika Mobile asset purchase and is due to combining the integrated emergency critical communications, mass messaging solutions and software development capabilities with existing hardware products for enhanced offerings and the skill level of the acquired workforces. The Company periodically reviews goodwill for impairment in accordance with relevant accounting standards. As of June 30, 2026 and September 30, 2025, goodwill was $
The changes in the carrying amount of goodwill by segment as of June 30, 2026, were as follows:
|
|
Hardware |
|
|
Software |
|
|
Total |
|
|||
Balance as of September 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Currency translation |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The changes in the carrying amount of intangible assets by segment as of June 30, 2026, were as follows:
|
|
Hardware |
|
|
Software |
|
|
Total |
|
|||
Balance as of September 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
12
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
Intangible assets and goodwill related to Genasys Spain are translated from Euros to U.S. dollars at the balance sheet date. The net impact of foreign currency exchange differences arising during the period related to goodwill and intangible assets was a decrease of $
The Company’s consolidated intangible assets consisted of the following:
|
|
June 30, |
|
|
September 30, |
|
||
Technology |
|
$ |
|
|
$ |
|
||
Customer relationships |
|
|
|
|
|
|
||
Trade name portfolio |
|
|
|
|
|
|
||
Patents |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
As of June 30, 2026, future amortization expense was as follows:
Fiscal year ending September 30, |
|
|
|
|
2026 (remaining three months) |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total estimated amortization expense |
|
$ |
|
|
Amortization expense was $
9. PREPAID EXPENSES AND OTHER
Prepaid expenses and other current assets consisted of the following:
|
|
June 30, |
|
|
September 30, |
|
||
Deposits for inventory |
|
$ |
|
|
$ |
|
||
Puerto Rico sales tax receivable |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Prepaid commissions |
|
|
|
|
|
|
||
Spain value-added tax and bank withholdings |
|
|
|
|
|
|
||
Dues and subscriptions |
|
|
|
|
|
|
||
Prepaid professional services |
|
|
|
|
|
|
||
Trade shows and travel |
|
|
|
|
|
|
||
Canadian goods and services and harmonized sales tax receivable |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Deposits for inventory
Deposits for inventory consisted of cash payments to vendors for inventory to be delivered in the future. The balance as of June 30, 2026 included $
Puerto Rico sales tax receivable
Puerto Rico sales tax receivable represents sales and use tax paid on importations into Puerto Rico that is recoverable from the Puerto Rico Treasury Department (“Hacienda”). The balance is eligible to be credited, refunded, or applied to other tax obligations
13
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
and is expected to be applied against the Company’s Puerto Rico income tax liability in its annual return.
Prepaid insurance
Prepaid insurance consisted of premiums paid for health, commercial and corporate insurance. These premiums are amortized on a straight-line basis over the term of the agreements.
Prepaid commissions
Prepaid commissions represented the current portion of sales commissions paid in connection with obtaining a contract with a customer. These costs are deferred and are amortized on a straight-line basis over the period of benefit, which is typically between and
Spain value-added tax receivable and bank withholdings
Spain value-added tax (“VAT”) is a consumption tax applied to most goods and services. Registered businesses can recover VAT paid on eligible purchases by submitting periodic tax returns. The VAT receivable represents the amount refundable from the Spanish tax authorities.
Dues and subscriptions
Dues and subscriptions consisted of payments made in advance for software subscriptions and trade and professional organizations. These payments are amortized on a straight-line basis over the term of the agreements.
Prepaid professional services
Prepaid professional services consisted of payments made in advance for services such as accounting and legal services.
Trade shows and travel
Trade shows and travel consisted of payments made in advance for trade show events.
Canadian goods and services and harmonized sales tax receivable
The goods and services tax and harmonized sales tax (“GST/HST”) is a Canadian value-added tax that applies to many goods and services. Registrants may claim refundable tax credits for GST/HST incurred through filing periodic tax returns. This GST/HST receivable is a receivable from the Canadian Revenue Agency.
10. ACCRUED AND OTHER LIABILITIES
Accrued liabilities consisted of the following:
|
|
June 30, |
|
|
September 30, |
|
||
Payroll and related |
|
$ |
|
|
$ |
|
||
Deferred revenue |
|
|
|
|
|
|
||
Accrued contract costs |
|
|
|
|
|
|
||
Income tax liability |
|
|
|
|
|
|
||
Warranty reserve |
|
|
|
|
|
|
||
Short-term provision |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Payroll and related
Accrued payroll and related obligations consisted primarily of accrued bonus, accrued vacation, accrued sales commissions and benefits.
Deferred revenue
Deferred revenue as of June 30, 2026, included prepayments from customers for services, including extended warranty, scheduled to be performed within the next twelve months. Deferred extended warranty consisted of warranties purchased in excess of the Company’s standard warranty. Extended warranties typically range from to
Accrued contract costs
Accrued contract costs consisted of accrued expenses for contracting a third-party service provider to fulfill repair and maintenance obligations required under a contract with a foreign military for units sold in prior periods. Payments to the service provider will be made annually upon completion of each year of service. The Company is contractually obligated to provide such
14
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
repair and maintenance services through November 2027. These services are being recorded in cost of revenues to correspond with the revenues for these services.
Warranty reserve
Changes in the warranty reserve and extended warranty were as follows:
|
|
Nine Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Warranty provision |
|
|
|
|
|
|
||
Warranty settlements |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
$ |
|
||
The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the adequacy of the provision for warranty costs each reporting period and adjusts the accrued warranty liability to an amount equal to estimated warranty expense for products currently under warranty.
11. TERM LOANS AND WARRANT LIABILITIES
May 2024 Term Loan
On May 13, 2024, the Company entered into a Term Loan and Security Agreement (the “Loan Agreement”), pursuant to which the Company received $
On May 9, 2025, the Company entered into a First Amendment to Term Loan and Security Agreement (the “First Amendment”), which amended the terms of the Loan Agreement. Pursuant to the First Amendment, the lenders (the “Lenders”) agreed to: (i) extend an additional term loan to the Company in the aggregate principal amount of $
The Loan Agreement contains customary representation and warranties of the Company, affirmative and negative covenants, including without limitation restricting the Company from certain distributions, investments, indebtedness, sales of assets, loans and payments, of the Company, events of default and remedies thereupon, indemnification obligations of the Company, termination provisions, and other obligations and rights of the parties. All obligations under the Loan Agreement are secured by substantially all of the Company’s assets. On March 18, 2026, the Company was not in compliance with the minimum cash requirement covenant in the Loan Agreement and signed a waiver with the Lenders in connection with such noncompliance. In connection with the waiver, the outstanding principal balance was increased by $
On May 12, 2026, the Company entered into a Second Amendment to Term Loan and Security Agreement (the “Second Amendment”), which extended the maturity date for the Close Date Term Loan to
The Company determined that the Term Loans were eligible for the FVO and accordingly elected the FVO for the Term Loans. This election was made because of operational efficiencies in valuing and reporting for the Term Loans in their entirety at each reporting date. As a result of electing the FVO, the Term Loans were recorded at fair value at issuance with subsequent remeasurements at fair value each reporting period. The Company recognizes the resulting gain or loss related to changes to the fair value of the Term Loans, other than changes associated with the Company’s own credit risk, on the condensed consolidated statements of operations within other income. The change in fair value related to the accrued interest components of the Term Loans is also included within other income on the condensed consolidated statement of operations. The change in fair value attributable to the Company’s own credit risk is recorded in other comprehensive income or loss in the Company’s condensed consolidated statements of operations and comprehensive loss. Direct costs and fees related to the Term Loans were expensed as incurred within other income on the condensed consolidated statement of operations.
15
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
Close Date Term Loan
The principal amount of the Close Date Term Loan is $
The Company utilized the discounted cash flow method with reliance on the Monte Carlo simulation model to determine the fair value of the Close Date Term Loan at issuance and subsequently at each reporting date. The fair value of the Close Date Term Loan was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. One of the significant fair value assumptions is the discount rate, which was
A summary of the changes in the fair value of the Close Date Term Loan Level 3 rollforward is as follows:
|
|
Nine Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Change in fair value related to non-credit risk recorded within |
|
|
|
|
|
|
||
Change in fair value related to credit risk in other comprehensive income |
|
|
|
|
|
( |
) |
|
Ending balance |
|
$ |
|
|
$ |
|
||
First Amendment Term Loan
The principal of the First Amendment Term Loan was $
The Company utilized the discounted cash flow method with reliance on the Monte Carlo simulation model to determine the fair value of the First Amendment Term Loan at issuance and subsequently at each reporting date. The fair value of the First Amendment Term Loan was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. One of the significant fair value assumptions is the discount rate, which was
The Company recognized a loss on issuance of the First Amendment Term Loan of $
The Company paid off the First Amendment Term Loan in December 2025.
|
|
Nine Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Transfer in |
|
|
|
|
|
|
||
Change in fair value related to non-credit risk recorded within |
|
|
|
|
|
|
||
Payment |
|
|
( |
) |
|
|
|
|
Ending balance |
|
$ |
|
|
$ |
|
||
16
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
Warrant Liabilities
The Company issued Warrants to the Lenders to purchase up to
The Warrants are recognized as liabilities in the condensed consolidated balance sheet and are subject to remeasurement at each balance sheet date from issuance. Any change in fair value is recognized in other income within the condensed consolidated statement of operations.
