UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q~~10-Q/A (Amendment No 1.)

x
	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED:~~DECEMBER~~March 31, ~~2017~~2023


	OR
¨ ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ~~__________~~ TO ~~__________.~~ .


Commission File number: 0-10004		~~0-10004~~


NAPCO SECURITY TECHNOLOGIES, ~~INC.~~	INC.
	(Exact name of Registrant as specified in its charter)

Delaware		11-2277818
(State or other jurisdiction of		(IRS Employer Identification
incorporation of organization)		Number)

333 Bayview Avenue
Amityville, New York		11701
(Address of principal executive offices)		(Zip Code)

	~~(631) 842-9400~~
(631) 842-9400
(Registrant’s telephone number including area code)


	(Former name, former address and former fiscal year if
changed from last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		NSSC		The Nasdaq Stock Market LLC

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 and Exchange Act of 1934 during the preceding 12 months (or 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: Yesx⌧ No¨☐

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

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

Large accelerated filer ⌧Accelerated ~~Filer~~¨ ~~Accelerated Filer~~x ~~Non-Accelerated Filer~~¨filer ☐ Non-accelerated filer ☐ Smaller reporting company¨☐ Emerging growth 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~~¨Act. ☐

Indicate by check mark whether the ~~registrant~~Registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act):. Yes ☐ No ⌧

~~Yes~~

Number of shares outstanding of each of the issuer’s classes of common stock, as of: ~~February 7, 2018~~May 5, 2023

COMMON STOCK, $.01 PAR VALUE PER SHARE ~~18,708,547~~36,767,780

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EXPLANATORY NOTE

Napco Security Technologies, Inc. (“Company”) is filing this Amendment No. 1 on Form 10-Q/A (the “Amendment”) to amend its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 8, 2023 (the “Original Report”). In filing this amendment, the Company is restating its previously issued unaudited financial statements for the periods contained therein to account for changes to the Company’s inventory valuation, which led to changes in, among other things, cost of goods sold, gross profit, operating income and net income as more fully described below. Those previously issued financial statements should no longer be relied upon. Except as described below, all other information in, and the exhibits to, the Original Report remain unchanged. Accordingly, this Amendment should be read in conjunction with the Original Report and with our filings with the SEC made after the Original Report. This Amendment speaks as of the date of the Original Report, and the Company has not updated the Original Report to reflect events occurring subsequent to the date of the Original Report.

Background and Effects of the Restatement

In the course of preparing the Company’s fiscal fourth quarter and year-end financial statements, management of the Company identified certain errors related to the Company’s calculation of cost of goods sold (“COGS”) and inventory for the period ended December 31, 2022. Specifically, the costs of several raw material components fluctuated significantly during fiscal 2023, and the Company’s costing procedures did not appropriately account for such fluctuations. As a result, inventories were overstated and COGS was understated, resulting in overstated gross profit, operating income, provision for income taxes and net income for each period. The effects of these changes on the financial statements for these periods are shown in Note 1A to the Condended Consolidated Financial Statements.

Internal Control Over Financial Reporting

In connection with the restatement, management has assessed the effectiveness of the Company’s internal control over financial reporting. Based on this assessment, the Company identified a material weakness in its internal control over financial reporting resulting in the conclusion by the Company’s Chief Executive Officer and Chief Financial Officer that the internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2022. Management is taking steps towards remediating the material weakness in the Company’s internal control over financial reporting. For additional information related to the material weakness in internal control over financial reporting and the related remedial measures, see “Part II – Item 9A. Controls and Procedures.”

Items Amended in this Filing

This Amendment sets forth the Original Form 10-Q, as modified and superseded where necessary to reflect the restatement and the related internal control considerations. Accordingly, the following items included in the Original Form 10-Q have been amended:

• Part I, Item 1, Condensed Consolidated Financial Statements

• Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations

• Part I, Item 4, Controls and Procedures

• Part II, Item 1A, Risk Factors

Additionally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company is including with this Amendment currently dated certifications from its Chief Executive Officer and Chief Financial Officer. These certifications are filed or furnished, as applicable, as Exhibits 31.1, 31.2 and 32.1.

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

			Page

PART I: FINANCIAL INFORMATION

	ITEM 1.	Financial Statements	4

		NAPCO SECURITY TECHNOLOGIES, INC. AND ~~SUBSIDIARIESINDEX – DECEMBER~~SUBSIDIARIES INDEX –March 31, ~~2017~~2023

		Condensed Consolidated Balance Sheets ~~December~~as of March 31, ~~2017~~2023 (unaudited) and June 30, ~~2017~~2022	3 4

		Condensed Consolidated Statements of Income for the Three Months ended ~~December~~March 31, ~~2017~~2023 and ~~2016~~2022 (unaudited)	4 5

		Condensed Consolidated Statements of Income for the ~~Six~~Nine Months ended ~~December~~March 31, ~~2017~~2023 and ~~2016~~2022 (unaudited)	5 6
		Condensed Consolidated Statements of Stockholders Equity for the Nine Months Ended March 31, 2023 and 2022 (unaudited)	7
		Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months ~~ended December~~Ended March 31, ~~2017~~2023 and ~~2016~~2022 (unaudited)	6 8

		Notes to Condensed Consolidated Financial Statements (unaudited)	7 9

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition ~~andResults~~and Results of Operations	18 30

	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	22 34

	ITEM 4.	Controls and Procedures	22 35

PART II: OTHER INFORMATION

	ITEM ~~1A.~~1.	Risk Factors	23 36

	ITEM 2.6.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~Exhibits	23 37

			~~ITEM 6.~~	~~Exhibits~~	24

SIGNATURE PAGE			25 38

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PART I: FINANCIAL INFORMATION
~~PART I:~~

~~FINANCIAL INFORMATION~~

~~Item 1.~~

~~Financial Statements~~

Item 1. Financial Statements

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2017
(unaudited)
June 30, 2017
(in thousands, except for share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,949 $ 3,454
Accounts receivable, net of allowance for doubtful accounts of $175 and $155 at December 31, 2017 and June 30, 2017, respectively, and other reserves 17,361 20,275
Inventories, net 26,687 26,212
Prepaid expenses and other current assets 1,139 1,330

Total Current Assets 49,136 51,271

Inventories - non-current, net 5,179 4,367
Deferred income taxes 1,461 644
Property, plant and equipment, net 6,710 6,543
Intangible assets, net 7,731 7,916
Other assets 270 121

TOTAL ASSETS $ 70,487 $ 70,862

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,488 $ 5,653
Accrued expenses 2,177 2,209
Accrued salaries and wages 1,876 2,322
Accrued income taxes 976 289
Total Current Liabilities 9,517 10,473
Long-term debt, net of current maturities 2,000 3,500

Total Liabilities 11,517 13,973

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Common Stock, par value $0.01 per share; 40,000,000 shares authorized; 21,179,192 and 21,174,507 shares issued; and 18,826,742 and 18,844,657 shares outstanding, respectively 212 212
Additional paid-in capital 16,790 16,638
Retained earnings 53,894 51,771
70,896 68,621
Less: Treasury Stock, at cost (2,352,450 and 2,329,850 shares, respectively) (11,926 ) (11,732 )

TOTAL STOCKHOLDERS' EQUITY 58,970 56,889

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 70,487 $ 70,862


	March 31, 2023
	(as Restated) (unaudited)		June 30, 2022

	(in thousands, except share data)
CURRENT ASSETS
Cash and cash equivalents	$	31,515	$	41,730
Investments - other		20,271		—
Marketable securities		5,155		5,068
Accounts receivable, net of allowance for credit losses of $125 and $243 as of March 31, 2023 and June 30, 2022, respectively		24,170		29,218
Inventories, net		38,725		40,781
Income tax receivable		688		—
Prepaid expenses and other current assets		2,610		2,838
Total Current Assets		123,134		119,635
Inventories - non-current, net		11,960		9,005
Property, plant and equipment, net		9,335		7,939
Intangible assets, net		4,029		4,300
Deferred income taxes		1,234		—
Operating lease asset		5,878		7,350
Other assets		299		347
TOTAL ASSETS	$	155,869	$	148,576

CURRENT LIABILITIES
Accounts payable	$	7,005	$	11,072
Accrued expenses		7,648		9,489
Accrued salaries and wages		2,843		4,064
Accrued income taxes		—		1,868
Total Current Liabilities		17,496		26,493
Deferred income taxes		—		166
Accrued income taxes		1,067		1,058
Long term operating lease liabilities		5,737		7,068
TOTAL LIABILITIES		24,300		34,785
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDERS’ EQUITY
Common Stock, par value $0.01 per share; 100,000,000 shares authorized as of March 31, 2023 and June 30, 2022; 39,661,495 and 39,628,197 shares issued; and 36,767,780 and 36,734,482 shares outstanding, respectively		397		396
Additional paid-in capital		21,220		20,005
Retained earnings		129,473		112,911
Less: Treasury Stock, at cost (2,893,715 shares)		(19,521)		(19,521)
TOTAL STOCKHOLDERS’ EQUITY		131,569		113,791
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	155,869	$	148,576

See accompanying notes to condensed consolidated financial statements.

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)


	Three Months ended March 31,
	2023 (as Restated)		2022

	(in thousands, except for share and per share data)
Net sales:
Equipment revenues	$	28,390	$	23,873
Service revenues		15,142		12,032
		43,532		35,905
Cost of sales:
Equipment related expenses		20,780		19,334
Service-related expenses		1,473		1,538
		22,253		20,872

Gross Profit		21,279		15,033

Operating expenses:
Research and development		2,314		2,009
Selling, general, and administrative expenses		8,425		8,442
Total Operating Expenses		10,739		10,451

Operating Income		10,540		4,582

Other income (expense):
Interest and other income (expense), net		437		(177)
Income before Provision for Income Taxes		10,977		4,405
Provision for Income Taxes		1,428		1,132
Net Income	$	9,549	$	3,273

Income per share:
Basic	$	0.26	$	0.09
Diluted	$	0.26	$	0.09

Weighted average number of shares outstanding:
Basic		36,793,000		36,743,000
Diluted		37,082,000		36,879,000

See accompanying notes to condensed consolidated financial statements.

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Three months ended December 31,
2017 2016
(In thousands, except share and per share data)

Net sales $ 21,112 $ 20,715
Cost of sales 14,272 14,098

Gross Profit 6,840 6,617
Selling, general, and administrative expenses 5,674 5,553

Operating Income 1,166 1,064

Other expense:
Interest, net 22 18

Income before Income Taxes 1,144 1,046
Income tax (benefit) expense (89 ) 189

Net Income $ 1,233 $ 857

Net Income per share:
Basic $ 0.07 $ 0.05
Diluted $ 0.07 $ 0.05

Weighted average number of shares outstanding:
Basic 18,849,000 18,798,000
Diluted 18,883,000 18,851,000


	Nine Months Ended March 31,
	2023 (as Restated)		2022

	(in thousands, except for share and per share data)
Net sales:
Equipment revenues	$	81,511	$	67,080
Service revenues		43,828		33,284
		125,339		100,364
Cost of sales:
Equipment-related expenses		70,341		56,077
Service-related expenses		4,799		4,355
		75,140		60,432

Gross Profit		50,199		39,932

Operating expenses:
Research and development		6,964		5,918
Selling, general, and administrative expenses		24,719		23,983
Total Operating Expenses		31,683		29,901

Operating Income		18,516		10,031

Other income (expense):
Interest and other income (expense), net		521		(102)
Gain on extinguishment of debt		—		3,904
Income before Provision for Income Taxes		19,037		13,833
Provision for Income Taxes		2,475		1,771
Net Income	$	16,562	$	12,062

Income per share:
Basic	$	0.45	$	0.33
Diluted	$	0.45	$	0.33

Weighted average number of shares outstanding:
Basic		36,736,000		36,723,000
Diluted		36,983,000		36,873,000

See accompanying notes to condensed consolidated financial statements.

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~INCOME~~STOCKHOLDERS EQUITY (unaudited)

Six months ended December 31,
2017 2016
(In thousands, except share and per share data)

Net sales $ 42,286 $ 40,883
Cost of sales 28,567 27,814

Gross Profit 13,719 13,069
Selling, general, and administrative expenses 11,494 11,289

Operating Income 2,225 1,780

Other expense:
Interest, net 48 42

Income before Income Taxes 2,177 1,738
Income tax expense 54 313

Net Income $ 2,123 $ 1,425

Net Income per share:
Basic $ 0.11 $ 0.08
Diluted $ 0.11 $ 0.08

Weighted average number of shares outstanding:
Basic 18,848,000 18,792,000
Diluted 18,881,000 18,844,000


	Nine months ended March 31, 2023 (as Restated) (in thousands, except for share data)
	Common Stock					Treasury Stock
	Number of			Additional
	Shares			Paid-in		Number of			Retained
	Issued	Amount		Capital		Shares	Amount		Earnings		Total
Balances at June 30, 2022	39,628,197	$	396	$	20,005	(2,893,715)	$	(19,521)	$	112,911	$	113,791
Net income	—		—		—	—		—		3,084		3,084
Stock-based compensation expense	—		—		477	—		—		—		477
Stock options exercised	8,480		—		45	—		—		—		45
Balances at September 30, 2022	39,636,677	$	396	$	20,527	(2,893,715)	$	(19,521)	$	115,995	$	117,397
Net income	—		—		—	—		—		3,929		3,929
Stock-based compensation expense	—		—		335	—		—		—		335
Stock options exercised	2,756		—		—	—		—		—		—
Balances at December 31, 2022	39,639,433	$	396	$	20,862	(2,893,715)	$	(19,521)	$	119,924	$	121,661
Net income (as restated)	—		—		—	—		—		9,549		9,549
Stock-based compensation expense	—		—		322	—		—		—		322
Stock options exercised	22,062		1		36	—		—		—		37
Balances at March 31, 2023	39,661,495	$	397	$	21,220	(2,893,715)	$	(19,521)	$	129,473	$	131,569


	Nine months ended March 31, 2022 (in thousands, except share data)
	Common Stock					Treasury Stock
	Number of			Additional
	Shares			Paid-in		Number of			Retained
	Issued	Amount		Capital		Shares	Amount		Earnings		Total
Balances at June 30, 2021	39,595,883	$	396	$	18,201	(2,893,715)	$	(19,521)	$	93,312	$	92,388
Net income	—		—		—	—		—		7,752		7,752
Stock-based compensation expense	—		—		89	—		—		—		89
Stock options exercised	5,000		—		16	—		—		—		16
Balances at September 30, 2021	39,600,883	$	396	$	18,306	(2,893,715)	$	(19,521)	$	101,064	$	100,245
Net income	—		—		—	—		—		1,037		1,037
Stock-based compensation expense	—		—		1,255	—		—		—		1,255
Stock options exercised	24,588		—		139	—		—		—		139
Balances at December 31, 2021	39,625,471	$	396	$	19,700	(2,893,715)	$	(19,521)	$	102,101	$	102,676
Net income	—		—		—	—		—	$	3,273	$	3,273
Stock-based compensation expense	—		—		35	—		—		—	$	35
Stock options exercised	1,784		—		—	—		—		—		—
Balances at March 31, 2022	39,627,255	$	396	$	19,735	(2,893,715)	$	(19,521)	$	105,374	$	105,984

See accompanying notes to condensed consolidated financial statements.

