GNSS 10-K & 10-Q changes, risk factors and insider trading

In fiscal year 2025, one customer accounted for 32% of revenues and no other customers accounted for more than 10% of revenues. In fiscal year 2024, one customer accounted for 18% of revenuesrevenues, and no other customers accounted for more than 10% of revenues. Historically, our revenues have been dependent upon a limited number of customers, and we expect that we will continue to have some significant customers in future years. We do not have long-term purchase commitments with these or other significant customers, and our customers have the right to cease doing business with us at any time. Military contracts that we have been awarded have terms of indefinite delivery/indefinite quantity during the term of the contract, so there are no guaranteed purchases under these contracts. No assurance can be given that these or other customers will continue to do business with us or that they will maintain their historical levels of business. If our relationship with any material customer were to cease, then our revenues would decline and negatively impact our results of operations. Any such decline could result in us increasing our accumulated deficit and a need to raise additional capital to fund our operations. If our expectations regarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls.

We may need additional capital to support our growth. While we expect to generate these funds from operations, we may not be able to do so.so, or may be able to do so only on terms unfavorable to us. Principal factors that could affect the availability of our internally generated funds include:

failure of sales toto, or delays in payment from, customers in the government, military, and commercial markets to meet planned projections;

political or economic uncertainty;

Should we require additional funds, general market conditions or the then-current market price of our common stock may not support equity or debt capital raising transactions and any such financing may require advance approval of our stockholders under the rules of the NASDAQ StockCapital Market. As a result of the size of our public float, we are limited in our ability to raise significant equity capital in a public offering. Our ability to obtain financing may be further constrained by prevailing economic conditions. We may be required to reduce costs, including the scaling back of research and development into new products, which could have a negative impact on our ability to compete and to innovate. If we raise additional funds by selling additional shares of our capital stock or securities convertible into or exercisable for common stock (assuming we are able to obtain additional financing), the ownership interest of our stockholders will be diluted, which could have a material negative impact on the market value of our common stock. If we raise additional funds through debt financing, the terms of such financing may not be favorable to us, and may also restrict our strategic or operational flexibility.

The volatile global economic environment has created market uncertainty. A slowdown in the financial markets or other economic conditions, including but not limited to global supply chain issues, inflation, fuel and energy costs, freight costs, lack of available credit, sovereign debt crises, interest rates, and tax rates, may adversely affect the Company’s growth and profitability. Fluctuation of prices and availability of commodities and materials used in the manufacture of our products may affect the cost of operations. In addition, increasing wage inflation and challenges hiring qualified personnel may impact our ability to meet customer demand. While we expect the impacts of market uncertainty and inflation could have an effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of these impacts at this time.

We have experienced cybersecurity incidents in the past, though none have materially impacted our Company, including our operations or financial condition. There can be no guarantee that future cyberattacks or incidents will not materially impact our Company generally or our IT Systems or data or that of critical service providers specifically. We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and data. Those risks include data security incidents, cybersecurity events, data breaches, ransomware attacks or other compromises of the IT Systems that we or our vendors use to provide services or process data on our behalf, which may lead to compromised network security and misappropriation or compromise of our information, our customer’s information or that of third parties, to system disruptions or to shutdowns. Cyberattack actors include criminal hackers, hacktivists, and state-sponsored intrusions, and may involve industrial espionage, employee malfeasance and human or technological error. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers and other third parties to disclose information or unwittingly provide access to systems or data. The risk of such attacks includes attempted breaches not only of our own products, services and systems, but also those of customers, contractors, business partners, vendors and other third parties.

Our products, services and systems may be used in critical government, company, customer, governmentcustomer or other third-party operations, or involve the storage, processing and transmission of sensitive data, including valuable intellectual property, classified information, other proprietary or confidential data, regulated data and personal information of employees, customers and others. In our command-and-control software systems, we process, store and transmit data provided by our customers, which is vital to our customer’s businesses and operations and may include sensitive and personal data. We also manage, store, transmit and otherwise process various sensitive personal or confidential data related to our company and our employees in the regular course of business. Successful breaches, employee malfeasance or human or technological error could result in, for example, unauthorized access to, disclosure, modification, misuse, loss or destruction of government company, customer, governmentcustomer or other third party data or systems; theft of sensitive, regulated, classified or confidential data including personal information and intellectual property; the loss of access to critical data or systems through distributed denial-of-service attacks, denial-of-service attacks, ransomware attacks, supply chain attacks, destructive attacks or other means; and business delays, service or system disruptions or denials of service. Further, hardware and operating system software and applications that we produce or procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could interfere with the operation of such systems. Given the nature of complex systems, software and services like ours, and the scanning tools that we deploy across our networks, infrastructure and products, we regularly identify and track security vulnerabilities. We are unable to comprehensively guarantee patches or confirm that measures are in place to mitigate all such vulnerabilities, or that patches will be applied before vulnerabilities are exploited by a threat actor. If attackers are able to exploit critical vulnerabilities before patches are installed or mitigating measures are implemented, significant compromises could impact our and our customers’ systems and data.