The Company utilized the Monte Carlo simulation model to determine the fair value of the warrant liabilities at issuance and subsequently at each reporting date. The fair value of the warrant liabilities is the present value of the warrant payoff at expiration; discounted at the risk-free rate. The fair value of the warrant liabilities was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.
The following is a summary of the fair value assumptions applied in determining the initial fair value and the subsequent fair value of the warrant liabilities as of each respective date:
|
|
June 30, |
|
|
September 30 |
|
||
|
|
2026 |
|
|
2025 |
|
||
Discount Rate |
|
|
% |
|
|
% |
||
Volatility |
|
|
% |
|
|
% |
||
A summary of the changes in the fair value of the warrant liabilities Level 3 rollforward is as follows:
|
|
Nine Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Change in fair value in |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
$ |
|
||
June 2026 Term Loan
On June 9, 2026, the Company entered into a loan agreement that provided for an unsecured term loan with an aggregate principal amount of $
Upon the occurrence and continuation of an event of default, the outstanding principal balance bears interest at the contractual rate plus an additional
The loan agreement contains customary representations and warranties, affirmative and negative covenants, events of default and related remedies. The covenants include restrictions on certain distributions, indebtedness, fundamental changes, asset sales and redemptions. The June Term Loan is subject to mandatory prepayment upon certain events, including a change in control, certain asset sales outside the ordinary course of business and certain equity issuances. The Company may also voluntarily prepay the June Term Loan in whole or in part in increments of at least $
17
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
The outstanding principal amount and carrying value of the June Term Loan is as follows:
|
|
June 30, |
|
|
|
|
2026 |
|
|
Principal |
|
$ |
|
|
Accrued exit fee |
|
|
|
|
Unamortized debt issuance cost |
|
|
( |
) |
Net carrying value |
|
$ |
|
|
12. LEASES
The Company determines if an arrangement is a lease at inception. The guidance in ASC 842 defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Operating lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Additionally, the portfolio approach is used in determining the discount rate used to present value lease payments. The ROU asset includes any lease payments made and excludes lease incentives and initial direct costs incurred.
The Company is party to operating leases for office and production facilities and equipment under agreements that expire at various dates through fiscal year 2028. The Company elected the package of practical expedients permitted under the lease standard. In electing the practical expedient package, the Company is not required to reassess whether an existing or expired contract is or contains a lease, reassess the lease classification for expired or existing leases nor reassess the initial direct costs for leases that commenced before the adoption of ASC 842. The Company also elected the short-term lease exemption such that the lease standard was applied to leases greater than one year in duration. Leases with an initial term of twelve months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The tables below show the operating lease ROU assets and liabilities as of September 30, 2025, and the balances as of June 30, 2026, including the changes during the periods.
|
|
Operating |
|
|
Operating lease ROU assets as of September 30, 2025 |
|
$ |
|
|
Less amortization of operating lease ROU assets |
|
|
( |
) |
Effect of exchange rate on operating lease ROU assets |
|
|
( |
) |
Operating lease ROU assets as of June 30, 2026 |
|
$ |
|
|
|
|
Operating |
|
|
Operating lease liabilities at September 30, 2025 |
|
$ |
|
|
Less lease principal payments on operating lease liabilities |
|
|
( |
) |
Effect of exchange rate on operating lease liabilities |
|
|
( |
) |
Operating lease liabilities as of June 30, 2026 |
|
|
|
|
Less non-current portion |
|
|
( |
) |
Current portion as of June 30, 2026 |
|
$ |
|
|
18
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
As of June 30, 2026, the Company’s operating leases have a weighted-average remaining lease term of
Fiscal year ending September 30, |
|
|
|
|
2026 (remaining three months) |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total undiscounted operating lease payments |
|
|
|
|
Less imputed interest |
|
|
( |
) |
Present value of operating lease liabilities |
|
$ |
|
|
For the three months ended June 30, 2026 and 2025, total lease expense under operating leases was approximately $
13. INCOME TAXES
The Company’s effective tax rate for the nine months ended June 30, 2026 and 2025 was negative
For the nine months ended June 30, 2026, the Company recorded an income tax expense of $
The Company continues to maintain a full valuation allowance against its U.S. and foreign deferred tax assets.
ASC 740, Income Taxes, requires the Company to recognize in its consolidated financial statements uncertainties in tax positions taken that may not be sustained upon examination by the taxing authorities. If interest or penalties are assessed, the Company would recognize these charges as income tax expense. The Company has
14. COMMITMENTS AND CONTINGENCIES
Litigation
We may at times be involved in litigation in the ordinary course of business. We will also, from time to time, when appropriate in management’s estimation, record adequate reserves in our financial statements for pending litigation.
On November 19, 2025, Gerry Darden, individually and as representative of the estate of Stacey Darden, filed a lawsuit in Los Angeles Superior Court against Southern California Edison Company and Edison International (collectively, the “Edison Defendants”) and the Company, related to the wildfire that occurred in early January 2025 in the Eaton Canyon/Altadena area of Los Angeles County (the “Eaton Fire”). In the complaint, the plaintiff alleges products liability and negligence claims against the Company based on Los Angeles County’s use of the Company’s products and seeks unspecified damages. The Company cannot assess with any meaningful probability the likelihood of an adverse outcome or the possible loss or range of loss, if any, related to this lawsuit. The Company will vigorously defend itself in the lawsuit.
On January 20, 2026, the Edison Defendants filed a cross-complaint in Los Angeles Superior Court against the Company and 11 other public and private entities related to the same wildfire, in a lawsuit that had been filed by Jeremy Gursey against the Edison Defendants. In the cross-complaint, the Edison Defendants allege negligence claims against the Company based on Los Angeles County’s use of the Company’s products and seek unspecified contribution. The Company cannot assess with any meaningful probability the likelihood of an adverse outcome or the possible loss or range of loss, if any, related to this lawsuit. The Company will vigorously defend itself in the lawsuit.
On May 7, 2026, Kevin Robertson filed a complaint in Los Angeles County Superior Court against the County of Los Angeles and the Company related to the Eaton Fire. The Company was served on June 30, 2026. The plaintiff alleges negligence claims against the Company based on Los Angeles County’s use of the Company’s products and seeks unspecified damages. The Company cannot assess with any meaningful probability the likelihood of an adverse outcome or the possible loss or range of loss, if any, related to this lawsuit. The Company will vigorously defend itself in the lawsuit.
19
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
15. SHARE-BASED COMPENSATION
Equity compensation plans
The Amended and Restated 2015 Equity Incentive Plan (“2015 Equity Plan”) expired on
Share-based compensation
The Company’s stock options have various restrictions that reduce option value, including vesting provisions and restrictions on transfer and hedging, among others, and are often exercised prior to their contractual maturity. Share-based compensation is accounted for in accordance with ASC Topic 718: Compensation - Stock Compensation. Total compensation expense for all share-based awards is based on the estimated fair market value of the equity instrument issued on the grant date. For share-based awards that vest based solely on a service condition, compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award. For share-based awards that vest based on a market condition, compensation expense is recognized on a straight-line basis over the requisite service period of each separately vesting tranche. For share-based awards that vest based on a performance condition, compensation expense is recognized for the number of awards that are expected to vest based on the probable outcome of the performance condition. Compensation cost for these awards will be adjusted to reflect the number of awards that ultimately vest.