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Six months ended December 31,
2017 2016
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,123 $ 1,425
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 672 649
Provision for doubtful accounts 20 —
Deferred income taxes (817 ) 184
Stock based compensation expense 136 98
Changes in operating assets and liabilities:
Accounts receivable 2,894 2,745
Inventories (1,287 ) (2,369 )
Prepaid expenses and other current assets 190 80
Other assets (151 ) —
Accounts payable, accrued expenses and accrued income taxes (956 ) 148

Net Cash Provided by Operating Activities 2,824 2,960

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment (651 ) (580 )

Net Cash Used in Investing Activities (651 ) (580 )

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (1,500 ) (2,450 )
Proceeds from stock option exercise 16 49
Cash paid for purchase of treasury stock (194 ) —

Net Cash Used in Financing Activities (1,678 ) (2,401 )

Net Increase (Decrease) in Cash and Cash Equivalents 495 (21 )
CASH AND CASH EQUIVALENTS - Beginning 3,454 3,805

CASH AND CASH EQUIVALENTS - Ending $ 3,949 $ 3,784

SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net $ 45 $ 49
Income taxes paid $ 184 $ 53
Surrender of common shares 3 $ 44


	Nine Months ended March 31,
	2023 (as Restated)		2022

	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	16,562	$	12,062
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,398		1,320
Gain on disposal of fixed asset		(15)		—
Interest income on other investments		(177)		—
Unrealized loss (gain) on marketable securities		23		226
Recovery of credit losses		(118)		—
Change to inventory reserve		(85)		331
Deferred income taxes		(1,400)		(11)
Stock based compensation expense		1,134		1,379
Gain on extinguishment of debt		—		(3,904)
Changes in operating assets and liabilities:
Accounts receivable		5,166		3,872
Inventories		(813)		(11,309)
Prepaid expenses and other current assets		228		(318)
Income tax receivable		(688)		—
Other assets		48		(127)
Accounts payable, accrued expenses, accrued salaries and wages, accrued income taxes		(8,847)		4,892
Net Cash Provided by (Used in) Operating Activities		12,416		8,413
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment		(2,547)		(1,189)
Proceeds from disposal of fixed asset		38		—
Purchases of marketable securities		(110)		(58)
Purchases of other investments		(30,185)		—
Redemption of other investments		10,091		—
Net Cash Used in Investing Activities		(22,713)		(1,247)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock option exercises		82		155
Net Cash Provided by Financing Activities		82		155

Net (decrease) increase in Cash and Cash Equivalents		(10,215)		7,321
CASH AND CASH EQUIVALENTS - Beginning		41,730		34,806
CASH AND CASH EQUIVALENTS - Ending	$	31,515	$	42,127
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid	$	12	$	12
Income taxes paid	$	6,421	$	2,154

See accompanying notes to condensed consolidated financial statements.

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

~~DECEMBER~~March 31, ~~2017~~2023

NOTE 1 - Nature of Business and Summary of Significant Accounting Policies

Nature of Business:

Napco Security Technologies, ~~Inc. and Subsidiaries (the "Company" or “Napco”~~Inc (“NAPCO”, “the Company”, “we”) is one of the leading manufacturers and designers of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions. We offer a diversified ~~manufacturer~~array of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance ~~products for commercial and residential use.~~products. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment.

We have experienced significant growth in recent years, primarily driven by fast growing recurring service revenues generated from wireless communication services for intrusion and fire alarm systems, as well as our school security products that are designed to meet the increasing needs to enhance school security as a result of on-campus shooting and violence in the U.S. Our wireless communication services have led to the substantial growth in our monthly recurring revenues.

The Company's fiscal year begins on July 1 and ends on June 30. Historically, the end users of ~~Napco's~~the Company’s hardware products want to install ~~its~~these products prior to the summer; therefore, sales of ~~its~~these products historically peak in the period April 1 through June 30, the Company's fiscal fourth quarter, and are reduced in the period July 1 through September 30, the Company's fiscal first quarter. In addition, demand isfor all of our products may be affected by the housing and construction markets. Deterioration of the current economic conditions may also affect this trend. The monthly recurring service revenue, which is less susceptible to these fluctuations, allows us to generate a more consistent and predictable stream of income and mitigates the risk of fluctuation in market demand for our equipment products.

Significant Accounting Policies:

Principles of Consolidation

The ~~unaudited condensed~~ consolidated financial statements of the Company, including these notes, have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations promulgated by the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2017 and the notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on September 13, 2017. Results of consolidated operations for the interim periods are not necessarily indicative of a full year’s operating results. The unaudited condensed consolidated financial statements herein include the accounts of ~~the Company~~Napco Security Technologies, Inc. and its ~~wholly owned~~wholly-owned subsidiaries. All ~~significant~~ inter-company ~~accounts~~balances and transactions have been ~~eliminated.~~eliminated in consolidation.

Stock Split

In December 2021, the Company's Board of Directors approved a two-for-one stock split in the form of a 100% stock dividend of the Company's common stock, payable to stockholders of record on December 20, 2021. The additional shares were distributed on January 4, 2022. All share and per share amounts (except par value) have been retroactively adjusted to reflect the stock split. There was no net effect on stockholders’ equity as a result of the stock split. Upon distribution of the dividend, the total number of shares outstanding increased from 18,365,878 to 36,731,756.

Accounting Estimates

The preparation of financial statements in conformity with ~~GAAP~~Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical estimates include ~~management's~~management’s judgments associated with reserves for sales returns and allowances, allowance for ~~doubtful accounts,~~credit losses, overhead expenses applied to inventory, inventory reserves, valuation ofintangible assets, share based compensation and income taxes. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The methods and assumptions used to estimate the fair value of the following classes of financial instruments were: Current Assets and Current Liabilities - The carrying amount of cash ~~short-term~~and cash equivalents, certificates of ~~deposit,~~deposits, current receivables and payables and

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certain other short-term financial instruments approximate their fair value as of ~~December~~March 31, ~~2017~~2023 and June 30, 2022 due to their short-term ~~maturities; Long-Term Debt - The carrying amounts of the Company’s long-term~~maturities.Long-term debt ~~at December 31, 2017 in the amount of $2,000,000~~ and ~~at June 30, 2017 in the amount of $3,500,000 approximates~~lease liabilities reflect fair ~~value.~~

value based on prevailing market rates.

Cash and Cash Equivalents

and Investments – other

Cash and cash equivalents include approximately ~~$460,000~~$10,225,000 of short-term time deposits, consisting of several certificates of deposit ~~at December~~totaling $10,162,000 and $63,000 in a money market fund as of March 31, ~~2017~~2023. Cash and cash equivalents include approximately $63,000 of short-term time deposits, consisting of $63,000 in a money market fund as of June 30, ~~2017.~~2022. The Company ~~considers all~~classifies these highly liquid investments with original maturities of three months or less ~~to be~~as cash equivalents. Certificates of Deposit with an original maturity greater than three months are classified as Investments-other.

Cash and cash equivalents consists of the following as of (in thousands):


	March 31, 2023		June 30, 2022

Cash	$	21,290	$	41,667
Money Market Fund		63		63
Certificates of Deposit		10,162		—
	$	31,515	$	41,730

Investments-other consists of the following as of (in thousands):


	March 31, 2023		June 30, 2022

Certificates of Deposit	$	20,271	$	—
	$	20,271	$	—

Certificates of deposit are recorded at the original cost plus accrued interest. The Company’s Certificates of Deposit consist of the following as of (in thousands):


March 31, 2023

Balance Sheet Classification	Interest Rate		Maturity Date		Cost		Carrying Value
Cash and Cash Equivalents		4.55% - 4.70%		4/24/2023 - 5/22/2023	$	10,000	$	10,162
Investments - other		4.75% - 4.90%		6/23/2023 - 9/21/2023		20,185		20,271

The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of ~~December~~March 31, ~~2017~~2023 and June 30, ~~2017.~~2022. The Company has not historically ~~not~~ experienced any credit losses with balances in excess of FDIC ~~limits~~limits.

Marketable Securities

The Company’s marketable securities include investments in mutual funds, which invest primarily in various government and corporate obligations, stocks and money market funds. The Company’s marketable securities are reported at fair value with the related unrealized and realized gains and losses included in other expense (income). Realized gains or losses on mutual funds are determined on a specific identification basis. The Company would record an impairment charge if the cost of the available-for-sale securities exceeds the estimated fair value of the securities and the decline in value is determined to be other-than-temporary. During the nine months ended March 31, 2023, the Company did not record an impairment charge regarding its investment in marketable securities because

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management believes, based on its evaluation of the circumstances, that the decline in fair value below the cost of certain of the Company’s marketable securities is temporary.

Accounts Receivable

Accounts receivable is stated net of the reserves for ~~doubtful accounts~~credit losses of ~~$175,000~~$125,000 and $243,000 as of ~~December~~March 31, ~~2017~~2023 and ~~$155,000 as of~~ June 30, ~~2017 and for returns and other allowances of $1,145,000 as of December 31, 2017 and $1,250,000 as of June 30, 2017.~~2022, respectively. Our reserves for ~~doubtful accounts and for returns and other allowances~~credit losses are subjective critical estimates that have a direct impact on reported net earnings. These reserves are based upon the evaluation of our accounts receivable aging, specific exposures, sales levels and historical trends.

Inventories

Inventories are valued at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (FIFO) method. The reported net value of inventory includes finished saleable products, work-in-process and raw materials that will be sold or used in future periods. Inventory costs include raw materials, direct labor and overhead. The Company’s overhead expenses are applied based, in part, upon estimates of the proportion of those expenses that are related to procuring and storing raw materials as compared to the manufacture and assembly of finished products. These proportions, the method of their application, and the resulting overhead included in ending inventory, are based in part on subjective estimates and actual results could differ from those estimates.

In addition, the Company records an inventory obsolescence reserve, which represents any excess of the cost of the inventory over its estimated ~~market value, based on various product sales projections.~~realizable value. This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age, historical trends, product life cycle, requirements to support forecasted sales, and the ability to find alternate applications of its raw materials and to convert finished product into alternate versions of the same product to better match customer demand. In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events. There is inherent professional judgment and subjectivity made by both production and engineering members of management in determining the estimated obsolescence percentage.

The Company also regularly reviews the period over which its inventories will be converted to sales. Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current.

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred; costs of major renewals and improvements are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts and the profit or loss on such disposition is reflected in income.

Depreciation is recorded over the estimated service lives of the related assets using primarily the straight-line method. Amortization of leasehold improvements is calculated by using the straight-line method over the estimated useful life of the asset or lease term, whichever is shorter.

Long-Lived and Intangible Assets

~~Intangible~~Long-lived assets ~~determined to have indefinite lives are not amortized. Intangible assets with definite lives~~ are amortized over their useful lives. Indefinite-lived intangible assets are reviewed for impairment at least annually at the Company’s fiscal year end of June 30 or more often whenever there is an indication that the carrying amount may not be recovered.

~~The Company’s acquisition of substantially all of the assets~~lives and certain liabilities of G. Marks Hardware, Inc. (“Marks”) in August 2008 included intangible assets recorded at fair value on the date of acquisition. The intangible assets are amortized over their estimated useful lives of twenty years (customer relationships). The Marks trade name was deemed to have an indefinite life.

~~Changes in intangible assets are as follows (in thousands):~~

December 31, 2017 June 30, 2017
Cost Accumulated
amortization Net book
value Cost Accumulated
amortization Net book
value

Customer relationships $ 9,800 $ (7,969 ) $ 1,831 $ 9,800 $ (7,784 ) $ 2,016
Trade name 5,900 — 5,900 5,900 — 5,900
$ 15,700 $ (7,969 ) $ 7,731 $ 15,700 $ (7,784 ) $ 7,916

Amortization expense for intangible assets subject to amortization was approximately $92,000 and $110,000 for the three months ended December 31, 2017 and 2016, respectively. Amortization expense for intangible assets subject to amortization was approximately $185,000 and $220,000 for the six months ended December 31, 2017 and 2016, respectively. Amortization expense for each of the next five fiscal years is estimated to be as follows: 2018 - $371,000; 2019 - $313,000; 2020 -$264,000; 2021 - $223,000; and 2022 - $188,000. The weighted average amortization period for intangible assets was 10.6 years and 11.6 years at December 31, 2017 and 2016, respectively.

~~Long-Lived Assets~~

~~Long-lived assets~~ are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets in question may not be recoverable. Impairment would be recorded in circumstances

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where undiscounted cash flows expected to be generated by an asset are less than the carrying value of that asset. Intangible assets determined to have indefinite lives were not amortized but were tested for impairment at least annually.

Intangible assets consisted of the follows (in thousands):


	March 31, 2023						June 30, 2022
	Carrying		Accumulated		Net book		Carrying		Accumulated		Net book
	value		amortization		value		value		amortization		value
Customer relationships	$	9,800		(9,262)	$	538	$	9,800		(9,143)	$	657
Trade name		4,048		(557)		3,491		4,048		(405)		3,643
	$	13,848	$	(9,819)	$	4,029	$	13,848	$	(9,548)	$	4,300

Amortization expense for intangible assets subject to amortization was approximately $90,000 and $98,000 for the three months ended March 31, 2023 and 2022, respectively. Amortization expense for intangible assets subject to amortization was approximately $271,000 and $293,000 for the nine months ended March 31, 2023 and 2022, respectively. Amortization expense for each of the next five fiscal years is estimated to be as follows: 2023 - $361,000; 2024 - $336,000; 2025 - $315,000; 2026 - $297,000; and 2027 - $283,000. The weighted average remaining amortization period for intangible assets was 15.7 years and 16.2 years at March 31, 2023 and June 30, 2022, respectively.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.

For product sales, the Company typically transfers control at a point in time upon shipment or delivery of the product. For monthly communication services the Company satisfies its performance obligation as the services are rendered and therefore recognizes revenue over the monthly period.

Typically timing of revenue recognition coincides with the timing of invoicing to the customers, at which time the Company has an unconditional right to consideration. As such, the Company typically records a receivable when revenue is recognized.

The contract with the customer states the final terms of the sale, including the description, quantity, and price of each product purchased. Payment for product sales is typically due within 30 and 180 days of the delivery date. Payment for monthly communication services is billed on a monthly basis and is typically due at the beginning of the month of service or in 30 days for customers with an open account.

The Company ~~recognizes revenue when the following criteria are met: (i) persuasive evidence~~provides limited standard warranty for defective products, usually for a period of ~~an agreement exists, (ii) there is a fixed~~24 to 36 months. The Company accepts returns for such defective products as well as for other limited circumstances. The Company also provides rebates to customers for meeting specified purchasing targets and ~~determinable price~~other coupons or credits in limited circumstances. The Company establishes reserves for the ~~Company's product or service, (iii) shipment~~estimated returns, rebates and ~~passage~~credits and measures such variable consideration based on the expected value method using an analysis of ~~title occurs or service has been provided, and (iv) collectability is reasonably assured. Revenues from product sales are recorded at the time the product is shipped or delivered~~historical data. Changes to the ~~customer pursuant to the terms of the sale. Revenues for services~~estimated variable consideration in subsequent periods are recorded at the time the service is provided to the customer pursuant to the terms of sale. The Company reports its sales on a net sales basis, with net sales being computed by deducting from gross sales the amount of actual sales returns and other allowances and the amount of reserves established for anticipated sales returns and other allowances.

~~Sales Returns and Other Allowances~~

not material.