We have current government contracts, and our future growth is dependent, in large part, on continued sales to U.S. and international governments and businesses that sell to governments.governments, which in turn are dependent on adequate government funding. In this context, we note a recent decline in federal funding in the United States.

In fiscal year 2024,2025, direct and indirect sales to the U.S. government accounted for approximately 29%56% of our total net sales, compared with 59%29% of our total net sales in fiscal year 2023.2024. 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 organizationsorganizations, including, for example, our recently received LRAD order for CROWS, are subject to the overall U.S. government budget and congressional appropriation decisions and processes which are driven by numerous factors, including geo-politicaldomestic political conditions, geopolitical events and macroeconomic conditions, and are beyond our control. Even awards granted may not result in orders due to spending constraints.constraints or Congressional delays in passing the federal budget. Similar issues apply to sales to international governments. WeFurthermore, we have no assurance that military interest in communication devices to minimize unnecessary use of force will continue or will provide future growth opportunities for our business.

To grow our business, in addition to continuing to obtain additional orders from our existing customers, we must develop relationships with new customers and obtain and fulfill orders from new customers. We are competing against a number of large competitors in the mass notification market, and we need to establish our product offerings as competitive to win awards against these competitors, increase our customer base, and gain market share. We cannot guarantee that we will be able to increase our customer base. Further, even if we do obtain new customers, we cannot guarantee that those customers will purchase from us in sufficient quantities or at product prices that will enable us to recover our costs in acquiring those customers and fulfilling those orders. Whether we will be able to sell more of our products will depend on several factors, including:

Since early 2018, we have completed several acquisitions, including Genasys Spain, Amika Mobile,Mobile assets, Zonehaven and most recently Evertel. Our ability to successfully implement our business plan and achieve targeted financial results and other benefits including, among other things, greater market presence and development, and enhancements to our product portfolio and customer base, is dependent on our ability to successfully identify, consummate and integrate acquisitions. We may not realize the intended benefits of these acquisitions, or the acquisition of other businesses in the future as rapidly as, or to the extent, anticipated by our management. There can be no assurance that we will be able to successfully integrate these businesses, products or technologies without substantial expenses, delays or other operational or financial problems. Acquisitions involve a number of risks, some or all which could have a material adverse effect on our acquired businesses, products or technologies. Furthermore, there can be no assurance that these businesses, or any other acquired business, product, or technology will be profitable or achieve anticipated revenues and income. Our failure to manage our acquisition and integration strategy successfully could have a material adverse effect on our business, results of operations, and financial condition. The process of integrating an acquired business involves risks, including but not limited to:

Potential customers for our products, including government, military, and emergency response agencies, may be influenced by claims or perceptions that long-range hailing devices are unsafe or may be used in an abusive manner. These claims have been voiced and exploited by third parties in the past, including on network television and social media. Such claims or perceptions, which we believe are unsubstantiated, could reduce our product sales.sales and harm our reputation.

We may not successfully penetrateexpand our position in the mass notification market.market, and our margins may be affected.

The emergency response and mass notification market is substantial and projected to grow globally over the near future. Our sales strategy for fiscal year 20252026 and beyond is to increase our share of the growing emergency response and mass notification market with our Protective Communications solutions. AHowever, numberwe may be unable to do so as a result of largecompetition companiesor currently have a substantial share of the market. While we believe we have a strong product platform that can successfully compete against these larger players, given the highly competitive environment, we expect to confront pricing pressures, which may negatively impact our overall margins.otherwise.

We may face wrongful death, personal injury and other product liability claims that may result in significant costs, harm our reputation and adversely affect our operating results and financial condition.

While our hardware products have been engineered to reduce the risk of damage to human hearing or human health, we could be exposed to claims of hearing damage if the product is not properly operated. A person injured in connection with the use of our products may bring legal action against us to recover damages on the basis of theories,various legal theories including personal injury, negligent design, dangerous product or inadequate warning. We may also be subject to lawsuits involving allegations of defects in or misuse of our products.hardware Ouror productsoftware liabilityproducts, insuranceincluding coverageallegations maythat besuch insufficientproducts failed to payprotect all such claims. Product liability insurance may also become too costly for us or may become unavailable to us in the future. We may not have sufficient resources to satisfy any product liability claims not covered by insurance, which would materially and adversely affect our operating results and financial condition. Significant litigation could also result in negative publicity and a diversion of management’s attention and resources.lives.