Stock options
A summary of the activity in options of the Company as of June 30, 2026, is presented below:
|
|
Number of |
|
|
Weighted |
|
||
Outstanding September 30, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Forfeited/expired |
|
|
( |
) |
|
$ |
|
|
Exercised |
|
|
( |
) |
|
$ |
|
|
Outstanding June 30, 2026 |
|
|
|
|
$ |
|
||
Exercisable June 30, 2026 |
|
|
|
|
$ |
|
||
The aggregate intrinsic value of options outstanding and exercisable as of June 30, 2026 was $
The following table summarizes information about stock options outstanding as of June 30, 2026:
Range of |
|
Number |
|
|
Weighted |
|
|
Weighted |
|
|
Number |
|
|
Weighted |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
20
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
The Company recorded $
As of June 30, 2026, there were approximately $
Stock options that do not contain market-based vesting conditions are valued using the Black-Scholes option pricing model.
|
|
Nine Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Volatility |
|
|
% |
|
|
% |
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
% |
|
|
% |
||
Expected term in years |
|
|
|
|
|
|
||
Expected volatility is based on the historical volatility of the Company’s common stock over the period commensurate with the expected term of the options. The risk-free interest rate is based on rates published by the Federal Reserve Board. The contractual term of the options granted under the Company’s 2015 Equity Plan was
Performance-based stock options
On October 8, 2022, the Company awarded performance-based stock options (“PVOs”) to purchase
On March 20, 2023, the Company granted PVOs to purchase up to
The Company did
Restricted stock units
Compensation expense for RSUs was $
21
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
A summary of the Company’s RSUs as of June 30, 2026, is presented below:
|
|
Number of |
|
|
Weighted |
|
||
Outstanding September 30, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited/cancelled |
|
|
( |
) |
|
$ |
|
|
Outstanding June 30, 2026 |
|
|
|
|
$ |
|
||
Performance-based units
On December 24, 2025, the Company granted
On January 26, 2026, the Company’s Board of Directors and its Compensation Committee approved the compensation for the Company’s Chief Executive Officer for fiscal year 2026. The arrangement includes a base salary, eligibility for a performance-based cash bonus, and grants of
As of June 30, 2026, there was $
The Company recorded share-based compensation expense and classified it in the condensed consolidated statements of operations as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Cost of revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
22
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
16. STOCKHOLDERS’ EQUITY
Summary
The following table summarizes changes in the components of stockholders’ equity during the nine months ended June 30, 2026 and 2025, respectively (amounts in thousands, except par value and share amounts):
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Shares |
|
|
Par Value |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
||||||
Balance as of September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Share-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock upon exercise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock upon vesting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Balance as of December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share-based compensation expense |
|
|
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Issuance of common stock upon exercise of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock upon vesting of |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
Other comprehensive loss |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Net income |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance as of March 31, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share-based compensation expense |
|
|
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Issuance of common stock upon exercise of |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive loss |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Balance as of June 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||||
23
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Shares |
|
|
Par Value |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
||||||
Balance as of September 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Share-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock upon exercise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock upon vesting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Obligation to issue common stock in Evertel acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive loss |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Balance as of December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Share-based compensation expense |
|
|
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Issuance of common stock upon exercise of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock upon vesting of |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
Other comprehensive income |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Balance as of March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share-based compensation expense |
|
|
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Other comprehensive income |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net loss |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Balance as of June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Preferred Stock
The Company is authorized under its certificate of incorporation and bylaws to issue
Dividends
There were
24
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
17. NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss per share:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assumed exercise of dilutive options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Potentially dilutive securities outstanding at period end excluded from diluted computation as the inclusion would have been antidilutive: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
RSU |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
18. SEGMENT INFORMATION
The Company is engaged in the design, development and commercialization of critical communications hardware and software solutions designed to alert, inform, and protect. The Company operates in
25
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
The following table presents the Company’s segment disclosures for three and nine months ended June 30, 2026:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2026 |
|
||||||||||
|
|
Hardware |
|
|
Software |
|
|
Hardware |
|
|
Software |
|
||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income from operations |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
The following table presents the Company’s segment disclosures for three and nine months ended June 30, 2025:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
June 30, 2025 |
|
|
June 30, 2025 |
|
||||||||||
|
|
Hardware |
|
|
Software |
|
|
Hardware |
|
|
Software |
|
||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax expense (benefit) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
26
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
The following table presents the Company’s segment assets as of June 30, 2026 and September 30, 2025:
|
|
June 30, |
|
|
September 30, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Long-lived assets |
|
|
|
|
|
|
||
Hardware |
|
$ |
|
|
$ |
|
||
Software |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Total assets |
|
|
|
|
|
|
||
Hardware |
|
$ |
|
|
$ |
|
||
Software |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
19. MAJOR CUSTOMERS, SUPPLIERS AND RELATED INFORMATION
For the three months ended June 30, 2026, revenues from
For the three months ended June 30, 2025, revenues from
Revenue from customers in the United States was $
The following table summarizes revenues by geographic region:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Americas |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes long-lived assets by geographic region:
|
|
June 30, |
|
|
September 30, |
|
||
United States |
|
$ |
|
|
$ |
|
||
Europe, Middle East and Africa |
|
|
|
|
|
|
||
Total long-lived assets |
|
$ |
|
|
$ |
|
||
20. SUBSEQUENT EVENTS
On July 13, 2026, the Company entered into a Third Amendment to the Term Loan and Security Agreement (the “Third Amendment”). As of the amendment date, the outstanding principal balance of the Close Date Term Loan was $
27
Genasys Inc.
Notes to the Condensed Consolidated Financial Statements
(in thousands, except per share and share amounts)
(Unaudited)
In connection with the Third Amendment, the Company amended the related warrant agreement to extend the expiration date of the warrants from
28
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, 2025. All dollar amounts presented in this section are in thousands.
Forward Looking Statements
This report contains certain statements of a forward-looking nature relating to future events or future performance. Any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. When used in this report and other reports, statements, and information we have filed with the Securities and Exchange Commission (“Commission” or “SEC”), in our press releases, presentations to securities analysts or investors, or in oral statements made by or with the approval of an executive officer, the words or phrases such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements but are not the only means of identifying forward-looking statements. Such statements are predictions; actual events or results may differ materially.
These forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but not limited to, any statements regarding expected payments under, and resumption of execution of, our Puerto Rico project; growth strategy; product and development programs; financial performance and financial condition; the continuation of historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs; anticipated problems and our plans for future operations; and the economy in general or the future of the emergency communications industry.
We caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors. Such risks and uncertainties include, but are not limited to, risks relating to continuous delays in receiving payment under, regulatory uncertainties surrounding, or disruptions in governmental support or funding of, the Puerto Rico project, our reliance on a limited number of customers, the likely need for additional capital, actual or perceived failures or breaches of our information and security systems, the effects of continued geopolitical unrest and regional conflicts, including the conflict in Iran and its effect on global oil supply and prices, continued funding of government spending, the timing of such funding, general economic and business conditions, including unforeseen weakness in the Company’s markets, competition, changes in technology and methods of marketing, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, market acceptance of the Company’s products, shortages in components or price increases that cannot be passed on to customers, inability to fully realize the expected benefits from acquisitions and restructurings or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, changes to export regulations, difficulties in retaining key employees and customers, changes in the market for microcap stocks regardless of growth and value and various other factors beyond our control. Some of these risks and uncertainties are identified in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (especially the “Liquidity and Capital Resources” section) and the section “Risk Factors” in this report and in our Annual Report on Form 10-K and you are urged to review those sections. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.
For purposes of this Quarterly Report, the terms “we,” “us,” “our” “Genasys” and the “Company” refer to Genasys Inc. and its consolidated subsidiaries.
Overview
We are a global provider of Protective Communications® solutions (“Protective Communications”), including our Genasys Protect® software platform (“Genasys Protect”) and Genasys Acoustics (“Acoustics”) and Long Range Acoustic Device® (“LRAD®”) hardware products. Our unified software platform receives information from a wide variety of sensors and Internet-of-Things (“IoT”) inputs to collect real-time information on developing and active emergency situations. Genasys’ customers use this information to create and disseminate alerts, warnings, notifications, and instructions through multiple channels before, during, and after public safety and enterprise threats, critical events, and other crisis situations.
Genasys Protect is a comprehensive portfolio of Protective Communications software and hardware systems serving federal governments and agencies; state and local governmental agencies, and education (“SLED”); and enterprise organizations in sectors including but not limited to oil and gas, utilities, manufacturing, automotive, and healthcare. Genasys Protect solutions have a diverse range of applications, including emergency warning and mass notification for public safety; critical event management for enterprise companies; de-escalation for defense and law enforcement; critical infrastructure protection; zone-based planning for accelerated, precise emergency response; secure and compliant cross-agency collaboration; and automated detection of real-time threats such as active shooters and severe weather.
29
LRAD by Genasys products broadcast audible voice messages with exceptional clarity from close range out to 5,000 meters. We have a history of successfully delivering innovative products, systems, and solutions for mission critical situations, pioneering the Acoustic Hailing Device (“AHD”) market with the introduction of our LRAD in 2002, and creating the first multi-directional, voice-based public safety mass notification systems in 2012, and the first AHDs with a digital interface for remote operations in 2023. Building on our proven, best in class, and reliable solutions, we offer the first and only unified, end-to-end Protective Communications platform.