The Company analyzes sales returns and is able to make reasonable and reliable estimates of product returns based on the Company’s past history. Estimates for sales returns are based on several factors including actual returns and based on expected return data communicated to it by its customers. Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns. Actual results could differ from those estimates. ~~As a percentage of gross sales, sales returns, rebates and allowances were 8% for the each of the six months ended December 30, 2017 and 2016, respectively.~~

Advertising and Promotional Costs

Advertising and promotional costs are included in "Selling, General and Administrative" expenses in the consolidated statements of income and are expensed as incurred. Advertising expense for the three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016~~2022 was ~~$462,000~~$926,000 and ~~$498,000,~~

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$655,000, respectively. Advertising expense for the ~~six~~three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016~~2022 was ~~$1,103,000~~$2,185,000 and ~~$1,172,000,~~$2,253,000, respectively.

Research and Development Costs

Research and development (“R&D”) costs incurred by the Company are charged to expense as incurred and are included in ~~"Cost of Sales"~~operating expenses in the consolidated statements of income. Company-sponsored ~~research and development~~R&D expense for the three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016~~2022 was ~~$1,639,000~~$2,314,000 and ~~$1,609,000,~~$2,009,000, respectively. Company-sponsored ~~research and development~~R&D expense for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 and ~~2016~~2022 was ~~$3,246,000~~$6,964,000 and ~~$3,237,000,~~$5,918,000, respectively.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The ~~enactment of H. R. 1, Tax Cuts and Jobs Act on December 22, 2017 reduced the U. S. Corporate income tax rate to 21% and had a favorable impact on the Company’s net deferred tax liabilities. The~~ effect on ~~the~~ deferred tax assets and liabilities ~~for the~~of a change in tax ~~rate~~rates is recognized in income in the ~~three and six month periods ending December 31, 2017 which~~period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company measures and recognizes the tax implications of positions taken or expected to be taken in its tax returns on an ongoing basis.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Net Income ~~Per~~per Share

(2023 amounts as restated)

Basic net income per common share (Basic EPS) is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per common share (Diluted EPS) is computed by dividing net income by the weighted average number of common shares and dilutive common share equivalents and convertible securities then outstanding.

The following provides a reconciliation of information used in calculating the per share amounts for the three months ended ~~December~~March 31, 2023 and 2022 (in thousands, except share and per share data):


	Net Income				Weighted Average Shares		Net Income per Share
	2023		2022		2023	2022	2023		2022
Basic EPS	$	9,549	$	3,273	36,793	36,743	$	0.26	$	0.09
Effect of Dilutive Securities:
Stock Options		—		—	289	136		—		—
Diluted EPS	$	9,549	$	3,273	37,082	36,879	$	0.26	$	0.09

Net Income Weighted Average Shares Net Income per Share
2017 2016 2017 2016 2017 2016

Basic EPS $ 1,233 $ 857 18,849 18,798 $ 0.07 $ 0.05
Effect of Dilutive Securities:
Stock Options — — 34 53 — —

Diluted EPS $ 1,233 $ 857 18,883 18,851 $ 0.07 $ 0.05

Options to purchase ~~870~~0 and ~~5,000~~388,000 shares of common stock were excluded for the three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively, and were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive. These options were still outstanding at the end of the ~~respective periods.~~period.

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The following provides a reconciliation of information used in calculating the per share amounts for the ~~six~~nine months ended ~~December~~March 31, 2023 and 2022 (in thousands, except share and per share data):


					Weighted Average		Net Income per
	Net Income				Shares		Share
	2023		2022		2023	2022	2023		2022
Basic EPS	$	16,562	$	12,062	36,736	36,723	$	0.45	$	0.33
Effect of Dilutive Securities:
Stock Options		—		—	247	150		—		—
Diluted EPS	$	16,562	$	12,062	36,983	36,873	$	0.45	$	0.33

Net Income Weighted Average Shares Net Income per Share
2017 2016 2017 2016 2017 2016

Basic EPS $ 2,123 $ 1,425 18,848 18,792 $ 0.11 $ 0.08
Effect of Dilutive Securities:
Stock Options — — 33 52 — —

Diluted EPS $ 2,123 $ 1,425 18,881 18,844 $ 0.11 $ 0.08

Options to purchase ~~435~~8,379 and ~~5,000~~156,145 shares of common stock were excluded for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively, and were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive. These options were still outstanding at the end of the ~~respective periods.~~

period.

Stock-Based Compensation

The Company has established ~~two~~four share incentive programs as discussed in Note 7.

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors.

Stock-based compensation costs of ~~$103,000~~$322,000 and ~~$65,000~~$35,000 were recognized for the three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively. Stock-based compensation costs of ~~$136,000~~$1,134,000 and ~~$98,000~~$1,379,000 were recognized for ~~six~~the nine months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively. ~~The effect on both Basic and Diluted Earnings per share was $0.00 for the three and six months ended December 31, 2017 and 2016.~~

Foreign Currency

The Company has determined the functional currency of all foreign subsidiaries is the U.S. Dollar. All ~~assets~~foreign operations are considered a direct and ~~liabilities~~integral part or extension of the Company’s operations. The day-to-day operations of all foreign subsidiaries are ~~translated into~~dependent on the economic environment of the U.S. ~~Dollars at fiscal period-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the fiscal period. The~~Dollar. Therefore, no realized and unrealized gains and losses associated with foreign currency translation ~~as well as related other comprehensive income, were not significant~~are recorded for the ~~either of the~~ three ~~and six~~or nine months ended ~~December~~March 31, ~~2017 and 2016.~~

2023 or 2022.

Comprehensive Income

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, the ~~Company's~~Company’s operations did not give rise to ~~significant~~material items includable in comprehensive income, which were not already included in net income. Accordingly, the ~~Company's~~Company’s comprehensive income approximates its net income for all periods presented.

Segment Reporting

The Company’s reportable operating segments are determined based on the ~~Company's~~Company’s management approach. The management approach is based on the way that the chief operating decision maker organizes the segments within an enterprise for making operating decisions and assessing performance. The ~~Company's~~Company’s results of operations are reviewed by the chief operating decision maker on a consolidated basis and the Company operates in only one segment. The Company has presented required geographical data in Note ~~11.~~

14.

Shipping and Handling ~~Revenues~~Sales and Costs

The Company records the amount billed to customers for shipping and handling in net sales ($~~125,000~~106,000 and ~~$105,000~~$106,000 in the three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively, and ~~$247,000~~$346,000 and ~~$245,000~~$318,000 in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively); and classifies the costs associated with these ~~revenues~~sales in cost of sales ($~~252,000~~437,000 and ~~$217,000~~$339,000 in the three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively, and ~~$459,000~~$1,285,000 and ~~$433,000~~$1,033,000 in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively).

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Leases

The Company records lease assets and corresponding lease liabilities for the operating lease on our Consolidated Balance Sheets, excluding short-term leases (leases with terms of 12 months or less) as described under ASU No. 2016-02, Leases (Topic 842). Lease payments are discounted using a third-party secured incremental borrowing rate based on information available at lease commencement. The Company analyzes whether or not amendments to existing leases classify as a Lease Modification or a full or partial termination of the existing lease. See Note 13 – Commitments and Contingencies; Leases for additional accounting policies and disclosures.

Recently Issued Accounting Standards

Reference Rate Reform (ASC Topic 848)

In March 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that changes the way companies account for certain aspects of share-based payments to employees. The most significant impact relates to the accounting for income tax effects of share-based compensation awards. This new guidance is part of the FASB’s simplification initiative and requires that all excess tax benefits and tax deficiencies be recorded as income tax expense or benefit in the income statement. In addition, companies are required to treat the tax effects of exercised or vested awards as discrete items in the period that they occur. Other updates include changing the threshold on tax withholding requirements. Under this guidance, an employer can withhold up to the maximum statutory withholding rates in a jurisdiction without tainting the award classification. Additionally, this guidance allows companies to elect a forfeiture recognition method whereby they account for forfeitures as they occur (actual) or they estimate the number of awards expected to be forfeited (current GAAP). Lastly, as it relates to public entities, this guidance also provides requirements for the cash flow classification of cash paid by an employer when directly withholding shares for tax-withholding purposes and excess tax benefits. This guidance became effective for the Company’s fiscal 2018 first quarter and the guidance prescribes different transition methods for the various provisions (i.e., retrospective, modified retrospective or prospective). The adoption of this standard did not have a material effect on our consolidated results of operations and financial condition.

~~In February 2016,~~2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”), which is expected to be phased out for new arrangements at the end of calendar 2021, and applies to lease contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that ~~requires lessees~~have LIBOR as the benchmark rate.

The Company’s bank has notified the Company that its LIBOR option will continue to be available to it through June 30, 2023, at which time the option will shift to the Benchmark Replacement as defined in the agreement with the bank (see Note 8). The Company does not believe that this transition will have a material impact on its financial condition.

NOTE 1A – Restatement of Previously Issued Financial Statements

During the preparation of the Company’s consolidated financial statements for the fiscal year ended June 30, 2023, management of the Company identified certain errors related to the Company’s calculation of cost of goods sold (“COGS”) and inventory for each of the first three quarters of fiscal 2023. Specifically, the costs of several raw materials fluctuated significantly during fiscal 2023, the Company’s costing procedures did not appropriately account for ~~most leases on their~~such fluctuations. As a result, inventories were overstated and COGS was understated, resulting in overstated gross profit, operating income and net income for each period.

The effects of the restatement resulted in a decrease to overall inventory (current and non-current inventory) and increase to cost of sales of $10,101,000, a decrease to the provision for income taxes of $975,000 and a decrease to net income and retained earnings of $9,126,000 as of and for the nine months ended March 31, 2023. Net cash provided by operating activities remained the same. The effects of the restatement resulted in an increase to cost of sales of $1,392,000, a decrease to the provision for income taxes of $101,000 and a decrease to net income of $1,291,000 for the three months ended March 31, 2023.

The table below sets forth the consolidated balance sheets ~~with~~information, including the ~~liability being equal~~balances originally reported and the restated balances as of March 31, 2023 (in thousands):


	As of March 31, 2023
	As
	previously		As
	reported		Restated
Inventory - Current	$	46,921	$	38,725
Income Tax Receivable		—		688
Inventory - Non-Current		13,865		11,960
Accrued Income Taxes		287		—
Retained earnings		138,599		129,473

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The table below sets forth the consolidated statements of income information, including the balances originally reported and the restated balances for the three months ended March 31, 2023:


	Three Months ended March 31, 2023
	(in thousands, except for per share data)
	As
	previously
	reported		As Restated
Equipment-related expenses	$	19,388	$	20,780
Cost of sales		20,861		22,253
Gross profit		22,671		21,279
Operating income		11,932		10,540
Income before provision for income taxes		12,369		10,977
Provision for income taxes		1,529		1,428
Net income		10,840		9,549

Income per share:
Basic	$	0.29	$	0.26
Diluted	$	0.29	$	0.26

The table below sets forth the consolidated statements of income information, including the balances originally reported and the restated balances for the nine months ended March 31, 2023:


	Nine Months ended March 31, 2023
	(in thousands, except for per share data)
	As
	previously
	reported		As Restated
Equipment-related expenses	$	60,240	$	70,341
Cost of sales		65,039		75,140
Gross profit		60,300		50,199
Operating income		28,617		18,516
Income before provision for income taxes		29,138		19,037
Provision for income taxes		3,450		2,475
Net income		25,688		16,562

Income per share:
Basic	$	0.70	$	0.45
Diluted	$	0.69	$	0.45

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The table below sets forth the consolidated statements of cash flows information, including the balances originally reported and the restated balances for the nine months ended March 31, 2023:


	Nine Months ended March 31, 2023
	(in thousands)
	As
	previously
	reported		As Restated
Net income	$	25,688	$	16,562
Change to inventory obsolescence reserve		960		(85)
Inventories		(11,959)		(813)
Income tax receivable		—		(688)
Accounts payable, accrued expenses, accrued salaries and wages, accrued income taxes		(8,560)		(8,847)
Net Cash Provided by Operating Activities		12,416		12,416

In addition to the present value of the lease payments. The right-of-use asset will be based on the lease liability adjusted for certain costs such as direct costs. Lease expense will be recognized similar to current accounting guidance with operating leases resulting in a straight-line expense and financing leases resulting in a front-loaded expense similar to the current accounting for capital leases. This guidance becomes effective for the Company’s fiscal 2020 first quarter, with early adoption permitted. This guidance must be adopted using a modified retrospective transition approach for leases that exist or are entered into after the beginning of the earliest comparative period in therestated consolidated financial statements, the information contained in notes 1, 5, 7 and ~~provides for certain practical expedients.~~ 14 have been restated.

NOTE 2 – Revenue Recognition and Contracts with Customers

The Company is ~~currently evaluating~~engaged in one major line of business: the ~~timing, impact~~development, manufacture, and ~~method~~distribution of ~~applying this guidance~~security products, encompassing access control systems, door security products, intrusion and fire alarm systems, alarm communication services, and video surveillance products for commercial and residential use. The Company also provides wireless communication service for intrusion and fire alarm systems on ~~its consolidated financial statements.~~a monthly basis. All of these products and services are used for commercial, residential, institutional, industrial and governmental applications, and are sold primarily to independent distributors, dealers and installers of security equipment. Sales to unaffiliated customers are primarily shipped from the United States.

As of March 31, 2023 and June 30, 2022, the Company included refund liabilities of approximately $4,841,000 and $5,863,000, respectively, in current liabilities. As of March 31, 2023 and June 30, 2022, the Company included return-related assets of approximately $1,132,000 and $974,000, respectively, in other current assets.

~~In July 2015, the FASB issued ASU 2015-11 “Inventory (Topic 330): Simplifying the Measurement~~As a percentage of ~~Inventory” (“ASU 2015-11”). The amendments in ASU 2015-11 simplify the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost~~gross sales, returns, rebates and ~~net realizable value (“NRV”). ASU 2015-11 was effective~~allowances were 8% and 10% for the ~~Company’s quarter~~three months ended ~~September 30, 2017.~~ March 31, 2023 and 2022, respectively. As a percentage of gross sales, returns, rebates and allowances were 6% and 11% for the nine months ended March 31, 2023 and 2022, respectively.