Our products are made from a wide range of materials and have a large number of components and sub-assemblies (including semiconductors and other electronic components) produced by numerous outside suppliers around the world. Because not all of our supply arrangements provide for guaranteed supply and some key parts may be available only from a single supplier or a limited group of suppliers, we are subject to supply and pricing risk. For example, we rely on one supplier for compression drivers for our LRAD products. Our operations and those of our suppliers are subject to disruption for a variety of reasons, including pandemic related supplier plant shutdowns or slowdowns, transportation delays, work stoppages, labor relations, labor shortages, price inflation, governmental regulatory and enforcement actions, intellectual property claims against suppliers, financial issues such as supplier bankruptcy, information technology failures, and hazards such as fire, earthquakes, flooding, or other natural disasters. For example, we expect to continue to be impacted by the following supply chain issues, due to economic, political and other factors largely beyond our control: increased input material costs and component shortages; supply chain disruptions and delays and cost inflation, all of which could continue or escalate in the future. The effects of climate change, including extreme weather events, long-term changes in temperature levels, water availability, increased cost for decarbonizing process heating, supply costs impacted by increasing energy costs, or energy costs impacted by carbon prices or offsets may exacerbate these risks. If these disruptions occur, or if we experience quality problems with suppliers, then our production schedules could be significantly delayed or costs significantly increased, which would have a material adverse effect on our business, liquidity, results of operations, and financial position.

the availability, pricing, and timeliness of delivery of components for our products and OEMoriginal equipment manufacturers (“OEMs”) products;

generalincreased economic conditions that could affect the timing of customer orders and capital spending and resultcompetition in orderthis cancellations or reschedulingmarket; and general political conditions in this country and in various other parts of the world that could affect spending for the products that we offer.

The agreements governing our Term LoanLoans impose financial and operating restrictions on us and any failure to meet our payment or other obligations under our Term LoanLoans could have a material adverse effect on us, including permitting the lenders under our Term LoanLoans to foreclose on, and acquire control of, substantially all of our assets.

Our Term LoanLoans imposes,impose, and the terms of any future debt may impose, operating and other restrictions on us. These restrictions could affect, and in many respects limit or prohibit, among other items, our ability to:

Our Term LoanLoans also requiresrequire us to achieve and maintain compliance with a minimum liquidity covenant. A breach of any of these restrictive covenants or the inability to comply with the financial metrics could result in a default under our Term Loan.Loans. Further, our Term LoanLoans isare jointly and severally guaranteed by us and certain of our subsidiaries. Borrowings under our Term LoanLoans are secured by liens on substantially all of our assets, including the capital stock of certain of our subsidiaries, and the assets of our subsidiaries that are loan party guarantors. If we are unable to repay outstanding borrowings when due or comply with other obligations and covenants under our Term Loan,Loans, the lenders under our Term LoanLoans will have the right to proceed against these pledged capital stock and take control of substantially all of our assets.

Our Term LoanLoans may not be sufficient for our future working capital, investments and cash requirements, in which case we would need to seek additional debt or equity financing or scale back our operations. In addition, we may need to seek additional financing to achieve and maintain compliance with specified financial criteria under our Term Loan.Loans. We may not be able to access additional capital resources due to a variety of reasons, including the restrictive covenants in our Term LoanLoans and the lack of available capital due to global economic conditions. If our financing requirements are not met and we are unable to access additional financing on favorable terms, or at all, our business, financial condition, operating results, and future growth prospects could be materially adversely affected.

Our Term LoanLoans providesprovide for interest to be calculated based on the prime rate, the federal funds rate and/or the secured overnight financing rate. While the Federal Reserve decreasedlowered interest rates inslightly 2024during any2025, future increases in benchmark rates would raise the interest rates onapplicable whichto our Term LoanLoans. Any such increases would result in higher interest ratesexpense are based would increase interest rates on our debt, whichand could materially adversely impact our interest expense, operating resultsresults, liquidity, and cash flows.

We are a global provider of Protective Communications solutions including our Genasys Protect software platform and LRAD by Genasys LRADhardware products. Our unified software platform receives information from a wide variety of sensors and IoT inputs to collect real-time information on developing and active emergency situations. Genasys uses this information to create and disseminate alerts, warnings, notifications, and instructions through multiple channels before, during, and after public safety and enterprise threats, critical events, and other crisis situations.