Software Products
The Genasys Protect Platform
The Complete Protective Communications Platform
The Genasys Protect platform provides a full suite of Protective Communications tools for many hazards, designed to provide targeted emergency communication, data-driven decision making, secure inter- and intra-agency collaboration, and more. By enabling communications with precision, speed, and clarity, Genasys Protect helps to enable preparedness, responsiveness, and collaboration to keep people, assets, and operations protected against the impacts of natural disasters, terrorism, violent civil unrest, and other dangerous situations, as well as power failures, facility shutdowns, and other non-emergency operational disruptions.
The Genasys Evertel Platform
Genasys Evertel is a leading cross-agency, Criminal Justice Information Services compliant, collaboration platform that streamlines and secures team and one-on-one communications for first responders and public safety agencies. With real-time intelligence sharing that exceeds regulatory privacy requirements for public agencies, Genasys Evertel’s instant communication platform empowers first responders and public safety personnel to collaborate and share information in a single space with text, videos, images, and audio from any location. Genasys Evertel provides a secure space where professionals can exchange information, make decisions, and collaborate with trust in data security. Record retention policies drive compliance that allows agencies and personnel to communicate securely.
Enabling public safety professionals to collaborate with other agencies throughout their region, state, and country, Genasys Evertel provides real-time interoperability to address critical events and crisis situations through coordinated efforts. Genasys Evertel data is protected and secured through high-level data encryption within a secure, U.S. based, government-only cloud environment.
Hardware Products
Genasys Acoustics
Acoustics unites Genasys’ next generation mass notification speaker systems with Genasys Protect command-and-control software. Most legacy mass notification systems are sirens with limited, if any, voice broadcast capability. Acoustics systems feature the industry’s highest Speech Transmission Index, large directional and omni-directional broadcast coverage areas, and an array of options, including solar power, battery backup, and satellite connectivity that enable the systems to continue operating when power and telecommunications infrastructure fails.
30
Acoustics gives operators the ability to send critical alerts and notifications from emergency operations centers, and authorized computers or smart phones. To reduce alert fatigue and direct notifications to only at-risk populations, networked Acoustics installations provide authorized personnel with the capability of managing individual systems to alert neighborhoods, system groups for local emergencies, or all networked installations for city-wide or regional crises. Acoustics systems broadcast highly audible, clear voice messages hundreds or thousands of meters away, staying on and connected even during broad power outages and cellular network failures. Genasys’s advanced driver and waveguide technology enables voice broadcasts to be clearly heard and understood above loud background noise and over long distances. Acoustics’ reliability empowers a constant stream of information to facilitate mass notification redundancy when key infrastructure fails during critical events.
LRAD by Genasys
LRAD is the world’s leading AHD, with the ability to project alert tones and audible voice messages with exceptional vocal clarity in a 30° beam from close range to 5,000 meters. LRADs are used throughout the world in multiple applications and circumstances to safely hail, warn, inform, direct, prevent misunderstandings, determine intent, establish large safety zones, resolve uncertain situations, and save lives. LRADs have been deployed in defense, law enforcement, fire rescue, critical infrastructure protection, maritime, border, and homeland security installations and applications where clear, intelligible voice communications are essential.
LRAD product models are available in varying audio outputs, communication coverage areas, sizes, functionalities, and mounting options. Several accessories and options (cameras, searchlights, mounts, and more) are also available to enhance LRAD capabilities.
All LRAD products are defined by their unparalleled audio output and clarity. LRADs use Genasys’ proprietary XL driver technology, which generates higher audio output in a smaller, lighter form factor. The technology also enables voice messages and alert tones to cut through background noise and be clearly heard and understood. These competitive advantages, and constant innovation, have made LRAD the de facto standard of the global AHD industry.
Recent Business Developments
Business developments during the first nine months of fiscal year 2026 and through the date of this report:
31
Trends and Uncertainties
As a result of administrative complexities surrounding the approval process within the authority responsible for electricity generation, distribution and transmission in Puerto Rico, which is responsible for requesting disbursement of funds from FEMA, we have recently experienced, and continue to experience, delays in receiving payments under our contract to provide the Puerto Rico Electric Power Authority with an Emergency Warning System (the “Puerto Rico EWS Project”). These delays have materially and adversely affected our liquidity position despite the continued significant contribution of the Puerto Rico EWS Project to the Company’s revenues. A further continuation of these delays and/or future delays would exacerbate our liquidity challenges.
In addition, the United States has recently experienced a decline in federal funding. Changes in defense and other government spending could have an adverse effect on our current and future revenues. Sales of our products to U.S. government agencies and organizations, including, for example, our LRAD order for the Common Remotely Operated Weapon Station (CROWS) II Technical Refresh program, are subject to the overall U.S. government budget and congressional appropriation decisions and processes which are driven by numerous factors, including domestic political conditions, geopolitical events, such as the conflicts in the Middle East, and macroeconomic conditions, and are beyond our control. Even awards granted may not result in orders due to spending constraints or Congressional delays in passing the federal budget.
The funding of U.S. government programs is subject to an annual congressional budget authorization and appropriations process. In years when the U.S. government does not complete its appropriations before the beginning of the new fiscal year on October 1, government operations are typically funded pursuant to a continuing resolution (“CR”), which allows federal government agencies to operate at spending levels approved in the previous appropriations cycle, but does not authorize new spending initiatives. When the U.S. government operates under a CR, delays can occur in the procurement of the products, services, and solutions that we provide and may result in new initiatives being canceled. We have on occasion experienced delays in contract awards which affect our future revenues as a result of this annual appropriations cycle, and we could experience similar declines in revenues from future delays in the appropriations process. When the U.S. government fails to complete its appropriations process or to provide for a CR, a full or partial federal government shutdown may result. A federal government shutdown could result in delays or cancellations of key programs or during extended government shutdown periods, the delay of contract payments, which could have a negative effect on our cash flows and adversely affect our future results.
From October 1, 2025 to November 12, 2025, the federal government of the United States was in a shutdown as Congress failed to pass appropriations legislation for the 2026 fiscal year. On November 10, 2025, Congress passed a CR, which funded the government at existing spending levels through January 30, 2026. On February 3, 2026, a funding appropriation bill was passed by Congress and signed by the President which covers the majority of U.S. Government spending for the 2026 fiscal year, and on April 30, 2026, an appropriations bill for the Department of Homeland Security, which includes FEMA, was enacted for fiscal year 2026.
We have been affected by price increases from our suppliers and logistics and other inflationary factors such as increased salary, labor, and overhead costs. We regularly review and adjust the sales price of our finished goods to offset these inflationary factors. Although we do not believe that inflation has had a material impact on our financial results through June 30, 2026, sustained or increased inflation in the future may have a negative effect on our ability to achieve certain expectations in gross margin and operating expenses. If we are unable to offset the negative impacts of inflation with increased prices, our future results could be materially affected.