The ~~adoption of this standard did not have a material effect on our consolidated results of operations and financial condition.~~

~~In May 2014, the FASB issued authoritative guidance that defines how companies should report revenues~~Company disaggregates revenue from contracts with ~~customers.~~customers into major product lines. The ~~standard requires an entity to recognize~~Company determines that disaggregating revenue into these categories achieves the disclosure objective to depict how the ~~transfer~~nature, amount, timing, and uncertainty of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It provides companies with a single comprehensive five-step principles-based model to use in accounting for revenue and ~~supersedes current revenue recognition requirements, including most industry-specific and transaction-specific revenue guidance. In August 2015,~~cash flows are affected by economic factors. As noted in the FASB deferred the effective date of the new revenue standard by one year. As a result, the new standard would not be effective for the Company until fiscal 2019. In addition, the FASB is allowing companies to early adopt this guidance foraccounting policy footnote, the Company’s ~~fiscal 2018. The guidance permits an entity to apply~~business consists of one operating segment. Following is the ~~standard retrospectively to all prior periods presented, with certain practical expedients, or apply the requirements in the year~~disaggregation of adoption, through a cumulative adjustment. The Company will apply this new guidance when it becomes effective and has not yet selected a transition method. The Company is currently evaluating the impact of adoptionrevenues based on ~~its consolidated financial statements.~~major product lines (in thousands):


	Three months ended March 31,				Nine months ended March 31,
	2023		2022		2023		2022
Major Product Lines:
Intrusion and access alarm products	$	11,530	$	12,667	$	36,405	$	33,230
Door locking devices		16,860		11,206		45,106		33,850
Services		15,142		12,032		43,828		33,284
Total Revenues	$	43,532	$	35,905	$	125,339	$	100,364

NOTE ~~2 -~~3 – Business and Credit Concentrations

An entity is more vulnerable to concentrations of credit risk if it is exposed to risk of loss greater than it would have had if it mitigated its risk through diversification of customers. Such risks of loss manifest themselves differently, depending on the nature of the concentration, and vary in significance. The Company had ~~two customers, both~~one customer with an accounts receivable balance that comprised of ~~which are nationwide distributors~~12% of the Company’s ~~products, with~~overall accounts receivable ~~balances that comprised 15% and 14%~~as of March 31, 2023. As of June 30, 2022, the accounts receivable balance with this

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respective customer did not exceed 10% of the Company’s overall accounts receivable. Sales to this customer did not exceed 10% of the Company’s net sales during the three and nine months ended March 31, 2023 and 2022. The Company had another customer with an accounts receivable balance that comprised 16% of the Company’s overall accounts receivable at ~~December~~June 30, 2023. This customer’s accounts receivable balance did not exceed 10% of the Company’s overall accounts receivable at March 31, ~~2017~~2023. 31, 2023. Sales to this customer did not exceed 10% of the Company’s net sales during the three and ~~24%~~nine months ended March 31, 2023 and 2022. The Company had another customer with an accounts receivable balance that comprised 19% and 22% of the Company’s overall accounts receivable as of March 31, 2023 and June 30, 2022, respectively. Sales to this customer was 12% and 10% ~~at June 30, 2017. Sales to neither of these customers exceeded 10% of net sales in either~~ of the ~~three or six months ended December 31, 2017. Sales to one of these customers comprised 13% and 14% of~~Company’s net sales for the three and ~~six~~nine months ended ~~December 2016,~~March 31, 2023, respectively. Sales to this customer did not exceed 10% of the Company’s net sales for the three and nine months ended March 31, 2022.

NOTE 4 – Marketable Securities

The Company’s marketable securities include investments in fixed income mutual funds, which invest primarily in various government and corporate obligations, stocks and money market funds, and are reported at their fair values. The disaggregated net gains and losses on the marketable securities recognized within the accompanying condensed consolidated statements of income for the three and nine months ended March 31, 2023 and 2022, are as follows (in thousands):


	Three months ended March 31,				Nine months ended March 31,
	2023		2022		2023		2022

Net gains recognized during the period on marketable securities	$	32	$	19	$	110	$	58
Less: Net gains recognized during the period on marketable securities sold during the period		—		—		—		—
Unrealized gains (losses) recognized during the reporting period on marketable securities still held at the reporting date		95		(191)		(23)		(226)
	$	127	$	(172)	$	87	$	(168)

The fair values of the Company’s marketable securities are determined as being the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Company utilizes the three-tier value hierarchy, as prescribed by US GAAP, which prioritizes the inputs used in measuring fair value as follows:

•

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s marketable securities, which are considered available-for-sale securities, are re-measured to fair value on a recurring basis and are valued using Level 1 inputs using quoted prices (unadjusted) for identical assets in active markets.

The following tables summarize the Company’s investments at March 31, 2023 and June 30, 2022, respectively (in thousands):


	March 31, 2023						June 30, 2022
					Unrealized						Unrealized
	Cost		Fair Value		Gain (Loss)		Cost		Fair Value		Gain (Loss)
Mutual Funds - Level 1	$	5,613		5,155	$	(458)	$	5,504	$	5,068	$	(436)

Investment income is recognized when earned and consists principally of interest income from fixed income mutual funds. Realized gains and losses on sales of investments are determined on a specific identification basis.

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NOTE 35 - Inventories

Inventories, net of reserves are valued at lower of cost (first-in, first-out method) or NRV. The Company regularly reviews parts and finished goods inventories on hand and, when necessary, records a provision for excess or obsolete inventories. The Company also regularly reviews the period over which its inventories will be converted to sales. Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current.

net realizable value. Inventories, net of reserves consist of the following (in thousands):

		December 31, 2017		June 30, 2017


						March 31,		June 30,
						2023 (as Restated)		2022
Component parts		$	17,310	$	16,638	$	33,477	$	32,656
Work-in-process			4,610		4,415		8,029		10,085
Finished product			9,946		9,526		9,179		7,045

		$	31,866	$	30,579

						$	50,685	$	49,786

Classification of inventories, net of reserves:	Classification of inventories, net of reserves:
Current		$	26,687	$	26,212	$	38,725	$	40,781
Non-current			5,179		4,367		11,960		9,005

		$	31,866	$	30,579
						$	50,685	$	49,786

NOTE 46 – Property, Plant, and Equipment

Property, plant and equipment consist of the following (in thousands):

	December 31, 2017			June 30, 2017			Useful Life in Years


								March 31, 2023		June 30, 2022		Useful Life in Years

Land	$	904		$	904		—	$	904	$	904	N/A
Buildings		8,911			8,911		30 to 40		8,911		8,911	30 to 40
Molds and dies		7,171			7,058		3 to 5		7,507		7,480	3 to 5
Furniture and fixtures		2,599			2,570		5 to 10		3,350		3,030	5 to 10
Machinery and equipment		22,544			22,183		7 to 10		28,275		26,696	3 to 10
Leasehold improvements		633			485		Shorter of the lease term or life of asset
		42,762			42,111
Building improvements									3,009		2,464	Shorter of the lease term or life of asset
									51,956		49,485
Less: accumulated depreciation and amortization		(36,052	)		(35,568	)			(42,621)		(41,546)
	$	6,710		$	6,543
								$	9,335	$	7,939

Depreciation and amortization expense on property, plant, and equipment was ~~$248,000~~approximately $380,000 and ~~$213,000~~$338,000 for the three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively. Depreciation and amortization expense on property, plant, and equipment was ~~$484,000~~approximately $1,127,000 and ~~$422,000~~$1,028,000 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

NOTE 57 - Income Taxes

(2023 amounts as restated)

The provision for income taxes represents Federal, foreign, and state and local income taxes. The effective rate differs from statutory rates due to the effect of state and local income taxes, tax rates in foreign jurisdictions, global intangible low-taxed income (“GILTI”), tax benefit of R&D credits, and certain nondeductible expenses. ~~Our~~The Company’s effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, and state and local income taxes. For the three and six months ended December 31, 2017 the effective tax rate was favorably impacted by the enactment of H.R. 1, Tax Cuts and Jobs Act (the “Act”) on December 22, 2017. The Act reduced the U.S. Corporate income tax rate to 21% and resulted in a $286,000 reduction in the Company’s net deferred tax liabilities. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. federal statutory rate of approximately 27.55% for fiscal 2018 and a 21% U.S. federal statutory rate for subsequent fiscal years. The Company reported $208,000 of provisional expense on its unremitted foreign earnings. Accounting Standard Codification (“ASC”) 740 requires filers to record the effects of tax law changes in the period enacted. However, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), that permits filers to record provisional amounts during a measurement period ending no later than one year from the date of the Act’s enactment. As of December 31, 2017, the Company has not completed accounting for the tax effects of enactment of the Act; however, the Company has made a reasonable estimate of the effects on the existing deferred balances as well as the computation of the one-time transition tax. In addition, changes in judgment from the evaluation of new information resulting in the recognition de-recognition or re-measurement of a tax position taken in a prior annual period is recognized separately in the quarter of the change.

For the nine months ended March 31, 2023 and March 31, 2022, the Company recognized net income tax expense of $2,475,000 and $1,771,000, respectively. During the nine months ended March 31, 2023, the Company’s reserve for uncertain income tax positions increased by $36,000. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense and accrued income taxes. As of March 31, 2023, the Company had accrued interest totaling $124,000, as well as $678,000 of unrecognized net tax benefits that, if recognized, would favorably affect the Company’s effective income tax rate in any future period. For the nine months ended March 31, 2023, additional interest expense was accrued for in the amount of $36,000.

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The Company does not expect that ~~our~~its unrecognized tax benefits will ~~significantly~~ change within the next twelve ~~months. We file~~months due to statute of limitation lapses. The Company files a consolidated U.S. income tax return and tax returns in certain state and local and foreign jurisdictions. As of ~~December~~March 31, ~~2017 we remain~~2023, the Company remains subject to examination in all tax jurisdictions for all relevant jurisdictional statutes for fiscal years ~~2014~~2018 and thereafter.

~~The~~In December 2022, the Company received a letter from the IRS (“IRS”) notifying it that the IRS has ~~identified~~closed its ~~U.S. Federal~~examination of the Company’s income tax return ~~and its State return~~for fiscal year ended June 30, 2020. There has been no changes proposed in ~~New York as its major tax jurisdictions.~~relation to this examination.

NOTE 68 - Long-Term Debt

As of December 31, ~~2017, long-term debt consisted of~~2022 and June 30, 2022, the Company had a revolving line of credit ~~facility~~ of $11,000,000 (the ~~“Revolving Credit Facility”~~“Revolver Agreement”) which expires in June ~~2021.~~

2024.

Outstanding balances and interest rates as of ~~December~~March 31, ~~2017~~2023 and June 30, ~~2017~~2022 are as follows (dollars in thousands):

December 31, 2017 June 30, 2017
Outstanding Interest Rate Outstanding Interest Rate

Revolving line of credit $ 2,000 2.5 % $ 3,500 2.2 %


	March 31, 2023			June 30, 2022
	Outstanding		Interest Rate	Outstanding		Interest Rate
Revolving line of credit:
Current maturities	$	—	n/a	$	—	n/a
Long-term debt		—	n/a		—	n/a
	$	—		$	—

The ~~Revolving Credit Facility (the “Agreement”)~~Revolver Agreement also provides for a LIBOR-based interest rate option of LIBOR plus 1.15% to 2.00%, depending on the ratio of outstanding debt to EBITDA, which is to be measured and adjusted quarterly, a prime rate-based option of the prime rate plus 0.25% and other terms and conditions as more fully described in the Revolver Agreement. In addition, the Agreement provides for availability under the Revolving Credit Facility to be limited to the lesser of $11,000,000 or the result of a borrowing base formula based upon the Company’s Accounts Receivables and Inventory values net of certain deductions. The Company’s obligations under the Revolver Agreement continue to be secured by substantially all of its domestic assets, including but not limited to deposit accounts, accounts receivable, inventory, ~~and the Company’s corporate headquarters in Amityville, NY,~~ equipment and fixtures and intangible assets. In addition, the Company’s ~~wholly-owned~~wholly owned subsidiaries, with the exception of the Company’s foreign subsidiaries, have issued guarantees and pledges of all of their assets to secure the Company’s obligations under the Revolver Agreement. All of the outstanding common stock of the Company’s domestic subsidiaries and 65% of the common stock of the Company’s foreign subsidiaries has been pledged to secure the Company’s obligations under the Revolver Agreement.

The Revolver Agreement contains various restrictions and covenants including, among others, restrictions on payment of dividends, restrictions on borrowings and compliance with certain financial ratios, as defined in the Revolver Agreement. In September 2020, the Company and its lender amended the Revolver Agreement, which had an expiration date of June 2021, to expire in June 2024. The amended Revolver Agreement also removed certain requirements and restrictions on the Company as well as removing the mortgage on the Company’s Amityville facility.

During the fourth quarter of fiscal 2020, the Company received the proceeds of promissory notes dated between April 17, 2020 and May 7, 2020 (the "PPP Loan Agreement"), entered into between the Company and HSBC Bank USA N.A., as lender (the "Lender”). The Lender made the loans pursuant to the Paycheck Protection Program (the "PPP"), created by Section 1102 of the CARES Act and governed by the CARES Act, Section 7(a)(36) of the Small Business Act, any rules or guidance that has been issued by the Small Business Association (“SBA”) implementing the PPP and acting as guarantor, or any other applicable loan program requirements, as defined in 13 CFR § 120.10, as amended from time to time. Pursuant to the PPP Loan Agreement, the Lender made loans to the Company with an aggregate principal amount of $3,904,000 (the "PPP Loan"). The PPP Loan and related extinguishment was accounted for in accordance with ASC 470 “Debt”.

Pursuant to the CARES Act, the loans may be forgiven by the SBA. During the year ended June 30, 2022, the PPP Loans were forgiven, in their entirety, in accordance with guidelines set forth in the PPP loan documents. The Company recognized a gain on the extinguishment of debt during the quarter ended September 30, 2021 in the amount of $3,904,000 within the other (expense) income section in the accompanying condensed consolidated statements of income. The SBA reserves the right to audit PPP forgiveness applications for a period of six years from the date of forgiveness. It has indicated that it will audit all of those that are in excess of $2 million.

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NOTE 79 - Stock ~~Options~~

Option

The Company follows ASC 718 ~~“Share-Based~~(“Share-Based Payment”), which requires that all ~~share based~~share-based payments to employees, including stock options, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period. ~~The~~For the three months ended March 31, 2023 and 2022, the Company recorded non-cash compensation expense ~~relating to stock-based compensation~~ of ~~$103,000~~$322,000 ($0.01 per basic and ~~$65,000 for the three months ended December 31, 2017~~diluted share) and ~~2016, respectively~~$35,000 ($0.00 per basic and diluted ~~share for each period). The~~ share), respectively, relating to stock-based compensation. For the nine months ended March 31, 2023 and 2022, the Company recorded non-cash compensation expense of $1,134,000 ($0.03 per basic and diluted share) and $1,379,000 ($0.04 per basic and diluted share), respectively, relating to stock-based ~~compensation~~compensation.

2022 Employee Stock Option Plan

In December 2022, the stockholders approved the 2022 Employee Stock Option Plan (the “2022 Employee Plan”). The plan authorizes the granting of ~~$136,000~~awards, the exercise of which would allow up to an aggregate of 950,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (“ISOs”) or non-incentive stock options, to valued employees. Any plan participant who is granted ISOs and ~~$98,000 for~~possesses more than 10% of the ~~six months ended December 31, 2017~~voting rights of the Company’s outstanding common stock must be granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2022 Employee Plan, stock options may be granted to valued employees with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and ~~2016, respectively ($0.00~~are exercisable, in whole or in part, at 20% per ~~basic and diluted share for each period).~~year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At September 30, 2022, no stock options were granted or outstanding under the 2022 Employee Plan.

2012 Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (the “2012 Employee Plan”). The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of ~~950,000~~1,900,000 shares of the ~~Company's~~Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (“ISOs”), or non-incentive stock options, to valued employees. Any plan participant who is granted ISOs and possesses more than 10% of the voting rights of the ~~Company's~~Company’s outstanding common stock must be granted an option with a price of at least 110% of the fair market value on the date of ~~grant.~~

grant and a term of 10 years.

Under the 2012 Employee Plan, stock options may be granted to valued employees with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable, in whole or in part, at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At ~~December~~March 31, ~~2017, 88,100~~2023, 522,580 stock options were ~~granted, 60,300~~outstanding, 236,652 stock options were exercisable and ~~823,900~~no further stock options were available for grant under this plan.

