ACQUISITION

January 18, 2018,

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

employees based primarily in Spain.

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

January 18, 2018

and include

$1,469,995

in net sales and a net operating loss of

$115,189

through

September 30, 2018.

The acquisition consideration consisted of the following:

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

During the year ended

September 30, 2018,

the acquisition escrow liability was paid to the former shareholders of Genasys. The Company incurred

$412,347

in acquisition expenses related to this transaction, through

September 30, 2018.

Acquisition expenses include fees paid to auditors, attorneys, consultants and other professional services. These expenses were recorded in selling, general, and administrative expenses in the consolidated statements of operations as follows:

$55,800

in the

fourth

quarter of fiscal

2018,

$119,202

in the

third

quarter of fiscal

2018,

$151,313

in the

second

quarter of fiscal

2018,

$45,016

in the

first

quarter of fiscal

2018

and

$41,016

in the

fourth

quarter of fiscal

2017.

Purchase Price Allocation and Other Items

Based on the fair value estimates, the purchase price for Genasys has been allocated to individual assets acquired and liabilities assumed as follows:

Assets Acquired
Cash and restricted cash acquired	$	579,644
Accounts receivable		426,940
Fixed assets		5,712
Intangible assets		1,850,000
Goodwill		2,603,688
Other assets		54,520
Total assets acquired		5,520,504

Liabilities assumed
Accounts payable		275,653
Accrued expenses and other liabilities		315,817
Severance obligation		397,558
Debt		1,520,037
Total liabilities assumed		2,509,065
Net assets acquired	$	3,011,439

The estimated fair value of identifiable intangible assets acquired, and their estimated useful lives at the acquisition date was as follows:

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

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

years. The intangible assets were recorded by Genasys and are translated at the rate in effect on the balance sheet date.

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

not

be deductible for tax purposes. The goodwill was recorded by Genasys and is translated at the rate in effect on the balance sheet date.

Pro Forma Information (unaudited)

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

September 30, 2018

and

2017,

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

2017.

Pro forma results do

not

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

not

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

may

result in the future.

	Year ended September 30,
	2018			2017
Net Revenues	$	27,255,960		$	22,381,779
Net Loss		(3,428,191	)		(969,195	)
Basic and diluted loss per share	$	(0.11	)	$	(0.03	)

	September 30, 2018					September 30, 2017
	Net revenues		Net income (loss)			Net revenues		Net income (loss)
LRAD actual results	$	24,836,795	$	(3,629,853	)	$	20,314,178	$	(876,754	)
Genasys actual results		2,419,165		158,264			2,067,601		64,012
Pro forma adjustments		-		43,398			-		(156,453	)
Pro forma results	$	27,255,960	$	(3,428,191	)	$	22,381,779	$	(969,195	)

The following table identifies the pro forma adjustments:

	Year ended September 30,
	2018			2017
Acquisition costs	$	371,331		$	41,016
Amortization costs		(316,396	)		(292,078	)
Tax effect of adjustments		(11,537	)		94,609
Pro forma adjustments	$	43,398		$	(156,453	)