Critical Accounting Policies and Estimates
We have identified a number of accounting policies and estimates as critical to our business operations and the understanding of our results of operations. These are described 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, 2025. The impact and any associated risks related to these policies on our business operations are discussed 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 and estimates, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), involve a significant level of estimation uncertainty and have a significant impact on the results we report in our financial statements, including with respect to financial conditions and results of operations. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates affect the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
32
Comparison of Results of Operations for the Three Months Ended June 30, 2026 and 2025 (in thousands)
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
|
|
|
|
|
||||||
|
|
|
|
|
Total |
|
|
|
|
|
Total |
|
|
Fav (Unfav) |
|
|||||||||
|
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
% |
|
||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Product sales |
|
$ |
4,275 |
|
|
|
58.6 |
% |
|
$ |
7,001 |
|
|
|
71.0 |
% |
|
$ |
(2,726 |
) |
|
|
(38.9 |
%) |
Contract and other |
|
|
3,020 |
|
|
|
41.4 |
% |
|
|
2,856 |
|
|
|
29.0 |
% |
|
|
164 |
|
|
|
5.7 |
% |
Total revenues |
|
|
7,295 |
|
|
|
100.0 |
% |
|
|
9,857 |
|
|
|
100.0 |
% |
|
|
(2,562 |
) |
|
|
(26.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cost of revenues |
|
|
3,130 |
|
|
|
42.9 |
% |
|
|
7,260 |
|
|
|
73.7 |
% |
|
|
4,130 |
|
|
|
56.9 |
% |
Gross profit |
|
|
4,165 |
|
|
|
57.1 |
% |
|
|
2,597 |
|
|
|
26.3 |
% |
|
|
1,568 |
|
|
|
60.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative |
|
|
6,127 |
|
|
|
84.0 |
% |
|
|
6,422 |
|
|
|
65.2 |
% |
|
|
295 |
|
|
|
4.6 |
% |
Research and development |
|
|
2,074 |
|
|
|
28.4 |
% |
|
|
2,100 |
|
|
|
21.3 |
% |
|
|
26 |
|
|
|
1.2 |
% |
Total operating expenses |
|
|
8,201 |
|
|
|
112.4 |
% |
|
|
8,522 |
|
|
|
86.5 |
% |
|
|
321 |
|
|
|
3.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss from operations |
|
|
(4,036 |
) |
|
|
(55.3 |
%) |
|
|
(5,925 |
) |
|
|
(60.1 |
%) |
|
|
1,889 |
|
|
|
31.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other expense, net |
|
|
(582 |
) |
|
|
(8.0 |
%) |
|
|
(554 |
) |
|
|
(5.6 |
%) |
|
|
(28 |
) |
|
|
5.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss before income taxes |
|
|
(4,618 |
) |
|
|
(63.3 |
%) |
|
|
(6,479 |
) |
|
|
(65.7 |
%) |
|
|
1,861 |
|
|
|
28.7 |
% |
Income tax expense |
|
|
59 |
|
|
|
0.8 |
% |
|
|
8 |
|
|
|
0.1 |
% |
|
|
(51 |
) |
|
|
(637.5 |
)% |
Net loss |
|
$ |
(4,677 |
) |
|
|
(64.1 |
%) |
|
$ |
(6,487 |
) |
|
|
(65.8 |
%) |
|
$ |
1,810 |
|
|
|
27.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Hardware |
|
$ |
4,627 |
|
|
|
63.4 |
% |
|
$ |
7,656 |
|
|
|
77.7 |
% |
|
|
(3,029 |
) |
|
|
(39.6 |
%) |
Software |
|
|
2,668 |
|
|
|
36.6 |
% |
|
|
2,201 |
|
|
|
22.3 |
% |
|
|
467 |
|
|
|
21.2 |
% |
Total net revenue |
|
$ |
7,295 |
|
|
|
100.0 |
% |
|
$ |
9,857 |
|
|
|
100.0 |
% |
|
$ |
(2,562 |
) |
|
|
(26.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
US v International Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
US Revenue |
|
$ |
4,807 |
|
|
|
65.9 |
% |
|
$ |
8,632 |
|
|
|
87.6 |
% |
|
$ |
(3,825 |
) |
|
|
(44.3 |
%) |
International Revenue |
|
|
2,488 |
|
|
|
34.1 |
% |
|
|
1,225 |
|
|
|
12.4 |
% |
|
|
1,263 |
|
|
|
103.1 |
% |
Total |
|
$ |
7,295 |
|
|
|
100.0 |
% |
|
$ |
9,857 |
|
|
|
100.0 |
% |
|
$ |
(2,562 |
) |
|
|
(26.0 |
%) |
The table above sets forth for the periods indicated certain items of our condensed consolidated statements of operations expressed in dollars and as a percentage of net revenues. The financial information and the discussion below should be read in conjunction with the condensed consolidated financial statements and notes contained in this report.
Revenues
Revenues decreased $2,562, or 26%, compared with the third fiscal quarter of the prior year. Hardware revenue decreased $3,029, or 40%, primarily due to an approximately $3,012 decrease in revenue from the Puerto Rico EWS Project resulting from a temporary suspension of work related to customer payment delays. Hardware revenue was also adversely affected by the timing of certain military and defense shipments due to component availability constraints, which were subsequently resolved. The decrease in hardware revenue was partially offset by a $467, or 21%, increase in software revenue reflecting an increase in the volume of existing products sold and support-related services. As of June 30, 2026, we had aggregate deferred revenue of $3,716 for extended warranty obligations and software support agreements.
Please see “— Trends and Uncertainties” for details on how payment delays under the Puerto Rico EWS Project affect our liquidity.
Gross Profit
Gross profit increased $1,568, or 60%, compared with the third fiscal quarter of the prior year. Gross profit and gross margin increased significantly, despite of lower total revenue, primarily attributable to the timing of revenue and cost recognition under the Puerto Rico EWS Project and a favorable shift in revenue mix toward higher-margin software revenue. In the third fiscal quarter of
33
2025, we recognized $4,333 of revenue associated with the initial delivery of hardware for the Puerto Rico EWS Project. The hardware revenue was recognized at zero margin because revenue was recorded in an amount equal to the cost of the hardware upon delivery. At that time, no installation or other project activities had been performed and, therefore, no progress toward completion of the project had been recognized. During the third fiscal quarter of 2026, we recognized $1,159 of revenue associated with the Puerto Rico EWS Project at improved margin levels. Gross profit and gross margin also benefited from a $467, or 21%, increase in software revenue compared with the prior-year period, as software revenue generally carries higher gross margins than hardware revenue.
For additional information, please see “Note.4. Revenue Recognition - Long-term contracts - over-time revenue recognition using input cost measures” in the notes to our financial statements, which disclosure is incorporated herein by reference.
As our products have varying gross margins, product mix may affect gross profits. In addition, our margins vary based on the sales channels through which our products are sold in a given period. We continue to implement product updates and changes, including raw material and component changes, that may impact product costs. We have limited warranty cost experience with product updates and changes and estimated future warranty costs can impact our gross margins. We do not believe that historical gross profit margins should be relied upon as an indicator of future gross profit margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $295, or 5% compared to the prior year period. The decrease was primarily attributable to an approximately $150 decrease in information technology expenses following the implementation of a service management platform in fiscal 2025, and an approximately $144 reduction in travel and trade show expenses. As a percentage of revenue, selling, general and administrative expenses increased to 84.0% from 65.2% in the prior-year period, primarily due to lower revenue during the quarter.
We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the three months ended June 30, 2026 and 2025 of $212 and $384, respectively.
We may expend additional resources on the marketing and selling of our products in future periods as we identify ways to optimize potential opportunities. Commission expenses will fluctuate based on the nature of our sales based on sales channels.
Research and Development Expenses
Research and development expenses decreased $26, or 1%, in the third quarter of fiscal year 2026 compared to the prior year period. The Company maintained consistent investment in research and development activities supporting its software and hardware product offerings.
We incurred non-cash share-based compensation expenses allocated to research and development expenses in the three months ended June 30, 2026 and 2025 of $41 and $57, respectively.
Research and development costs vary period to period due to the timing of projects, and the timing and extent of using outside consulting, design, and development firms. We seek to continually improve our product offerings, and we expect to continue to expand our product line with new products, customizations, and enhancements.
Other Expense, Net
Other expense, net was $582 in the third quarter of this fiscal year, compared to other expense, net of $554 in the prior year period. The change was primarily attributable to normal fluctuations in non-operating expenses and changes in the fair value of our $15,000 term loan (the “Close Date Term Loan”) and the warrants issued in connection with the Close Date Term Loan (the “Warrants”).
