. DEBT

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

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

June 30, 2018:

	Principal

Loans with governmental agencies, current portion	$	532,822
Loans with governmental agencies, long-term		207,530
Total debt	$	740,352

Loans with governmental agencies represents debt granted by ministries within Spain and the European Union for the purpose of stimulating economic development and promoting research and development. Loans with governmental agencies as of

June 30, 2018

are as follows:

Agency	Due Date	Interest Rate		Principal
Ministry of Industry, Tourism, and Commerce	December 31, 2018		0.53%	$	69,828	a
Ministry of Industry, Tourism, and Commerce	December 31, 2019		0.51%		102,036	b
Ministry of Industry, Tourism, and Commerce	January 31, 2020		3.95%		89,463	c
Ministry of Science and Innovation	February 2, 2022		0.00%		70,086
Ministry of Science and Innovation	February 2, 2024		0.00%		280,243	d
Center for Development of Industrial Technology	March 31, 2021		0.00%		78,843
European Union Agency for Network and Information Security	October 28, 2018	Euribor +2.25%			49,853
				$	740,352

This loan is secured by

$24,688

of cash pledged as collateral by Genasys. This amount is included in restricted cash at

June 30, 2018.

The cash will be released upon repayment of the loan.

This loan is secured by

$38,165

of cash pledged as collateral by Genasys, which represents

25%

of the original principal received. This amount is included in restricted cash at

June 30, 2018.

The cash will be released upon repayment of the loan.

This loan is secured by

$60,290

of cash pledged as collateral by Genasys, which represents

35%

of the original principal received. This amount is included in restricted cash at

June 30, 2018.

The cash will be released upon repayment of the loan.

This loan is secured by

$280,243

of cash pledged as collateral by Genasys, which is the current balance of the loan. This amount represents

66.6%

of the original principal received. This amount is included in restricted cash at

June 30, 2018.

The Company expects the Ministry of Science and Innovation to declare the terms of the loan satisfied within fiscal year

2018

and that the outstanding balance of the loan will be paid in full during fiscal year

2018.

Accordingly, this has been included in the current portion of notes payable as of

June 30, 2018.

The following is a schedule of future annual payments as of

June 30, 2018:

July 2018-June 2019	$	532,822
July 2019-June 2020		134,887
July 2020-June 2021		55,121
July 2021-June 2022		17,522
Thereafter		-
Total	$	740,352

The Company has pledged

$444,482

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

June 30, 2018.

The Company recorded

$4,390

and

$14,205

in interest expense for the

three

months and

nine

months ended

June 30, 2018,

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