0 and 37,500 options were granted during the three and nine months ended March 31, 2023. 0 and 338,000 options were granted during the three and nine months ended March 31, 2022, respectively. No further options may be granted under this plan after December 2022. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	2023		2022
Risk-free interest rates	3.03	%	1.64	%
Expected lives	7.27 Years		6.18 Years
Expected volatility	43	%	43	%
Expected dividend yields	0	%	0	%

The following table reflects activity under the 2012 Employee Plan for the ~~six~~nine months ended ~~December 31,:~~March 31:

2017 2016
Options Weighted average
exercise price Options Weighted average
exercise price

Outstanding, beginning of year 70,600 $ 5.84 112,500 $ 5.54
Granted 20,000 8.97 5,000 8.15
Terminated/Lapsed — — (400 ) 6.31
Exercised (2,500 ) 6.31 (1,500 ) 6.31

Outstanding, end of period 88,100 $ 6.53 115,600 $ 5.64

Exercisable, end of period 60,300 $ 6.03 74,500 $ 5.57

Weighted average fair value at grant date of options granted $ 111,000 $ 26,000

Total intrinsic value of options exercised $ 7,000 $ 9,000
Total intrinsic value of options outstanding $ 279,000 $ 331,000
Total intrinsic value of options exercisable $ 221,000 $ 218,000

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	2023				2022
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		523,080	$	18.59		214,080	$	9.59
Granted		37,500	$	26.94		338,000	$	23.17
Forfeited/Lapsed		—		—		—		—
Exercised		(38,000)	$	10.63		(29,000)	$	5.45
Outstanding, end of period		522,580	$	19.34		523,080	$	18.59
Exercisable, end of period		236,652	$	17.47		164,776	$	15.01
Weighted average fair value at grant date of options granted	$	13.36			$	12.16
Total intrinsic value of options exercised	$	787,000			$	502,000
Total intrinsic value of options outstanding	$	9,531,000			$	1,903,000
Total intrinsic value of options exercisable	$	4,760,000			$	1,085,000

~~500~~30,800 and ~~1,500~~38,000 stock options were exercised during the three and nine months ended ~~December~~March 31, ~~2017~~2023, respectively. 27,600 of the 30,800 options that were exercised during the three months ended March 31, 2023, were settled by exchanging 9,943 shares of the Company’s common stock which were retired and ~~2016, respectively. $3,000~~returned to unissued status upon receipt. 29,600 of the 38,000 options that were exercised during the nine months ended March 31, 2023, were settled by exchanging 10,150 shares of the Company’s common stock which were retired and ~~$9,000~~returned to unissued status upon receipt. $36,000 and $81,000 cash was received from the option exercises during the three and nine months ended ~~December~~March 31, ~~2017 and 2016, respectively, and the~~2023, respectively. The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2023 was $0 ~~for each of these periods. 2,500~~ and ~~1,500~~$0, respectively. 1,000 and 29,000 stock options were exercised during the ~~six~~three and nine months ended ~~December~~March 31, ~~2017~~2022, respectively. 1,000 options that were exercised during the three and ~~2016, respectively. $16,000~~nine months ended March 31, 2023, were settled by exchanging 153 shares of the Company’s common stock which were retired and ~~$9,000~~returned to unissued status upon receipt. $0 and $155,000 cash was received from the option exercises during the ~~six~~three and nine months ended ~~December~~March 31, ~~2017 and 2016, respectively, and the~~2022, respectively. The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2022 was $0$3,000 for ~~each of these~~both periods.

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at ~~December~~March 31, ~~2017:~~2023:

Options outstanding Options exercisable
Range of
exercise prices Number
outstanding Weighted average
remaining
contractual life Weighted average
exercise price Number
exercisable Weighted average
exercise price

$4.29-$9.63 88,100 7.3 $ 6.53 60,300 $ 6.03
88,100 7.3 $ 6.53 60,300 $ 6.03


	Options outstanding				Options exercisable
		Weighted average
	Number	remaining	Weighted average		Number	Weighted average
Range of exercise prices	outstanding	contractual life	exercise price		exercisable	exercise price
$3.15 ‑ $26.94	522,580	7.90	$	19.34	236,652	$	17.47
	522,580	7.90	$	19.34	236,652	$	17.47

As of ~~December~~March 31, ~~2017,~~2023, there was ~~$132,000~~$2,208,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. ~~20,000~~0 and ~~5,000 options~~37,500 Options were granted during the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023, respectively. 5,200 and ~~2016,~~97,900 options vested during the three and nine months ended March 31, 2023, respectively. The total grant date fair value of the options vesting during the three and nine months ended ~~December~~March 31, ~~2017 and 2016~~2023 under this plan was ~~$80,000~~$33,000 and ~~$59,000,~~$916,000, respectively. 0 and 338,000 options were granted during the three and nine months ended March 31, 2022. 5,200 and 95,600 options vested during the three and nine months ended March 31, 2022, respectively. The total grant date fair value of the options vesting during the ~~six~~three and nine months ended ~~December~~March 31, ~~2017 and 2016~~2022 under this plan was ~~$96,000~~$36,000 and ~~$75,000,~~$975,000, respectively.

2012 Non-Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Non-Employee Stock Option Plan (the “2012 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of ~~50,000~~100,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2012 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An

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option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At March 31, 2023, 20,400 stock options were outstanding, 13,920 stock options were exercisable and no further stock options were available for grant under this plan.

There were no options granted during the three and nine months ended March 31, 2023. 0 and 9,600 Options were granted during the three and nine months ended March 31, 2022. No options may be granted under this plan after December 2022. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	2023	2022
Risk-free interest rates	n/a	1.68	%
Expected lives	n/a	6.18 Years
Expected volatility	n/a	43	%
Expected dividend yields	n/a	0	%

The following table reflects activity under the 2012 Non-Employee Plan for the nine months ended March 31:


	2023				2022
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		20,400	$	14.39		12,000	$	6.55
Granted		—		—		9,600	$	22.93
Forfeited/Lapsed		—		—		—		—
Exercised		—		—		—		—
Outstanding, end of period		20,400	$	14.39		21,600	$	13.83
Exercisable, end of period		13,920	$	10.99		12,480	$	8.48
Weighted average fair value at grant date of options granted		n/a			$	12.58
Total intrinsic value of options exercised		n/a			$	n/a
Total intrinsic value of options outstanding	$	473,000			$	168,000
Total intrinsic value of options exercisable	$	370,000			$	155,000

No stock options were exercised during the three and nine months ended March 31, 2023 and 2022, respectively. No cash was received from option exercises during the three and nine months ended March 31, 2023 and 2022, respectively, and the actual tax benefit realized for the tax deductions from option exercises was $0 for both periods.

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at March 31, 2023:


	Options outstanding				Options exercisable
		Weighted average	Weighted			Weighted
	Number	remaining	average exercise		Number	average exercise
Range of exercise prices	outstanding	contractual life	price		exercisable	price
$4.35 - $22.93	20,400	6.90	$	14.39	13,920	$	10.99
	20,400	6.90	$	14.39	13,920	$	10.99

As of March 31, 2022, there was $52,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. No options were granted during the three and nine months ended March 31, 2023, respectively. 720 and 2,640 options vested during the three and nine months ended March 31, 2023, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2023 under this plan was $5,000 and $24,000, respectively. 0 and 9,600 Options were granted during the three and nine months ended March 31, 2022. 720 and 6,240 options vested during the three and nine months ended March 31, 2022, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2022 under this plan was $5,000 and $39,000, respectively.

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2018 Non-Employee Stock Option Plan

In December 2018, the stockholders approved the 2018 Non-Employee Stock Option Plan (the “2018 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 100,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the ~~2012~~2018 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At ~~December~~March 31, ~~2017, 29,200~~2023, 77,500 stock options were ~~granted, 15,200~~outstanding, 53,220 stock options were exercisable and no further stock options were available for grant under this plan.

There were no options granted during the three and nine months ended March 31, 2023. 0 and 23,500 Options were granted during the three and nine months ended March 31, 2022. No options may be granted under this plan after December 2028. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	2023	2022
Risk-free interest rates	n/a	1.68	%
Expected lives	n/a	6.18 Years
Expected volatility	n/a	43	%
Expected dividend yields	n/a	0	%

The following table reflects activity under the ~~2012~~2018 Non-Employee Plan for the ~~six~~nine months ended ~~December 31,:~~March 31:

	2017				2016
	Options		Weighted average exercise price		Options			Weighted average exercise price


										2023				2022
												Weighted average				Weighted average
										Options		exercise price		Options		exercise price
Outstanding, beginning of year		14,200	$	4.69		35,000		$	4.73		89,000	$	14.91		70,100	$	11.93
Granted		15,000		8.70		—			—		—		—		23,500	$	22.93
Terminated/Lapsed		—		—		—			—
Forfeited/Lapsed											—		—		—		—
Exercised		—		—		(5,200	)		4.76		(11,500)	$	15.14		(4,600)	$	10.43

Outstanding, end of period		29,200	$	6.75		29,800		$	4.73		77,500	$	14.88		89,000	$	14.91

Exercisable, end of period		15,200	$	5.53		20,800		$	4.76		53,220	$	13.03		45,040	$	12.98

Weighted average fair value at grant date of options granted	$	83,000				n/a					n/a			$	12.58

Total intrinsic value of options exercised		n/a			$	25,000				$	164,000			$	58,000
Total intrinsic value of options outstanding	$	86,000			$	112,000				$	1,760,000			$	556,000
Total intrinsic value of options exercisable	$	63,000			$	78,000				$	1,307,000			$	351,000

~~No stock~~1,600 and 11,500 options were exercised during the three ~~or six~~and nine months ended ~~December~~March 31, ~~2017.~~2023, respectively. The 1,600 options that were exercised during the three months ended March 31, 2023 were settled by exchanging 395 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. The 11,500 options that were exercised during the nine months ended March 31, 2023 were settled by exchanging 6,052 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. No cash was received from option exercises during the three ~~or six~~and nine months ended ~~December~~March 31, ~~2017~~2023. and the actual tax benefit realized for the tax deductions from option exercises was ~~$0 for each of these periods. 5,200~~$8,000 and $34,000, respectively. 1,600 and 4,600 options were exercised during the three and ~~six~~nine months ended ~~December~~March 31, ~~2016. All of~~2022, respectively. The 1,600 options that were exercised during the ~~5,200 exercises~~three months ended March 31, 2022, were settled by exchanging ~~3,056~~663 shares of the Company’s common stock which were retired and returned to ~~authorized.~~unissued status upon receipt. The 4,600 options that were exercised during the nine months ended March 31, 2022, were settled by exchanging 2,075 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. No cash was received from option exercises during the three and ~~six~~nine months ended ~~December~~March 31, ~~2016~~2022. For the three and nine months ended March 31, 2022 the actual tax benefit realized for the tax deductions from option exercises was ~~$0 for each~~$4,000 and $12,000, respectively.

Table of ~~these periods.~~Contents

The following table summarizes information about stock options outstanding under the ~~2012~~2018 Non-Employee Plan at ~~December~~March 31, ~~2017:~~2023:

Options outstanding Options exercisable
Range of
exercise prices Number
outstanding Weighted average
remaining
contractual life Weighted
average exercise
price Number
exercisable Weighted
average exercise
price

$4.37 - $8.70 29,200 8.1 $ 6.75 15,200 $ 5.53
29,200 8.1 $ 6.75 15,200 $ 5.53


	Options outstanding				Options exercisable
		Weighted average	Weighted			Weighted
	Number	remaining	average exercise		Number	average exercise
Range of exercise prices	outstanding	contractual life	price		exercisable	price
$8.10 - $22.93	77,500	7.03	$	14.88	53,220	$	13.03
	77,500	7.03	$	14.88	53,220	$	13.03

As of ~~December~~March 31, ~~2017,~~2023, there was ~~$72,000~~$166,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the ~~2012~~2018 Non-Employee Plan. ~~15,000~~No options were granted during the three and ~~six~~nine months ended ~~December~~March 31, ~~2017. No~~2023, respectively. 5,380 and 19,680 options ~~were granted~~vested during the three ~~or six~~and nine months ended ~~December~~March 31, ~~2016.~~2023, respectively. The total grant date fair value of the options vesting during the three and nine months ended ~~December~~March 31, ~~2017 and 2016~~2023 under this plan was ~~$22,000~~$35,000 and ~~$6,000,~~$149,000, respectively. 0 and 23,500 options were granted during the three and nine months ended March 31, 2022. 5,380 and 19,680 options vested during the three and nine months ended March 31, 2022. The total grant date fair value of the options vesting during the ~~six~~three and nine months ended December 31, ~~2017 and 2016~~2021 under this plan was ~~$39,000~~$35,000 and ~~$22,000,~~$160,000, respectively.

~~2002 Employee~~2020 Non-Employee Stock Option Plan

In ~~December 2002,~~May 2020, the stockholders approved the ~~2002 Employee~~2020 Non-Employee Stock Option Plan (the ~~“2002 Employee~~“2020 Non-Employee Plan”). This plan ~~expired in October 2012. This plan authorized~~authorizes the granting of awards, the exercise of which would allow up to an aggregate of ~~1,836,000~~100,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may ~~have granted~~grant stock options ~~which were intended~~ to ~~qualify as incentive stock options (ISOs),~~non-employee directors and consultants to ~~key employees. Any plan participant who was granted ISOs~~the Company and ~~possessed more than 10% of the voting rights of the Company's outstanding common stock must have been granted an option with a price of at least 110% of the fair market value on the date of grant.~~

its subsidiaries.

Under the ~~2002 Employee~~2020 Non-Employee Plan, stock options ~~have been~~may be granted ~~to key employees~~ with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year ~~from~~beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At ~~December~~March 31, ~~2017, 1,471,480 stock options had been granted and no~~2023, 56,900 stock options were ~~exercisable. No further~~outstanding, 18,760 stock options were exercisable and 43,100 stock options were available for grant under this plan.