34
Comparison of Results of Operations for the Nine Months Ended June 30, 2026 and 2025 (in thousands)
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|||||||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
|
|
|
|
|
||||||
|
|
|
|
|
Total |
|
|
|
|
|
Total |
|
|
Fav (Unfav) |
|
|||||||||
|
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
% |
|
||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Product sales |
|
$ |
31,262 |
|
|
|
78.4 |
% |
|
$ |
14,215 |
|
|
|
59.9 |
% |
|
$ |
17,047 |
|
|
|
119.9 |
% |
Contract and other |
|
|
8,603 |
|
|
|
21.6 |
% |
|
|
9,514 |
|
|
|
40.1 |
% |
|
|
(911 |
) |
|
|
(9.6 |
)% |
Total revenues |
|
|
39,865 |
|
|
|
100.0 |
% |
|
|
23,729 |
|
|
|
100.0 |
% |
|
|
16,136 |
|
|
|
68.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cost of revenues |
|
|
17,698 |
|
|
|
44.4 |
% |
|
|
15,344 |
|
|
|
64.7 |
% |
|
|
(2,354 |
) |
|
|
(15.3 |
)% |
Gross profit |
|
|
22,167 |
|
|
|
55.6 |
% |
|
|
8,385 |
|
|
|
35.3 |
% |
|
|
13,782 |
|
|
|
164.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative |
|
|
18,973 |
|
|
|
47.6 |
% |
|
|
19,904 |
|
|
|
83.9 |
% |
|
|
931 |
|
|
|
4.7 |
% |
Research and development |
|
|
6,300 |
|
|
|
15.8 |
% |
|
|
6,602 |
|
|
|
27.8 |
% |
|
|
302 |
|
|
|
4.6 |
% |
Total operating expenses |
|
|
25,273 |
|
|
|
63.4 |
% |
|
|
26,506 |
|
|
|
111.7 |
% |
|
|
1,233 |
|
|
|
4.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss from operations |
|
|
(3,106 |
) |
|
|
(7.8 |
%) |
|
|
(18,121 |
) |
|
|
(76.4 |
%) |
|
|
15,015 |
|
|
|
82.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other (expense) income, net |
|
|
(1,336 |
) |
|
|
(3.4 |
%) |
|
|
1,496 |
|
|
|
6.3 |
% |
|
|
(2,832 |
) |
|
|
(189.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss before income taxes |
|
|
(4,442 |
) |
|
|
(11.1 |
%) |
|
|
(16,625 |
) |
|
|
(70.1 |
%) |
|
|
12,183 |
|
|
|
73.3 |
% |
Income tax expense |
|
|
329 |
|
|
|
0.8 |
% |
|
|
79 |
|
|
|
0.3 |
% |
|
|
(250 |
) |
|
|
(316.5 |
)% |
Net loss |
|
$ |
(4,771 |
) |
|
|
(12.0 |
%) |
|
$ |
(16,704 |
) |
|
|
(70.4 |
%) |
|
$ |
11,933 |
|
|
|
71.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Hardware |
|
$ |
32,541 |
|
|
|
81.6 |
% |
|
$ |
16,966 |
|
|
|
71.5 |
% |
|
|
15,575 |
|
|
|
91.8 |
% |
Software |
|
|
7,324 |
|
|
|
18.4 |
% |
|
|
6,763 |
|
|
|
28.5 |
% |
|
|
561 |
|
|
|
8.3 |
% |
Total net revenue |
|
$ |
39,865 |
|
|
|
100.0 |
% |
|
$ |
23,729 |
|
|
|
100.0 |
% |
|
$ |
16,136 |
|
|
|
68.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
US v International Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
US Revenue |
|
$ |
31,263 |
|
|
|
78.4 |
% |
|
$ |
19,095 |
|
|
|
80.5 |
% |
|
$ |
12,168 |
|
|
|
63.7 |
% |
International Revenue |
|
|
8,602 |
|
|
|
21.6 |
% |
|
|
4,634 |
|
|
|
19.5 |
% |
|
|
3,968 |
|
|
|
85.6 |
% |
Total |
|
$ |
39,865 |
|
|
|
100.0 |
% |
|
$ |
23,729 |
|
|
|
100.0 |
% |
|
$ |
16,136 |
|
|
|
68.0 |
% |
The table above sets forth for the periods indicated certain items of our condensed consolidated statements of operations expressed in dollars and as a percentage of net revenues. The financial information and the discussion below should be read in conjunction with the condensed consolidated financial statements and notes contained in this report.
Revenues
Revenues increased $16,136, or 68%, for the nine months ended June 30, 2026, compared with the prior year period. Hardware and software revenue increased $15,575 and $561, respectively, compared with the prior year period. The increase in hardware revenue was primarily attributable to the conversion of higher backlog at the beginning of fiscal year 2026 resulting from increased orders received during fiscal year 2025. Included in those orders was the Puerto Rico EWS Project, which has a longer duration than our typical projects and is expected to extend beyond a twelve-month period. Revenue recognized on the Puerto Rico EWS Project totaled $21,469 during the first nine months of fiscal year 2026, compared with $5,563 during the prior year period, representing an increase of $15,906. Excluding the Puerto Rico EWS Project, revenue remained relatively consistent with the prior year period and reflected changes in customer mix and the timing of product shipments.
Please see “— Trends and Uncertainties” for details on how payment delays under the Puerto Rico EWS Project affect our liquidity.
The receipt of orders and signing of contracts is often uneven due to the timing of budget cycles, government financial issues, and military conflict. As of June 30, 2026, we had aggregate deferred revenue of $3,716 for extended warranty obligations and software support agreements.
35
Gross Profit
Gross profit increased $13,782, or 164%, compared with the same nine-month period last year, primarily driven by higher hardware revenue and improved gross margin on the Puerto Rico EWS Project. Gross margin increased compared with the prior year period, primarily due to the timing of revenue and cost recognition under the Puerto Rico EWS Project.
During the nine months ended June 30, 2025, we recognized $5,563 of revenue associated with the Puerto Rico EWS Project. Certain hardware components were delivered and recognized at zero margin, as revenue was recorded in an amount equal to the cost of the hardware upon delivery. At that time, limited installation and other project activities had been performed, and therefore minimal progress had been recognized toward completion of the project. During the current year-to-date period, as installation and other project activities progressed, we recognized $21,469 of revenue associated with the Puerto Rico EWS Project, an increase of $15,906 compared with the prior-year period. As a result of this progress, a portion of the previously unrecognized hardware margin was recognized in the current period. Because a significant portion of the related hardware and material costs had been incurred in prior periods, revenue recognized during the first nine months of fiscal year 2026 was not accompanied by a proportional level of material cost, contributing to higher gross profit and gross margin.
For additional information, please see “Note.4. Revenue Recognition - Long-term contracts - over-time revenue recognition using input cost measures” in the notes to our financial statements, which disclosure is incorporated herein by reference.
As our products have varying gross margins, product mix may affect gross profits. In addition, our margins vary based on the sales channels through which our products are sold in a given period. We continue to implement product updates and changes, including raw material and component changes, that may impact product costs. We have limited warranty cost experience with product updates and changes and estimated future warranty costs can impact our gross margins. We do not believe that historical gross profit margins should be relied upon as an indicator of future gross profit margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $931, or 5% in the nine months ended June 30, 2026 over the prior year period. The decrease was primarily attributable to lower legal expenses of $400, reduced computer and information technology expenses of $326, lower travel expenses of $234, and reduced sales and marketing expenses of $230. As a percentage of revenue, selling, general and administrative expenses decreased compared with the prior-year period as revenue growth outpaced operating expenses, reflecting improved operating leverage.
We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the nine months ended June 30, 2026 and 2025 of $1,054 and $1,048, respectively.
We may expend additional resources on the marketing and selling of our products in future periods as we identify ways to optimize potential opportunities. Commission expenses will fluctuate based on the nature of our sales.
Research and Development Expenses
Research and development expenses decreased $302, or 5% in the nine months ended June 30, 2026 compared to the prior year period. The decrease was primarily attributable to a $565 reduction in professional services expense resulting from the Company's cost reduction initiatives implemented during fiscal year 2025.
We incurred non-cash share-based compensation expenses allocated to research and development expenses in the nine months ended June 30, 2026 and 2025 of $128 and $161, respectively.
Research and development costs vary period to period due to the timing of projects, and the timing and extent of using outside consulting, design, and development firms. We seek to continually improve our product offerings, and we expect to continue to expand our product line with new products, customizations, and enhancements.
Other (Expense) Income, Net
Other expense, net was $1,336 in the first nine months of fiscal 2026, compared to other income, net of $1,496 in the prior fiscal year period. The change was primarily attributable to the changes in the fair value of our $15,000 Close Date Term Loan and the Warrants and normal fluctuations in non-operating expenses.
36
Other Metrics
We monitor a number of financial and operating metrics, including adjusted EBITDA, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Our business metrics may be calculated in a manner different than similar other business metrics used by other companies.
Non-U.S. GAAP Financial Measure: Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure. We define adjusted EBITDA as net income loss before interest income, interest expense, income tax expense (benefit), and depreciation and amortization expense adjusted for share-based compensation, fair value measurements of our Term Loans and Warrants, other non-recurring expense (income) and other items that we do not consider indicative of our core operating performance.
Adjusted EBITDA are measures used by management to understand and evaluate our core operating performance and trends and to generate future operating plans, make strategic decisions regarding allocation of capital, and invest in initiatives that are focused on cultivating new markets for our solutions. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis. We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (1) although depreciation and amortization are non-cash charges, the intangible assets that are amortized and property and equipment that is depreciated, will need to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacement or for new capital expenditure requirements; (2) adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (3) adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (4) adjusted EBITDA does not reflect tax payments or receipts that may represent a reduction or increase in cash available to us; and (5) other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces the usefulness of the metric as a comparative measure. Because of these and other limitations, you should consider adjusted EBITDA alongside our other U.S. GAAP-based financial performance measures, net income, and our other U.S. GAAP financial results.