LRAD products provide audible voice messages with exceptional vocal clarity from close range out to 5,5005,000 meters. We have a history of successfully delivering innovative systems and solutions in mission critical situations, pioneering the AHD market with the introduction of our first LRAD AHD in 2002 and2002, creating the first multidirectional voice-based public safety mass notification systems in 2012.2012, and the first AHDs with a digital interface for remote operation in 2023. Building on our proven, best in class, and reliable solutions and systems, we offer the first and only unified, end-to-end Protective Communications platform.

In fiscal 2025,year 2026, we intend to continue pursuing domestic and international business opportunities with the support of business development consultants, key representatives, and resellers. We plan to grow our revenues through increased direct sales to governments and agencies that desire to integrate our communication technologies into their homeland security and public safety systems. This includes building on fiscal 2024year 2025 domestic defense sales by expanding and pursuing further U.S. military opportunities. We also plan to pursue domestic and international emergency warning, enterprise and critical event management, government, law enforcement, fire rescue, homeland and international security, private and commercial security, border security, maritime security, and wildlife preservation and control business opportunities. In addition to the matters above, we are authorized for the performance of services and provision of goods pursuant to Delaware General Corporation Law.

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

Accounting Standards Codification (“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:

Allocate the transaction price to the performance obligations Recognize revenue when or as the performance obligations have been satisfied ASC 606 requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services.

We derive our revenue from the sale of products and services to customers, contracts, license fees, other services, and freight. We sell our products and services through itsour direct sales force and through authorized resellers and system integrators. We recognize 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.

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 timely 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, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, market acceptance of the Company’s products, shortages in components or price increases that cannot be passed on to customers, inability to fully realize the expected benefits from acquisitions and restructurings or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, changes to export regulations, difficulties in retaining key employees and customers, changes in the market for microcap stocks regardless of growth and value and various other factors beyond our control. Some of these risks and uncertainties are identified in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (especially the “Liquidity and Capital Resources” section) and the section “Risk Factors” in this report and in our Annual Report on Form 10-K and you are urged to review those sections. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.

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.

Acoustics unites Genasys’ next generation of mass notification speaker systems with Genasys Protect command-and-control software. Most legacy mass notification systems are sirens with limited, if any, voice broadcast capability. Acoustics systems feature the industry’s highest Speech Transmission Index, 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.

Business developments during the first sixnine months of fiscal year 2026 and through the date of this report:

Announced $1,000 Genasys Acoustics order from a nuclear energy operator In accordance with the terms of the First Amendment, dated May 9, 2025, to the Term Loan and Security Agreement among the Company, Evertel Technologies, LLC, Zonehaven LLC, Genasys Puerto Rico, LLC, the lenders from time to time party thereto and Cantor Fitzgerald Securities, as administrative agent and collateral agent (the “Close Date Term Loan”), on December 29, 2025, the Company repaid in full the additional $4 million term loan extended pursuant to such amendment (the “First Amendment Term Loan” and with the Close Date Term Loan, the “Term Loans”), plus related interest and fees.

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, servicesservices, 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.year, However,and theon fundingApril 30, 2026, an appropriations bill excludedfor the Department of Homeland Security, which includes FEMA.FEMA, Fundingwas enacted for thefiscal Departmentyear of Homeland Security remains subject to further negotiations.2026.

Comparison of Results of Operations for the Three Months Ended MarchJune 31,30, 2026 and 2025 (in thousands)

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the three months ended MarchJune 31,30, 2026 and 2025 of $489$212 and $338,$384, respectively.

Research and development expenses increaseddecreased $114,$26, or 5%,1%, in the secondthird quarter of fiscal year 2026 compared to the prior year period. The increaseCompany wasmaintained primarilyconsistent dueinvestment toin higherresearch engineeringand labordevelopment costsactivities associatedsupporting withits enhancementssoftware toand thehardware Genasysproduct Protect platform.offerings.

We incurred non-cash share-based compensation expenses allocated to research and development expenses in the three months ended MarchJune 31,30, 2026 and 2025 of $42$41 and $56,$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. Based on current plans, we may expend additional resources on research and development in the current fiscal year compared to the prior fiscal year.

Other (Expense) Income,Expense, Net

Other expense, net was $414$582 in the secondthird quarter of this fiscal year, compared to other income,expense, net of $187$554 in the prior year period. The change was primarily dueattributable to thenormal lossfluctuations fromin thenon-operating changeexpenses and changes in the fair value of our $15,000 term loan (the “Close Date Term Loan”), ourand $4,000 Term Loan (the “Firstwarrants Amendmentissued Termin Loan” andconnection with the Close Date Term Loan, the “Term Loans”) and the warrants issued in accordance with the Term LoansLoan (the “Warrants”).