5,000 and 30,000 Options were granted during the three and nine months ended March 31, 2023 under the 2020 Non-Employee Plan. 0 and 16,900 Options were granted during the three and nine months ended March 31, 2022. No options may be granted under this plan after May 2030. The fair value of each option granted was estimated on the ~~plan’s expiration in October 2012.~~date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	2023		2022
Risk-free interest rates	3.03 - 3.40	%	1.68	%
Expected lives	7.23 - 7.27 Years		6.18 Years
Expected volatility	43	%	43	%
Expected dividend yields	0	%	0	%

The following table reflects activity under the ~~2002 Employee plan~~2020 Non-Employee Plan for the ~~three~~nine months ended ~~December 31,:~~March 31:

	2017					2016
	Options			Weighted average exercise price		Options			Weighted average exercise price


											2023				2022
													Weighted average				Weighted average
											Options		exercise price		Options		exercise price
Outstanding, beginning of year		5,000		$	5.35		102,500		$	6.04		26,900	$	18.64		10,000	$	11.40
Granted		—			—		—			—		30,000	$	27.57		16,900	$	22.93
Terminated/Lapsed		—			—		(10,500	)		6.02
Forfeited/Lapsed												—		—		—		—
Exercised		(5,000	)		5.35		(52,000	)		6.31		—		—		—		—

Outstanding, end of period		—		$	—		40,000		$	5.69		56,900	$	23.35		26,900	$	18.64

Exercisable, end of period		—		$	—		40,000		$	5.69		18,760	$	20.73		7,380	$	16.68

Weighted average fair value at grant date of options granted		n/a					n/a				$	13.74			$	12.58
Total intrinsic value of options exercised	$	20,000				$	114,000					n/a				n/a
Total intrinsic value of options outstanding		n/a				$	113,000				$	810,000			$	91,000
Total intrinsic value of options exercisable		n/a				$	113,000				$	316,000			$	36,000

~~0 and 5,000~~Table of Contents

No stock options were exercised during the three and ~~six~~nine months ended ~~December~~March 31, ~~2017, respectively. The 5,000 exercises were settled in cashless exercises by exchanging 2,815 shares of~~2023 and 2022 under the ~~Company’s common stock which were retired and returned to unissued status.~~2020 Non-Employee Plan. No cash was received from option exercises during either of the three ~~or six~~and nine months ended ~~December~~March 31, ~~2017~~2023 or 2022 and the actual tax benefit realized for the tax deductions from option exercises was $0 for ~~each of these~~both periods. ~~52,000~~

The following table summarizes information about stock options outstanding under the 2020 Non-Employee Plan at March 31, 2023:


	Options outstanding				Options exercisable
		Weighted average
	Number	remaining	Weighted average		Number	Weighted average
Range of exercise prices	outstanding	contractual life	exercise price		exercisable	exercise price
$11.40 - $30.71	56,900	8.84	$	23.35	18,760	$	20.73
	56,900	8.84	$	23.35	18,760	$	20.73

As of March 31, 2023, there was $376,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan. 5,000 and 30,000 options were ~~exercised~~granted during the three and ~~six~~nine months ended ~~December~~March 31, ~~2016. 45,500 of the 52,000 exercises were settled by exchanging 40,655 shares of the Company’s common stock which were retired~~2023, respectively. 1,000 and ~~returned to authorized. The remaining 6,500 exercises were paid for in cash. $40,000 was received from option exercises~~11,380 options vested during the three and ~~six~~nine months ended ~~December~~March 31, ~~2016~~2023. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2023 under this plan was $16,000 and $129,000. 0 and 5,380 options vested during the ~~actual tax benefit realized for~~three and nine months ended March 31, 2022. The total grant date fair value of the ~~tax deductions from option exercises~~options vesting during the three and nine months ended March 31, 2022 under this plan was $0 ~~for each of these periods.~~and $55,000.

NOTE 810 – Stockholders’ Equity Transactions

On September 16, 2014, the Company’s board of directors authorized the repurchase of up to 12 million of the approximately ~~19.4~~38.8 million shares of the Company’s common stock then outstanding. ~~The repurchase will~~Such repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions and the market price of the common stock. Relative to the ~~Loan~~Revolver Agreement described in Note 6,8, the Company’s lender gave its consent to this stock repurchase plan. ~~22,600 shares were purchased under this plan during~~During the three and ~~six~~nine months ended March 31, 2023 and the fiscal year ended June 30, 2022, the Company did not repurchase any shares of its outstanding common stock. Pursuant to the PPP loan described in Note 8, the Company was not allowed to repurchase any of its shares of common stock until 12 months after the termination of the term loans described therein which occurred between August, 2021 and September, 2021.

On December 6, 2021, the stockholders of the Company approved an amendment of the Company’s Certificate of Incorporation increasing the number of authorized shares the Company may issue to 100,000,000 shares of common stock at $.01 par value per share.

In December 2021, the Company's Board of Directors approved a two-for-one stock split in the form of a 100% stock dividend of the Company’s common stock payable to stockholders of record on December 20, 2021. The additional shares were distributed on January 4, 2022. All share and per share amounts (except par value) have been retroactively adjusted to reflect the stock split. There was no net effect on total stockholders' equity as a result of the stock split.

During the three months ended March 31, ~~2017.~~2023, certain employees and directors exercised stock options under the Company's 2012 Employee and 2018 Non-Employee Stock Option Plans totaling 32,400 shares. 29,200 of the 32,400 of these exercises were completed as cashless exercises as allowed for under the plans, where the exercise shares are issued by the Company in exchange for shares of the Company’s common stock that are owned by the optionees. The number of shares surrendered by the optionees was 10,338 and was based upon the per share price on the effective date of the option exercise. $36,000 cash was received from the other 3,200 options exercised.

During the nine months ended March 31, 2023, certain employees and directors exercised stock options under the Company's 2012 Employee and 2018 Non-Employee Stock Option Plans totaling 49,500 shares. 41,100 of these exercises were completed as cashless exercises as allowed for under the plans, where the exercise shares are issued by the Company in exchange for shares of the Company’s common stock that are owned by the optionees. The number of shares surrendered by the optionees was 16,202 and was based upon the per share price on the effective date of the option exercise. $81,000 cash was received from the other 8,400 shares exercised.

During fiscal 2022, certain employees and directors exercised stock options under the Company's 2012 Employee and Non-Employee and 2018 Non-employee Stock Option Plans totaling 34,800 shares. 6,800 of these exercises were completed as cashless exercises as allowed for under the plans, where the exercise shares are issued by the Company in exchange for shares of the Company's common

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stock that are owned by the optionees. The number of shares surrendered by the optionees was 2,486 and was based upon the per share price on the effective date of the option exercise.

NOTE 911 – Related Party Transaction

On February 13, 2023, the Company's President and Chairman and the Company’s Executive Vice President and Chief Financial Officer sold 2,012,500 and 87,500 shares of our common stock, respectively, as selling stockholders in an underwritten secondary public offering at a public offering price of $31.50 per share. In connection with such offering, the selling stockholders granted the underwriters an option to purchase additional shares (the “Greenshoe Option”). On February 15, 2023, the underwriters exercised in full the Greenshoe Option, pursuant to which the selling stockholders sold a total of 300,000 additional shares of common stock at the same public offering price. The Company did not sell any shares in the offering and received no proceeds from the offerings, but the Company incurred $496,000 in offering expenses, which are recorded in selling, general, and administrative expenses in the accompanying condensed consolidated statements of income.

NOTE 12 - 401(k) Plan

The Company maintains a 401(k) plan (“the Plan”) that ~~covers~~is available to all U.S. non-union employees with ~~one or more years of service~~ and is qualified under Sections 401(a) and 401(k) of the Internal Revenue Code. Company contributions to this plan are discretionary and totaled ~~$33,000~~$64,000 and ~~$27,000~~$187,000 for the three and nine months ended ~~December~~March 31, ~~2017~~2023. Company contributions to this plan are discretionary and ~~2016, respectively~~totaled $59,000 and ~~$64,000 and $55,000~~$132,000 for the ~~six~~three and nine months ended ~~December~~March 31, ~~2017 and 2016, respectively~~2022.

NOTE 1013 - Commitments and Contingencies

Leases

~~Leases~~

~~The Company is committed under various operating leases, not including the land~~Our lease ~~discussed below, which do not extend beyond fiscal 2023~~.

~~Rent expense, with the exception~~obligation consists of ~~the land~~a 99-year lease, referred to below, totaled approximately $7,000 and $6,000 for the three months ended December 31, 2017 and 2016, respectively and $13,000 and $12,000 for the six months ended December 31, 2017 and 2016, respectively.

~~Land Lease~~

~~On April 26, 1993,~~entered into by one of the ~~Company's~~Company’s foreign subsidiaries, ~~entered into a 99 year lease, expiring in 2092,~~ for approximately four acres of land in the Dominican Republic ~~at an annual cost of $288,000,~~ on which the ~~Company's~~Company’s principal production facility is located. The lease, which commenced on April 26, 1993 and expires in 2092, initially had an annual base rent of approximately $235,000 plus $53,000 in annual service charges. On September 14, 2022, a lease modification was executed which provides for an annual base rent of $235,000 plus $105,000 in annual service charges. The service charges increase 2% annually over the remaining life of the lease. The modification resulted in a remeasurement of the operating lease asset and liability, and the effect was a reduction to the asset and liability of $1.3 million.

Operating leases are included in operating lease right-of-use assets, accrued expenses and operating lease liabilities, non-current on our condensed consolidated balance sheets.

~~Litigation~~For the three months March 31, 2023 and 2022, cash payments against operating lease liabilities totaled $85,000 and $72,000, respectively. For the nine months March 31, 2023 and 2022, cash payments against operating lease liabilities totaled $249,000 and $216,000, respectively.

Supplemental balance sheet information related to operating leases was as follows:


Weighted-average remaining lease term	69 Years
Weighted-average discount rate	6.25	%

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The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2023 (in thousands):


Year Ending June 30,	Amount
2023	$	81
2024		316
2025		299
2026		282
2027		267
Thereafter		4,633
Total	$	5,878

Operating lease expense totaled approximately $123,000 and $80,000 for the three months ended March 31, 2023 and 2022, respectively. Operating lease expense totaled approximately $334,000 and $239,000 for the nine months ended March 31, 2023 and 2022, respectively.

Litigation

In the normal course of business, the Company is a party to claims and/or litigation. Management believes that the settlement of such claims and/or litigation, considered in the aggregate, will not have a material adverse effect on the ~~Company's~~Company’s financial position and results of operations.

Employment Agreements

As of ~~December 31, 2017,~~September 30, 2022, the Company was obligated under ~~three~~two employment agreements and one severance agreement. The employment agreements are with the Company’s CEO ~~Senior Vice President of Sales and Marketing (“the SVP of Sales”)~~ and the Senior Vice President of Engineering (“the SVP of Engineering”). The severance agreement is with the Company’s CFO.

The employment agreement with the CEO provides for an annual salary of ~~$730,000,~~$872,000, as adjusted for inflation; incentive compensation as may be approved by the Board of Directors from time to time and a termination payment in an amount up to 299% of the average of the prior five calendar ~~year's~~years’ compensation, subject to certain limitations, as defined in the agreement. The employment agreement renews annually in August unless either party gives the other notice of non-renewal at least six months prior to the end of the applicable term.

The employment agreement with the SVP of ~~Sales~~Engineering expires in ~~October 2018~~August 2024 and provides for an annual salary of ~~$334,000, a bonus arrangement for fiscal 2018~~$361,000, and, if terminated by the Company without cause, severance of nine months’ salary and continued company-sponsored health insurance for six months from the date of termination. The employment agreement with the SVP of Engineering expires in August 2018 and provides for an annual salary of $302,000, a bonus arrangement for fiscal 2018 and, if terminated by the Company without cause, severance of nine month’s salary and continued company-sponsored health insurance for six months from the date of termination.

The severance agreement is with the ~~Senior~~Executive Vice President of Operations and ~~Finance~~Chief Financial Officer and provides for, if terminated by the Company without cause or within three months of a change in corporate control of the ~~Registrant,~~Company, severance of nine ~~month’s~~months’ salary, continued company-sponsored health insurance for six months from the date of termination and certain non-compete and other restrictive provisions. Each of the severance agreements with the SVP of Sales, the SVP of Engineering and the Senior Vice President of Operations and Finance contains non-compete restrictions for three years after the employee’s termination of employment.

NOTE ~~11 -~~14 – Geographical Data

The Company is engaged in one major line of business: the development, manufacture, and distribution of security products, encompassing access control systems, ~~door security~~door-locking products, intrusion and fire alarm systems and video surveillance products for commercial and residential use. The Company also provides wireless communication service for intrusion and fire alarm systems. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment. Sales to unaffiliated customers are primarily shipped from the United States. The Company has customers worldwide with major concentrations in North America.

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Financial Information Relating to Domestic and Foreign Operations (in thousands):

	Three months ended December 31,				Six months ended December 31,
	2017		2016		2017		2016
Sales to external customers(1):


									Three months ended March 31,				Nine months ended March 31,
									2023		2022		2023		2022
Sales to external customers (1):
Domestic	$	20,451	$	20,100	$	41,103	$	39,593	$	43,228	$	35,522	$	124,373	$	99,327
Foreign		661		615		1,183		1,290		304		383		966		1,037

Total Net Sales	$	21,112	$	20,715	$	42,286	$	40,883	$	43,532	$	35,905	$	125,339	$	100,364

	December 31, 2017		June 30, 2017

					March 31, 2023		June 30, 2022
					(as Restated)
Identifiable assets:

United States	$	52,124	$	55,550	$	111,016	$	98,791
Dominican Republic (2)		18,363		15,312		44,853		49,785

Total Identifiable Assets	$	70,487	$	70,862	$	155,869	$	148,576

(1)	All of the Company’s sales originate in the United States and are shipped primarily from the Company’s facilities in the United States. There were no sales into any one foreign country in excess of 10% of total Net Sales.

(2)

Consists primarily of inventories (March 31, 2023 = $34,428; June 30, 2022 = $38,755), operating lease assets (March 31, 2023 = $5,878; June 30, 2022 = $7,350) and fixed assets (March 31, 2023 = $4,083; June 30, 2022 = $3,253) located at the Company’s principal manufacturing facility in the Dominican Republic.

~~(1) All~~

NOTE 15 - Subsequent Events

The Company has evaluated subsequent events occurring after the date of the ~~Company's sales originate~~condensed consolidated financial statements for events requiring recording or disclosure in the condensed consolidated financial statements.

On May 5, 2023, the Company’s Board of Directors declared a cash dividend of $.0625 per share payable on June 12, 2023 to stockholders of record on May 22, 2023.

On August 18, 2023, the Company’s Board of Directors declared a cash dividend of $.08 per share payable on September 22, 2023 to stockholders of record on September 1, 2023.

On August 29, 2023, a purported class action was filed in the United States District Court for the Eastern District of New York against the Company, its Chairman and ~~are shipped primarily from~~Chief Executive Officer, and its Chief Financial Officer, alleging violations of the ~~Company's facilities~~Securities Exchange Act of 1934 in connection with statements made in the ~~United States. There were no sales into any one foreign country in excess of 10% of total Net Sales.~~

~~(2) Consists primarily of inventories (December~~Company’s quarterly reports on Form 10-Q for the quarters ended September 30, 2022, December 31, ~~2017 = $14,765, June 30, 2017 = $11,831)~~2022 and ~~long-lived assets (December~~March 31, ~~2017 = $3,379, June 30, 2017 = $3,233) located at~~2023 (the “10-Q’s”). The Company previously announced that it was going to restate the ~~Company's principal manufacturing facility~~financial statements contained in the ~~Dominican Republic.~~10-Qs. The Company intends to vigorously defend against the action.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Restatement of Previously Issued Financial Statements

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been amended and restated to give effect to the restatement of our financial statements, as more fully described in Note 1A to our financial statements entitled “Restatement of Previously Issued Financial Statements”. For further detail regarding the restatement, see “Explanatory Note” and “Item 4. Controls and Procedures.”