The following table presents a reconciliation of adjusted EBITDA to net loss, the most directly comparable U.S. GAAP measure, for each of the periods indicated (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net loss |
|
$ |
(4,677 |
) |
|
$ |
(6,487 |
) |
|
$ |
(4,771 |
) |
|
$ |
(16,704 |
) |
Interest income |
|
|
102 |
|
|
|
15 |
|
|
|
120 |
|
|
|
113 |
|
Interest expense |
|
|
488 |
|
|
|
406 |
|
|
|
1,248 |
|
|
|
1,124 |
|
Income tax expense |
|
|
59 |
|
|
|
8 |
|
|
|
329 |
|
|
|
79 |
|
Depreciation and amortization |
|
|
664 |
|
|
|
685 |
|
|
|
2,035 |
|
|
|
2,114 |
|
EBITDA |
|
$ |
(3,568 |
) |
|
$ |
(5,403 |
) |
|
$ |
(1,279 |
) |
|
$ |
(13,500 |
) |
Non-GAAP Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation |
|
|
269 |
|
|
|
459 |
|
|
|
1,239 |
|
|
|
1,264 |
|
Change in fair value of Term Loans and Warrants |
|
|
(230 |
) |
|
|
560 |
|
|
|
(231 |
) |
|
|
3,180 |
|
Other non-recurring expense (income)* |
|
|
(34 |
) |
|
|
723 |
|
|
|
(23 |
) |
|
|
673 |
|
Adjusted EBITDA |
|
$ |
(3,103 |
) |
|
$ |
(4,781 |
) |
|
$ |
168 |
|
|
$ |
(14,743 |
) |
* Other non-recurring expense (income) consists of one-time legal fees and consulting fees and gain/loss on sale of assets, which we do not consider indicative of ongoing operations
37
Segment Results
Segment results include net sales and operating income by segment. Corporate expenses, including various administrative expenses and costs of a publicly traded company, are included in the Hardware segment as per historical financial reporting.
Comparison of Segment Adjusted EBITDA for the Three Months Ended June 30, 2026 and 2025 (in thousands)
|
|
Hardware |
|
|
Software |
|
||||||||||||||||||||||||||
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Fav (Unfav) |
|
|
June 30, |
|
|
Fav (Unfav) |
|
||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||||||
Revenue |
|
$ |
4,627 |
|
|
$ |
7,656 |
|
|
$ |
(3,029 |
) |
|
|
(39.6 |
)% |
|
$ |
2,668 |
|
|
$ |
2,201 |
|
|
$ |
467 |
|
|
|
21.2 |
% |
Operating loss |
|
|
(1,847 |
) |
|
|
(2,589 |
) |
|
|
742 |
|
|
|
28.7 |
% |
|
|
(2,189 |
) |
|
|
(3,336 |
) |
|
|
1,147 |
|
|
|
34.4 |
% |
Net loss |
|
|
(2,537 |
) |
|
|
(3,169 |
) |
|
|
632 |
|
|
|
19.9 |
% |
|
|
(2,140 |
) |
|
|
(3,318 |
) |
|
|
1,178 |
|
|
|
35.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of GAAP to Non-GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other expense (income), net |
|
|
631 |
|
|
|
570 |
|
|
|
(61 |
) |
|
|
10.7 |
% |
|
|
(49 |
) |
|
|
(16 |
) |
|
|
33 |
|
|
|
206.3 |
% |
Income tax expense (benefit) |
|
|
59 |
|
|
|
10 |
|
|
|
(49 |
) |
|
|
(490.0 |
)% |
|
|
— |
|
|
|
(2 |
) |
|
|
2 |
|
|
NA |
|
|
Depreciation and amortization |
|
|
97 |
|
|
|
86 |
|
|
|
(11 |
) |
|
|
(12.8 |
)% |
|
|
567 |
|
|
|
599 |
|
|
|
32 |
|
|
|
5.3 |
% |
Share-based compensation |
|
|
201 |
|
|
|
355 |
|
|
|
154 |
|
|
|
43.4 |
% |
|
|
68 |
|
|
|
104 |
|
|
|
36 |
|
|
|
34.6 |
% |
Adjusted EBITDA |
|
$ |
(1,549 |
) |
|
$ |
(2,148 |
) |
|
$ |
599 |
|
|
|
27.9 |
% |
|
$ |
(1,554 |
) |
|
$ |
(2,633 |
) |
|
$ |
1,079 |
|
|
|
41.0 |
% |
Hardware Segment
Hardware segment revenue decreased $3,029, or 40%, compared to the prior year period. The decrease was primarily attributable to lower revenue recognized on the Puerto Rico EWS Project during the quarter and delays in certain military and defense shipments due to component availability constraints.
Operating loss was $1,847 in the third quarter of fiscal year 2026 compared to an operating loss of $2,589 in the prior year period. The improvement was primarily attributable to higher gross margin resulting from improved profitability on the Puerto Rico EWS Project and lower operating expenses.
Software Segment
Software segment revenue increased $467, or 21%, compared to the prior year period. The increase was primarily attributable to higher software support and subscription revenue, including approximately $161 of software revenue recognized on the Puerto Rico EWS Project during the quarter, compared to no software revenue recognized on the project in the prior year period.
Operating loss decreased $1,147 in the third quarter of the current fiscal year compared to the prior year period. The improvement was primarily attributable to higher revenue and lower operating expenses resulting from cost reduction initiatives implemented during the fourth quarter of fiscal year 2025, including reduced professional services expense and a lower reliance on temporary personnel and contractors.
Comparison of Segment Adjusted EBITDA for the Nine Months Ended June 30, 2026 and 2025 (in thousands)
|
|
Hardware |
|
|
Software |
|
||||||||||||||||||||||||||
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Fav (Unfav) |
|
|
June 30, |
|
|
Fav (Unfav) |
|
||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||||||
Revenue |
|
$ |
32,541 |
|
|
$ |
16,966 |
|
|
$ |
15,575 |
|
|
|
91.8 |
% |
|
$ |
7,324 |
|
|
$ |
6,763 |
|
|
$ |
561 |
|
|
|
8.3 |
% |
Operating income (loss) |
|
|
3,566 |
|
|
|
(8,952 |
) |
|
|
12,518 |
|
|
|
139.8 |
% |
|
|
(6,672 |
) |
|
|
(9,169 |
) |
|
|
2,497 |
|
|
|
27.2 |
% |
Net income (loss) |
|
|
1,795 |
|
|
|
(7,580 |
) |
|
|
9,375 |
|
|
|
123.7 |
% |
|
|
(6,566 |
) |
|
|
(9,124 |
) |
|
|
2,558 |
|
|
|
28.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of GAAP to Non-GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other expense (income), net |
|
|
1,442 |
|
|
|
(1,453 |
) |
|
|
(2,895 |
) |
|
|
(199.2 |
)% |
|
|
(106 |
) |
|
|
(43 |
) |
|
|
63 |
|
|
|
146.5 |
% |
Income tax expense (benefit) |
|
|
329 |
|
|
|
81 |
|
|
|
(248 |
) |
|
|
(306.2 |
)% |
|
|
— |
|
|
|
(2 |
) |
|
|
2 |
|
|
NA |
|
|
Depreciation and amortization |
|
|
282 |
|
|
|
271 |
|
|
|
11 |
|
|
|
(4.1 |
)% |
|
|
1,753 |
|
|
|
1,843 |
|
|
|
90 |
|
|
|
4.9 |
% |
Share-based compensation |
|
|
1,023 |
|
|
|
978 |
|
|
|
(45 |
) |
|
|
(4.6 |
)% |
|
|
216 |
|
|
|
286 |
|
|
|
70 |
|
|
|
24.5 |
% |
Adjusted EBITDA |
|
$ |
4,871 |
|
|
$ |
(7,703 |
) |
|
$ |
12,574 |
|
|
|
163.2 |
% |
|
$ |
(4,703 |
) |
|
$ |
(7,040 |
) |
|
$ |
2,337 |
|
|
|
33.2 |
% |
38
Hardware Segment
Hardware segment revenue increased $15,575, or 92%, compared to the prior year period. The increase was primarily driven by progress toward completion of the Puerto Rico EWS Project. Revenue recognized on the Puerto Rico EWS project totaled $21,469 during the first nine months of fiscal year 2026, compared with $5,563 during the prior year period
Operating income was $3,566 in the first nine months of fiscal year 2026 compared to an operating loss of $8,952 in the prior year period. The improvement was primarily attributable to higher revenue and gross profit associated with the Puerto Rico EWS Project, including the recognition of previously deferred project margin, as well as lower operating expenses.
Software Segment
Software segment revenue increased $561, or 8%, compared to the prior year period. The increase was primarily attributable to higher software support and subscription revenue, including $485 recognized on the Puerto Rico EWS Project during fiscal year 2026.
Operating loss decreased $2,497 in the first nine months of the current fiscal year compared to the prior year period. The improvement was primarily driven by lower operating expenses that reflected cost reduction initiatives implemented during the fourth quarter of fiscal year 2025. These initiatives included reduced professional services expense, lower spending on temporary personnel and contractors, and reduced payroll and benefit costs. The decreases were partially offset by continued investments in software development and strategic platform enhancements.