Comparison of Results of Operations for the SixNine Months Ended MarchJune 31,30, 2026 and 2025 (in thousands)

Revenues increased $18,698,$16,136, or 135%,68%, for the sixnine months ended MarchJune 31,30, 2026, compared with the same prior year period. Hardware and software revenue increased $18,604$15,575 and $94,$561, respectively, compared with the prior year period. The increase in hardware revenue for the first six months of fiscal year 2026 was largelyprimarily attributable to the conversion of higher backlog at the beginning of the fiscal year 2026 resulting from increased orders received induring fiscal year 2024.2025. FiscalIncluded yearin 2024those orders includedwas the Puerto Rico EWS Project, which has a longer duration than our typical projects and is expected to extend beyond a 12-monthtwelve-month period. BacklogRevenue representsrecognized customer purchase orders received that are expected to ship within the next twelve months. Hardware revenue for the current year-to-date period included $20,148 related toon the Puerto Rico EWS Project.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.

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 MarchJune 31,30, 2026, we had aggregate deferred revenue of $3,710$3,716 for extended warranty obligations and software support agreements.

Gross profit increased $12,214,$13,782, or 211%,164%, compared with the same six-monthnine-month period last year, primarily driven by higher hardware revenue and improved gross margin on the Puerto Rico EWS project.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 priornine yearmonths period,ended certainJune hardware30, components2025, we recognized $5,563 of revenue associated with the Puerto Rico EWS ProjectProject. 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 additional$21,469 of revenue associated with the project.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 sixnine 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.

Selling, general and administrative expenses decreased $636,$931, or 5% in the sixnine months ended MarchJune 31,30, 2026 over the prior year period. The decrease was primarily drivenattributable byto $285lower inlegal professionalexpenses services,of $177$400, inreduced computer and information technology expenses of $326, lower travel expenses of $234, and reduced sales and marketing expenseexpenses of $230. As a percentage of revenue, selling, general and $176administrative inexpenses computerdecreased compared with the prior-year period as revenue growth outpaced operating expenses, consistentreflecting withimproved ouroperating cost reduction trends.leverage.

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the sixnine months ended MarchJune 31,30, 2026 and 2025 of $842$1,054 and $664,$1,048, respectively.

Research and development expenses decreased $276,$302, or 6%5% in the sixnine months ended MarchJune 31,30, 2026 compared to the prior year period,period. dueThe decrease was primarily attributable to lowera $565 reduction in professional serviceservices expensesexpense ofresulting $387, partially offset by an increase in compensation of $161 for engineering labor costs associated with enhancements tofrom the GenasysCompany's Protectcost platform.reduction initiatives implemented during fiscal year 2025.

We incurred non-cash share-based compensation expenses allocated to research and development expenses in the sixnine months ended MarchJune 31,30, 2026 and 2025 of $87$128 and $104,$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. Based on current plans, we may expend additional resources on research and development in the current fiscal year compared to the prior fiscal year.

Other expense, net was $754$1,336 in the first sixnine months of fiscal 2026, compared to other income, net of $2,050$1,496 in the prior fiscal year period. The change was primarily driven by a $1 loss in the current year, compared to a $2,620 gain in the prior year, relatedattributable to the changes in the fair value of theour $15,000 Close Date Term LoansLoan and Warrants.the Warrants and normal fluctuations in non-operating expenses.

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.

Comparison of Segment Adjusted EBITDA for the Three Months Ended MarchJune 31,30, 2026 and 2025 (in thousands)

Operating incomeloss was $3,516$1,847 in the secondthird quarter of fiscal year 2026 compared to an operating loss of $3,212$2,589 in the prior year period,period. with theThe improvement was primarily dueattributable to higher revenuegross margin resulting from improved profitability on the Puerto Rico EWS Project and resultant gross profit, as well as a reduction inlower operating expenses.

Operating loss decreased $809$1,147 in the secondthird quarter of the current fiscal year compared to the prior year periodperiod. dueThe improvement was primarily attributable to higher revenue and lower operating expenses inresulting payrollfrom andcost benefitsreduction initiatives implemented during the fourth quarter of fiscal year 2025, including reduced professional services expense and a reductionlower inreliance professionalon service.temporary personnel and contractors.

Comparison of Segment Adjusted EBITDA for the SixNine Months Ended MarchJune 31,30, 2026 and 2025 (in thousands)