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q and the ~~information incorporated~~documents we incorporate by reference ~~may include "Forward-Looking Statements"~~contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of ~~1934. The Company intends~~1934, as amended, or the ~~Forward-Looking Statements to be covered by the Safe Harbor Provisions for Forward-Looking Statements.~~Exchange Act. All statements, other than statements of historical fact, included or incorporated in this prospectus regarding ~~the Company's expected~~our strategy, future operations, clinical trials, collaborations, intellectual property, cash resources, financial position, ~~and operating results, its business strategy, its financing~~future revenues, projected costs, prospects, plans, and ~~the outcome~~objectives of ~~any contingencies~~management are ~~Forward-Looking Statements.~~forward-looking statements. The Forward-Looking Statements are based on current estimates and projections about our industry and our business. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," or variations of such words “believes,” “anticipates,” “estimates,” “plans,” “expects,” “intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,” “continue,” “will,” “schedule,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we will achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause our actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such ~~Forward-Looking Statements. The Forward-Looking Statements~~forward-looking statements. There are ~~subject to risks and uncertainties~~a number of important factors that could cause our actual results to differ materially from those ~~set forth~~indicated or implied by any Forward-Looking Statements. For example, the Company is highly dependent on its Chief Executive Officer for strategic planning. If he is unable to perform his services for any significant period of time, the Company's ability to grow could be adversely affected. In addition, factors that could cause actual results to differ materially from the Forward-Looking Statements include, but are not limited to, uncertain economic, military and political conditionsforward-looking statements. See “Risk Factors” in ~~the world,~~ our ability to maintain and develop competitive products, adverse tax consequences of offshore operations, the ability to maintain adequate financing and significant fluctuations in the exchange rate between the Dominican Peso and the U.S. Dollar. The Company’s Risk Factors are discussed in more detail in Item 1A in the Company’s 2017 Annual Report on Form ~~10-K.~~

10-K for the year ended June 30, 2022 for more information. These factors and the other cautionary statements made in this prospectus and the documents we incorporate by reference should be read as being applicable to all related forward-looking statements whenever they appear in this prospectus and the documents we incorporate by reference. In addition, any forward-looking statements represent our estimates only as of the date that this prospectus is filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. We do not assume any obligation to update any forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.

Overview

~~The Company~~Napco Security Technologies, Inc (“NAPCO”, “the Company”, “we”) is one of the leading manufacturers and designers of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions. We offer a diversified ~~manufacturer~~array of security products, encompassing access control systems, ~~door security~~door-locking products, intrusion and fire alarm systems and video surveillance ~~products for commercial and residential use.~~products. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment. ~~International sales accounted~~We have experienced significant growth in recent years, primarily driven by fast growing recurring service revenues generated from wireless communication services for ~~approximately 3%~~intrusion and fire alarm systems, as well as our school security products that are designed to meet the increasing needs to enhance school security as a result of on-campus shooting and violence in the U.S. Our wireless communication services have led to the substantial growth in our ~~revenues~~monthly recurring revenues.

Since 1969, NAPCO has established a heritage and proven record in the professional security community for ~~each~~reliably delivering both advanced technology and high-quality security solutions, building many of the ~~six months ended December 31, 2017~~industry’s widely recognized brands, such as NAPCO Security Systems, Alarm Lock, Continental Access, Marks USA, and ~~2016.~~

~~The Company owns~~other popular product lines: including Gemini and ~~operates manufacturing facilities in Amityville, New York~~F64-Series hardwire/wireless intrusion systems and iSee Video internet video solutions. We are also dedicated to developing innovative technology and producing the ~~Dominican Republic. A significant portion~~next generation of reliable security solutions that utilize remote communications and wireless networks, including our ~~operating costs~~StarLink, iBridge, and more recently the iSecure product lines. Today, millions of businesses, institutions, homes, and people around the globe are ~~fixed, and do not fluctuate with changes in production levels or utilization~~protected by products from the NAPCO Group of our manufacturing capacity. As production levels rise and factory utilization increases, the fixed costs are spread over increased output, which may contribute to increasing profit margins. Conversely, when production levels decline our fixed costs are spread over reduced levels, which may contribute to decreasing margins.Companies.

~~The security products market is characterized by constant incremental innovation in product design and manufacturing technologies. Generally, the Company devotes 6-8%~~Table of revenues to research and development (“R&D”) on an annual basis. The Company does not expect products resulting from our R&D investments in fiscal 2018 to contribute materially to revenue during fiscal 2018, but may benefit the Company over future years. In general, the new products introduced by the Company are initially shipped in limited quantities, and increase over time. Prices and manufacturing costs tend to decline over time as products and technologies mature.Contents

Economic and Other Factors

We are subject to the effects of general economic and market conditions. ~~In the event that~~If the U.S. or international economic conditions deteriorate, our revenue, profit and cash-flow levels could be materially adversely affected in future periods. In the event of such deterioration, many of our current or potential future customers may experience serious cash flow problems and as a result may modify, delay or cancel purchases of our products. Additionally, customers may not be able to pay, or may delay payment of, accounts receivable that are owed to us. If such events do occur, they may result in our fixed and semi-variable expenses ~~being~~becoming too high in relation to our revenues and cash flows.

Seasonality

The Company's fiscal year begins on July 1 and ends on June 30. Historically, the end users of the Company’s hardware products want to install ~~its~~these products prior to the summer; therefore, sales of ~~its~~these products historically peak in the period April 1 through June 30, the Company's fiscal fourth quarter, and are reduced in the period July 1 through September 30, the Company's fiscal first quarter. ~~In addition, demand~~Our monthly recurring service revenue, which is ~~affected by the housing~~less susceptible to these fluctuations, allows us to generate a more consistent and ~~construction markets. Deterioration of the current economic conditions may also affect this trend.~~

predictable income stream.

Critical Accounting Policies and Estimates

The ~~Company's~~Company’s significant accounting policies are fully described in Note 1 to the ~~Company's~~Company’s consolidated financial statements included in its ~~2017~~2022 Annual Report on Form 10-K. Management believes ~~the following~~these critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

~~Revenue Recognition~~

The Company recognizes revenue when the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) there is a fixed and determinable price for the Company's product or service, (iii) shipment and passage of title occurs or service has been provided, and (iv) collectability is reasonably assured. Revenues from product sales are recorded at the time the product is shipped or delivered to the customer pursuant to the terms of the sale. Revenues for services are recorded at the time the service is provided to the customer pursuant to the terms of sale. The Company reports its sales on a net sales basis, with net sales being computed by deducting from gross sales the amount of actual sales returns and other allowances and the amount of reserves established for anticipated sales returns and other allowances.

~~Concentration of Credit Risk~~

An entity is more vulnerable to concentrations of credit risk if it is exposed to risk of loss greater than it would have had if it mitigated its risk through diversification of customers. Such risks of loss manifest themselves differently, depending on the nature of the concentration, and vary in significance. The Company had two customers, both of which are nationwide distributors of the Company’s products, with accounts receivable balances that comprised 15% and 14% of the Company’s accounts receivable at December 31, 2017 and 24% and 10% at June 30, 2017. Sales to neither of these customers exceeded 10% of net sales in either of the three or six months ended December 31, 2017. Sales to one of these customers comprised 13% and 14% of net sales for the three and six months ended December 2016, respectively.

In the ordinary course of business, we have established a reserve for doubtful accounts and customer deductions in the amount of $175,000 as of December 31, 2017 and $155,000 as of June 30, 2017. Our reserve for doubtful accounts is a subjective critical estimate that has a direct impact on reported net earnings. This reserve is based upon the evaluation of accounts receivable agings, specific exposures and historical or anticipated events.

~~Sales Returns and Other Allowances~~

The Company analyzes sales returns and is able to make reasonable and reliable estimates of product returns based on the Company’s past history. Estimates for sales returns are based on several factors including actual returns and based on expected return data communicated to it by its customers. Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns. Actual results could differ from those estimates. As a percentage of gross sales, sales returns, rebates and allowances were 8% for the each of the six months ended December 30, 2017 and 2016, respectively.

~~Inventories~~

Inventories are valued at the lower of cost or NRV, with cost being determined on the first-in, first-out (FIFO) method. The reported net value of inventory includes finished saleable products, work-in-process and raw materials that will be sold or used in future periods. Inventory costs include raw materials, direct labor and overhead. The Company’s overhead expenses are applied based, in part, upon estimates of the proportion of those expenses that are related to procuring and storing raw materials as compared to the manufacture and assembly of finished products. These proportions, the method of their application, and the resulting overhead included in ending inventory, are based in part on subjective estimates and actual results could differ from those estimates.

In addition, the Company records an inventory obsolescence reserve, which represents the difference between the cost of the inventory and its estimated NRV, based on various product sales projections. This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age, historical trends, requirements to support forecasted sales, and the ability to find alternate applications of its raw materials and to convert finished product into alternate versions of the same product to better match customer demand. There is inherent professional judgment and subjectivity made by both production and engineering members of management in determining the estimated obsolescence percentage. In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events. The Company also regularly reviews the period over which its inventories will be converted to sales. Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current.

~~Intangible Assets~~

Intangible assets determined to have indefinite lives are not amortized. Intangible assets with definite lives are amortized over their useful lives. Indefinite-lived intangible assets are reviewed for impairment at least annually at the Company’s fiscal year end of June 30 or more often whenever there is an indication that the carrying amount may not be recovered. Impairment testing is performed in two steps: (i) the Company determines if there is impairment by comparing the fair value of a reporting unit with its carrying value, and (ii) if there is impairment, the Company measures the amount of impairment loss by comparing the implied fair value of intangible assets with the carrying amount of the intangible assets.

~~Income Taxes~~

~~The Company has identified the United States and New York State as its major tax jurisdictions. The fiscal 2014 and forward years are still open for examination.~~

For the six months ended December 31, 2017, the Company recognized a net income tax expense of $54,000. For the six months ended December 31, 2017, the effective tax rate was favorably impacted by the enactment of H.R. 1, Tax Cuts and Jobs Act (the “Act”) on December 22, 2017. The Act reduced the U.S. Corporate income tax rate to 21% and resulted in a $286,000 reduction in the Company’s net deferred tax liabilities. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. federal statutory rate of approximately 27.55% for fiscal 2018 and a 21% U.S. federal statutory rate for subsequent fiscal years.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities for the change in tax rate is recognized in income in the three and six month period ending December 31, 2017 which includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

In addition, the Company reported $208,000 of provisional expense on its unremitted foreign earnings. Accounting Standard Codification (“ASC”) 740 requires filers to record the effects of tax law changes in the period enacted. However, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), that permits filers to record provisional amounts during a measurement period ending no later than one year from the date of the Act’s enactment. As of December 31, 2017, the Company has not completed accounting for the tax effects of enactment of the Act; however, the Company has made a reasonable estimate of the effects on the existing deferred balances as well as the computation of the one-time transition tax.

During the six months ended December 31, 2017 the Company increased its reserve for uncertain income tax positions by $32,000. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense and accrued income taxes. As of December 31, 2017, the Company had accrued interest totaling $0 and $215,000 of unrecognized net tax benefits that, if recognized, would favorably affect the Company’s effective income tax rate in any future period. The Company uses the flow through method to account for investment tax credits earned on eligible research and development expenditures. Under this method, the investment tax credits are recognized as a reduction to income tax expense.

~~The Company measures and recognizes the tax implications of positions taken or expected to be taken in its tax returns on an ongoing basis.~~

Results of Operations


	Three months ended March 31,								Nine months ended March 31,
	(dollars in thousands)								(dollars in thousands)
							% Increase/								% Increase/
	2023 (as Restated)			2022			(decrease)		2023 (as Restated)			2022			(decrease)
Net sales: equipment revenues	$	28,390		$	23,873		18.9	%	$	81,511		$	67,080		21.5	%
service revenues		15,142			12,032		25.8	%		43,828			33,284		31.7	%
Total net sales		43,532			35,905		21.2	%		125,339			100,364		24.9	%
Gross Profit: equipment		7,610			4,539		67.7	%		11,170			11,003		1.5	%
services		13,669			10,494		30.3	%		39,029			28,929		34.9	%
Total gross profit		21,279			15,033		41.5	%		50,199			39,932		25.7	%
Gross profit as a % of net sales:		48.9	%		41.9	%	16.7	%		40.1	%		39.8	%	0.8	%
equipment		26.8	%		19.0	%	41.1	%		13.7	%		16.4	%	(16.5)	%
services		90.3	%		87.2	%	3.5	%		89.1	%		86.9	%	2.5	%

Research and development		2,314			2,009		15.2	%		6,964			5,918		17.7	%
Selling, general and administrative		8,425			8,442		(0.2)	%		24,719			23,983		3.1	%
Selling, general and administrative as a percentage of net sales		19.4	%		23.5	%	(17.4)	%		19.7	%		23.9	%	(17.5)	%
Operating income		10,540			4,582		130.0	%		18,516			10,031		84.6	%
Interest and other income (expense), net		437			(177)		(346.9)	%		521			(102)		(610.8)	%
Gain on extinguishment of debt		—			—		—			—			3,904		(100.0)	%
Provision for income taxes		1,428			1,132		26.1	%		2,475			1,771		39.8	%
Net income		9,549			3,273		191.8	%		16,562			12,062		37.3	%

Three months ended December 31,
(dollars in thousands) Six months ended December 31,
(dollars in thousands)
2017 2016 % Increase/
(decrease) 2017 2016 % Increase/
(decrease)

Net sales $ 21,112 $ 20,715 1.9 % $ 42,286 $ 40,883 3.4 %

Gross profit 6,840 6,617 3.4 % 13,719 13,069 5.0 %
Gross profit as a % of net sales 32.4 % 31.9 % 1.6 % 32.4 % 32.0 % 1.3 %

Selling, general and administrative 5,674 5,553 2.2 % 11,494 11,289 1.8 %
Selling, general and administrative as a percentage of net sales 26.9 % 26.8 % 0.4 % 27.2 % 27.6 % (1.4 )%

Operating income 1,166 1,064 9.6 % 2,225 1,780 25.0 %
Interest expense, net 22 18 22.2 % 48 42 14.3 %
Provision (benefit) for income taxes (89 ) 189 (147.1 )% 54 313 (82.7 )%

Net income 1,233 857 43.9 % 2,123 1,425 49.0 %

Net Sales for the three months ended ~~December~~March 31, ~~2017~~2023 increased by ~~$397,000~~$7,627,000, or 21.2%, to ~~$21,112,000~~$43,352,000 as compared to ~~$20,715,000~~$35,905,000 for the same period a year ago. The increase in sales for the three months ended ~~December~~March 31, ~~2017~~2023 was due primarily to ~~increased intrusion sales ($545,000), which resulted primarily from an increase of $968,000, a 52% increase over last year’s second quarter,~~revenue increases in recurring ~~revenue~~communication services ~~related to the Company’s intrusion~~($3,110,000), Alarm Lock brand door-locking products ($4.278,000), Marks brand door-locking products ($927,000), and Continental brand access control products ($~~377,000)~~113,000) as partially offset by a decrease in ~~the Company’s door-locking~~Napco brand intrusion products ($~~525,000)~~1,250,000). Net Sales for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 increased by ~~$1,403,000~~$24,975,000, or 24.9%, to ~~$42,286,000~~

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$125,339,000 as compared to ~~$40,883,000~~$100,364,000 for the same period a year ago. The increase in sales for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 was due primarily to ~~increased intrusion sales ($1,235,000), which resulted primarily from an increase of $1,894,000, a 54% increase over the same period a year ago,~~revenue increases in recurring ~~revenue~~communication services ~~related to~~($10,544,000), Napco brand intrusion products, which include the Company’s ~~intrusion~~cellular radio products ($1,993,000), Alarm Lock brand door-locking products ($9,045,000), Marks brand door-locking products ($2,212,000), and Continental brand access control products ($~~703,000) as partially offset by~~1,182,000). The Company’s increase in equipment sales was primarily due to a ~~decrease~~general increase in demand for the Company’s ~~door-locking products ($535,000).~~hardware products.