Liquidity and Capital Resources
Cash and cash equivalents as of June 30, 2026 were $3,068, compared with $7,969 as of September 30, 2025. We had no short-term marketable securities as of June 30, 2026, compared with $70 as of September 30, 2025.
Our internal sources of liquidity include cash and cash equivalents, short-term marketable securities, other working capital and expected future cash flows from operating activities in subsequent periods. Our primary external source of liquidity consists of our Term Loans and the June Term Loan, although we have also relied in the past, and may rely in the future, on equity or debt offerings. The disclosure on our Term Loans and the June Term Loan contained in “Note 11. Term Loans and Warrant Liabilities” and “Note 20. Subsequent Events”, including on the recent extension of maturity under the Close Date Term Loan, in the “Notes to Condensed Consolidated Financial Statements,” including the defined terms contained therein, is incorporated herein by reference.
We continue to manage all aspects of our business including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships and developing new opportunities for growth.
Principal factors that could affect the availability of our internally generated funds include:
Principal factors that could affect our ability to obtain cash from external sources include:
Based on (a) our current cash position, (b) the extension of maturity under the Close Date Term Loan to July 13, 2027 , (c) new financing under the June Term Loan, (d) currently planned expenditures and (e) current level of operations, we believe we have sufficient capital to fund operations for the next twelve months. We continue to encounter delays in the receipt of funds from our Puerto Rico EWS Project, as also described in “— Trends and Uncertainties” and our annual report on Form 10-K for the year ended September 30, 2025 under “Item 1A. Risk Factors – Risks Related to our Business and Industry - Our short-term liquidity may be materially adversely affected by administrative complexities surrounding the disbursement of funds under our Puerto Rico Early Warning System project. Furthermore, our ability to receive the full benefits of such project could be materially and adversely affected by the economic, governmental, and environmental conditions in Puerto Rico and by natural disasters impacting our
39
operations or delivery of products in a timely manner.” Furthermore, we generally operate in a rapidly evolving and unpredictable business environment that may change the timing or amount of expected future cash receipts and expenditures. 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 or otherwise. 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:
|
|
Nine Months Ended |
|
|||||
|
|
June 30, |
|
|
June 30, |
|
||
Cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(5,047 |
) |
|
$ |
(11,271 |
) |
Investing activities |
|
$ |
30 |
|
|
$ |
7,893 |
|
Financing activities |
|
$ |
138 |
|
|
$ |
4,025 |
|
Operating Activities
During the nine months ended June 30, 2026, net cash used in operating activities was $5,047, resulting from a net loss of $4,771, adjusted for a net cash decrease from changes in our operating assets and liabilities of $4,647, and offset by an increase in non-cash expenses of $4,371. The net cash decrease from changes in our operating assets and liabilities consisted primarily of a $3,302 decrease in customer deposits primarily driven by the fulfillment of obligations from our Puerto Rico EWS Project, a $2,835 increase in inventory, a $1,288 increase in accounts receivable, and a $543 increase in prepaid expenses and other, offset by a $2,242 decrease in contract assets, $574 increase in accrued liabilities and a $505 increase in accounts payable related to procurement of inventory. Non-cash expense adjustments of $4,371, consisted primarily of a $2,041 loss on fair value of Term Loans driven by the closer maturity term, $2,035 depreciation and amortization, $1,239 share-based compensation and $624 amortization of operating lease ROU assets, offset by a $1,810 gain on fair value of Warrants driven mostly by our stock price.
Investing Activities
During the nine months ended June 30, 2026, net cash provided by investing activities was zero, primarily due to the net proceeds received from the maturities of investments in our holdings in marketable securities, offset by the capital expenditures. We anticipate additional expenditures for tooling and equipment during the balance of fiscal year 2026.
Financing Activities
In the nine months ended June 30, 2026, net cash used in financing activities was $138, primarily due to the repayment of $4,000 of principal on the First Amendment Term Loan, offset by $3,999 cash proceeds received from the June Term Loan and the exercise of stock options.
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.
Information requested by this Item is not included as we are electing scaled disclosure requirements available to Smaller Reporting Companies.
Item 4. Controls and Procedures.
We are required to maintain disclosure controls and procedures designed to ensure that material information related to us, including our consolidated subsidiaries, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of our disclosure controls and procedures as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2026.
40
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our fiscal quarter ended June 30, 2026, 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 financial statements for pending litigation.
As previously disclosed, on November 19, 2025, Gerry Darden, individually and as representative of the estate of Stacey Darden, filed a lawsuit in Los Angeles Superior Court against Southern California Edison Company and Edison International (collectively, the “Edison Defendants”) and the Company, related to the wildfire that occurred in early January 2025 in the Eaton Canyon/Altadena area of Los Angeles County (the “Eaton Fire”). In the complaint, the plaintiff alleges products liability and negligence claims against the Company based on Los Angeles County’s use of the Company’s products and seeks unspecified damages. The Company cannot assess with any meaningful probability the likelihood of an adverse outcome or the possible loss or range of loss, if any, related to this lawsuit. The Company will vigorously defend itself in the lawsuit.
On January 20, 2026, the Edison Defendants filed a cross-complaint in Los Angeles Superior Court against the Company and 11 other public and private entities related to the same wildfire, in a lawsuit that had been filed by Jeremy Gursey against the Edison Defendants. In the cross-complaint, the Edison Defendants allege negligence claims against the Company based on Los Angeles County’s use of the Company’s products and seek unspecified contribution. The Company cannot assess with any meaningful probability the likelihood of an adverse outcome or the possible loss or range of loss, if any, related to this lawsuit. The Company will vigorously defend itself in the lawsuit.
On May 7, 2026, Kevin Robertson filed a complaint in Los Angeles County Superior Court against the County of Los Angeles and the Company related to the Eaton Fire. The Company was served on June 30, 2026. The plaintiff alleges negligence claims against the Company based on Los Angeles County’s use of the Company’s products and seeks unspecified damages. The Company cannot assess with any meaningful probability the likelihood of an adverse outcome or the possible loss or range of loss, if any, related to this lawsuit. The Company will vigorously defend itself in the lawsuit.
Item 1A. Risk Factors.
There have been no material changes to the risk factors described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the SEC on December 15, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On July 13, 2026, in connection with entering into the Third Amendment (as defined in “Note 20. Subsequent Events”), the Company entered into an amendment (the “Warrant Amendment”) to the Warrant Agreement, dated as of May 13, 2024, by and between the Company and its warrant agent to extend the exercise period of the 3,068,182 Warrants issued thereunder from May 13, 2029 to May 13, 2030 and to reduce the exercise price of the Warrants from $2.53 per share to $2.28 per share. The Warrants were issued pursuant to the Warrant Agreement, as amended by the Warrant Amendment, to accredited investors without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
41
Item 5. Other Information.
During the quarter ended June 30, 2026, none of our directors or executive officers
42
Item 6. Exhibits.
|
|
|
|
10.1 |
Second Amendment to Term Loan and Security Agreement, dated May 12, 2026 among Genasys Inc., Evertel Technologies, LLC, Zonehaven LLC, Genasys Puerto Rico, LLC, the lenders party thereto and Cantor Fitzgerald Securities, as administrative agent and collateral agent. Incorporated by reference to Exhibit 10.1 on Form 8-K filed May 14, 2026 |
|
|
10.2 |
Loan Agreement, dated June 9, 2026, between Genasys Inc. and Maran Partners Fund, LP. Incorporated by reference to Exhibit 10.1 on Form 8-K filed June 14, 2026 |
|
|
10.3 |
Third Amendment to Term Loan and Security Agreement, dated July 13, 2026, among Genasys Inc., Evertel Technologies, LLC, Zonehaven LLC, Genasys Puerto Rico, LLC, the lenders party thereto and Cantor Fitzgerald Securities, as administrative agent and collateral agent. Incoporated by reference to Exhibit 10.1 on Form 8-K filed July 15, 2026 |
|
|
10.4 |
First Amendment to Warrant Agreement, dated July 13, 2026, by and among Genasys, Inc., Equiniti Trust Company, LLC, as successor to Issuer Direct Corporation, and the holders party thereto. Incorporated by reference to Exhibit 10.2 on Form 8-K filed July 15, 2026 |
|
|
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 Cassandra L. Hernandez-Monteon, Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
|
|
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 Cassandra L. Hernandez-Monteon, Principal Financial Officer.* |
|
|
101.INS |
Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
104 |
Cover page formatted as Inline XBRL and contained in Exhibit 101 |
* Filed concurrently herewith.
43
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.
|
|
|
|
GENASYS INC. |
|
|
|
|
Date: August 13, 2026 |
By: |
/s/ Cassandra L. Hernandez-Monteon |
|
|
Cassandra L. Hernandez-Monteon, Chief Financial Officer |
|
|
(Principal Financial Officer) |
44