~~Gross~~The Company's gross profit increased by $6,246,000 to $21,279,000, or 48.9% of net sales, for the three months ended ~~December~~March 31, ~~2017 increased to $6,840,000 or 32.4% of sales~~2023 as compared to ~~$6,617,000~~$15,033,000, or ~~31.9%~~41.9% of net sales, for the same period a year ago. Gross profit on equipment sales was $7,610,000, or 26.8% of net equipment sales, for the ~~six~~three months ended ~~December~~March 31, ~~2017 increased to $13,719,000~~2023 and $4,539,000, or ~~32.4%~~19.0% of net equipment sales, ~~as compared to $13,069,000~~for the same period a year ago. Gross profit on service revenues was $13,669,000, or ~~32.0%~~90.3% of ~~sales~~net service revenues, for the three months ended March 31, 2023 and $10,494,000, or 87.2% of net service revenues, for the same period a year ago. The increase in gross profit ~~for the three~~in dollars and ~~six months~~as a percentage of net sales on equipment sales and service revenues was primarily ~~due to~~the result of the increase in ~~sales~~revenues of each as described ~~above.~~above as well as increased availability and lower costs of components and transportation as compared to the same period last year, which resulted from improvements within the Company’s supply chain. The increases in revenues resulted in improved overhead absorption rates. In addition, the increase in gross margin on service revenues was due, in part, to increased service revenues relating to the Company’s fire radios, which have higher monthly selling prices than the Company’s intrusion radios.

~~Selling, general and administrative expenses~~The Company's gross profit increased by $10,267,000 to $50,199,000, or 40.1% of net sales, for the ~~three~~nine months ended ~~December~~March 31, ~~2017 increased by $121,000~~2023 as compared to ~~$5,674,000 from $5,553,000~~$39,932,000, or 39.8% of net sales, for the same period a year ago. ~~Selling, general and administrative expenses~~Gross profit on equipment sales was $11,170,000, or 13.7% of net equipment sales, for the ~~six~~nine months ended ~~December~~March 31, ~~2017 increased by $205,000 to $11,494,000 from $11,289,000~~2023 and $11,003,000, or 16.4% of net equipment sales, for the same period a year ago. ~~Selling, general and administrative expenses as a percentage~~Gross profit on service revenues was $39,029,000, or 89.1% of net ~~sales remained relatively constant at 26.9%~~service revenues, for the ~~three~~nine months ended ~~December~~March 31, ~~2017 as compared to 26.8% for the same period a year ago. Selling, general~~2023 and ~~administrative expenses as a percentage~~$28,929,000, or 86.9% of net sales decreased to 27.2% for the six months ended December 31, 2017 from 27.6% for the same period a year ago. The increase for the three months was due primarily to increased sales commissions. The increase in dollars for the six months was due primarily to increased sales commissions as well as increased accounting costs associated with the audit of the Company’s internal control procedures which was performed primarily during the quarter ended September 30, 2017. The audit became required when the Company’s public float exceeded $75,000,000 at December 31, 2016, resulting in the Company being classified as an Accelerated Filer and subject to additional compliance requirements under the Sarbanes-Oxley Act of 2002. The decrease as a percentage of sales for the six months is due primarily to the increase in net sales being proportionally greater than the increase in these expenses.

Interest expense, net for the three months ended December 31, 2017 increased by $4,000 to $22,000 as compared to $18,000 for the same period a year ago. Interest expense, net for the six months ended December 31, 2017 increased by $6,000 to $48,000 as compared to $42,000service revenues, for the same period a year ago. The increase in ~~interest~~gross profit in dollars on equipment sales for the nine months ended March 31, 2023 was primarily the result of the increase in revenues as described above, which improved overhead absorption rates, increased availability and lower costs of components and transportation as compared to the same period last year as well as a favorable shift in product mix the Company’s Alarm Lock brand door locking products, which typically have higher margins. These factors were mostly offset by the lower margins realized during the first two quarters of fiscal 2023 which resulted, in part, The decrease in gross profit as a percentage of equipment sales was primarily the result of the sale of the remaining portion of finished goods that were in opening inventory that contained certain higher priced components as disclosed in the Form 10-Q/A for the period ending September 30, 2022. The Company purchased these components at a significant premium during the supply chain interruptions during the latter part of fiscal 2022 in order to continue to supply the Company’s communication devices that led to the creation of recurring service revenues for the Company. The effect of these higher-priced components on the nine months ended March 31, 2023 was partially offset by the higher sales volume during this period as compared to the same period a year ago. The increase in gross margin on service revenues was due primarily to increased service revenues relating to the Company’s fire radios, which have higher monthly selling prices than the Company’s intrusion radios.

Research and development expenses for the three months ended March 31, 2023 increased $305,000 to $2,314,000, or 5.3% of net sales, as compared to $2,009,000, or 5.6% of net sales, for the same period a year ago. Research and development expenses for the nine months ended March 31, 2023 increased $1,046,000 to $6,964,000, or 5.6% of net sales, as compared to $5,918,000, or 5.9% of net sales, for the same period a year ago. The increase in dollars was due primarily to salary increases and additional staff.

Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2023 remained relatively consistent at $8,425,000 as compared to $8,442,000 for the same period a year ago. SG&A expenses as a percentage of net sales decreased to 19.4% for the three months ended March 31, 2023 as compared to 23.5% for the same period a year ago. The decrease as a percentage of net sales was due primarily to the increase in net sales without the need to increase to increase SG&A expenses. SG&A expenses for the nine months ended March 31, 2023 increased by $736,000, or 3.1%, to $24,719,000 from $23,983,000 for the same period a year ago. SG&A expenses as a percentage of net sales decreased to 19.7% for the nine months ended March 31, 2023 as compared to 23.9% for the same period a year ago. The increase in dollars resulted primarily from increases in expenses relating to the Company's President and Chairman and the Company’s Executive Vice President and Chief Financial Officer selling shares of our Common stock in an underwritten secondary public offering, which is discussed more fully in Note 11 to the Condensed Consolidated financial statements, and credit card processing fees related to our monthly recurring service revenues. The decrease as a percentage of net sales was due primarily to the increase in net sales as partially offset by the aforementioned increase in expense dollars.

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Interest and other income (expense), net for the three months ended March 31, 2023 increased by $614,000 to income of $437,000 as compared to expense of $177,000 for the same period a year ago. Interest and other income (expense), net for the nine months ended March 31, 2023 increased by $623,000 to income of $521,000 as compared to expense of $102,000 for the same period a year ago. The increases in income for the three and ~~six~~nine months was primarily due to interest income on certificates of deposits purchased during the nine months ended ~~December~~March 31, ~~2017~~2023.

Gain on extinguishment of debt resulted from ~~an increase~~a one-time gain in ~~interest rates~~the nine months ended March 31, 2022 which resulted from the forgiveness of the Company’s PPP loans as ~~partially offset by reduced outstanding debt.~~

described in Note 8 to the condensed consolidated financial statements.

The Company’s provision for income taxes for the three months ended ~~December~~March 31, ~~2017 decreased~~2023 increased by ~~$278,000~~$296,000 to ~~a benefit of $89,000~~$1,428,000 as compared to ~~a provision of $189,000~~$1,132,000 for the same period a year ago. The ~~Company’s provision for income taxes for the six months ended December 31, 2017 decreased by $259,000 to $54,000 as compared to $313,000 for the same period a year ago. The change~~increase in the provision for income taxes for the three months ended March 31, 2023 was ~~caused~~ primarily ~~by recent changes~~due to higher taxable income in the ~~Federal tax code. As a result, the~~U.S. The Company’s effective rate for income tax was ~~(8)%~~13.0% and ~~18%~~25.7% for the three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016, respectively and 2% and 18%~~2022, respectively. The Company’s provision for income taxes for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 increased by $704,000 to $2,475,000 as compared to $1,771,000 for the same period a year ago. The increase in the provision for income taxes for the nine months ended March 31, 2023 was primarily due to higher taxable income in the U.S. The Company’s effective rate for income tax was 13.0% and ~~2016,~~12.8% for the nine months ended March 31, 2023 and 2022, respectively.

Net income ~~increased by $376,000 to $1,233,000 or $0.07 per diluted share~~ for the three months ended ~~December~~March 31, ~~2017~~2023 increased by $6,276,000 to $9,549,000 or $0.26 per diluted share as compared to ~~$857,000~~$3,273,000 or ~~$0.05~~$0.09 per diluted share for the same period a year ago. Net income for the nine months ended March 31, 2023 increased by ~~$698,000~~$4,500,000 to ~~$2,123,000~~$16,562,000 or ~~$0.11~~$0.45 per diluted share ~~for the six months ended December 31, 2017~~ as compared to ~~$1,425,000~~$12,062,000 or ~~$0.08~~$0.33 per diluted share for the same period a year ago. The ~~change~~increase in net income for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023 was primarily due to the items described above.

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Liquidity and Capital Resources

During the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2023, the Company utilized a portion of its cash ~~generated from operations~~balance at June 30, 2022 ($~~2,345,000~~32,732,000 of ~~$2,824,000)~~$41,730,000) to purchase marketable securities and other investments ($30,185,000) and property, plant and equipment ($~~651,000), re-pay outstanding debt ($1,500,000)~~2,547,000). The securities and ~~repurchase~~investments consist of money market accounts, CD’s and time deposits. During the nine months ended March 31, 2023, the Company ~~common stock ($194,000).~~generated cash flows from operations of $12,416,000. The Company believes its current working capital, cash flows from operations and its revolving credit agreement will be sufficient to fund the Company’s operations through the next twelve months.

Accounts receivable at ~~December~~March 31, ~~2017~~2023 decreased ~~$2,914,000~~by $5,048,000 to ~~$17,361,000~~$24,170,000 as compared to ~~$20,275,000~~$29,218,000 at June 30, ~~2017.~~2022. This decrease iswas primarily the result of the ~~lower~~higher sales volume of equipment during the quarter ended ~~December 31, 2017~~June 30, 2022, which is typically the Company’s highest, as compared to the quarter ended ~~June 30, 2017, which is typically~~March 31, 2023. In addition, sales of the Company’s ~~highest.~~

radio communication devices were unusually high in the month of June 2022 due to the Company fulfilling backorders of these products which had built up during the world-wide supply chain difficulties. Sales of these products were at more normal levels in the month of March 2023.

Inventories, which include both current and non-current portions, increased by $899,000 to $50,685,000 at ~~December~~March 31, ~~2017 increased $1,287,000 to $31,866,000~~2023 as compared to ~~$30,579,000~~$49,786,000 at June 30, ~~2017. This~~2022. The increase iswas due primarily ~~the result~~to a build-up of inventory of the Company’s ~~level-loading its production output throughout~~radio products in order to mitigate potential supply chain interruptions of these products. The increase was also due to the ~~year, whereas the Company’s sales are typically highest in the fourth quarter. This was partially offset by~~ongoing shortages of certain component parts and the Company ~~selling inventory of its recently introduced products. Inventory levels~~purchasing large quantities of these ~~products had been increased in~~hard to source component parts when they become available. As these challenges have begun to subside, the ~~fourth quarter of fiscal 2017 in anticipation of customer demand.~~

Company believes its inventory levels will decrease.

Accounts payable and accrued expenses, ~~other than accrued~~not including income taxes payable, decreased ~~$1,643,000~~by $7,129,000 to ~~$8,541,000~~$17,496,000 as of ~~December~~March 31, ~~2017~~2023 as compared to ~~$10,184,000 at~~$24,625,000 as of June 30, ~~2017.~~2022. This decrease was primarily due ~~primarily~~to a decrease in the Company’s accrued refund liability, which is explained in Note 2 to the ~~inventory increase~~Notes to the Company’s Condensed Consolidated Financial Statements, accrued employee compensation, and accounts payable, which relates to the Company reducing purchases of component parts in the ~~fourth~~latter part of the quarter ofended March 31, 2023 after building up its inventory in fiscal ~~2017 as described above.~~

2022.

As of ~~December~~March 31, ~~2017,~~2023 and 2022, long-term debt consisted of a revolving line of credit ~~facility~~ of $11,000,000 (“Revolver Agreement”) which expires in June ~~2021. As of December 31, 2017, the Company had $2,000,000 in~~2024. There was no outstanding ~~borrowings and $9,000,000 in availability~~balance under the ~~Agreement.~~Revolver Agreement at March 31, 2023 and June 30, 2022. The ~~Company’s long-term debt is described more fully in Note 6 to the condensed consolidated financial statements. The Agreement~~revolving credit facility contains various restrictions and covenants including, among others, restrictions on borrowings and compliance with certain financial ratios, as defined in the ~~restated~~ agreement.

The Company’s long-term debt is described more fully in Note 8 to the condensed consolidated financial statements.

As of ~~December~~March 31, ~~2017~~2023, the Company had no material commitments for capital expenditures or inventory purchases other than purchase orders issued in the normal course of business. In addition, the Company’s balance sheet reflects a refund liability of $4,841,000 as of March 31, 2023 for customer returns and promotional credits which is more fully discussed in Note 2 to the Condensed Consolidated Financial Statements.

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

The Company's principal financial instrument is long-term debt (consisting of a revolving credit facility) that provides for interest based on the prime rate or LIBOR as described in the agreement. The Company is affected by market risk exposure primarily through the effect of changes in interest rates on amounts payable by the Company under ~~this~~these credit facility. At December 31, 2017, an aggregate principal amount of approximately $2,000,000 was outstanding under the Company's credit facility with a weighted average interest rate of approximately 2.5%. If principal amounts outstanding under the Company's credit facility remained at this level for an entire year and the interest rate increased or decreased, respectively, by 1% the Company would pay or save, respectively, an additional $20,000 in interest that year.

facilities.

All foreign sales transactions by the Company are denominated in U.S. dollars. As such, the Company has shifted foreign currency exposure onto its foreign customers. As a result, if exchange rates move against foreign customers, the Company could experience difficulty collecting unsecured accounts receivable, the cancellation of existing orders or the loss of future orders. The foregoing could materially adversely affect the Company's business, financial condition and results of operations. We are also exposed to foreign currency risk relative to expenses incurred in Dominican Pesos ("RD$"), the local currency of the Company's production facility in the Dominican Republic. The result of a 10% strengthening or weakening in the U.S. dollar to the RD$ would result in an annual increase or decrease in income from operations of approximately ~~$630,000.~~$885,000.

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ITEM 4: Controls and Procedures

(as Restated)

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the ~~SEC's~~SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding ~~management's~~management’s control objectives.

At the conclusion of the period ended ~~December~~March 31, ~~2017,~~2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. ~~The Company determined that it did not have effective disclosure controls and procedures as of December 31, 2017.~~ As disclosed in our Annual Report on Form 10-K for the year ended June 30, ~~2017, we~~2022, management initially identified two material weaknesses in internal control.

One material weakness in internal control related to ineffective information technology general controls (ITGCs) in the area of user access and lack of effective program change-management over certain information technology (IT) systems that support the Company’s financial reporting processes. Our business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. We believe that these control deficiencies were a result of: IT control processes lacking sufficient documentation and risk-assessment procedures to assess changes in the IT environment and program change management of personnel that could impact internal controls over financial reporting. The material weakness did not ~~have~~result in any identified misstatements to the financial statements and there were no changes to the previously released financial results as a result of this material weakness.

The second material weakness in internal control related to the reserve for excess and slow-moving inventory. This control deficiency was a result of a lack of effective ~~disclosure~~review and reconciliation controls over the forecasted sales and ~~procedures~~usage data. The material weakness did not result in a material misstatement to the financial statements, there were no changes to the previously released financial results as a result of this material weakness. Based on these material weaknesses, the Company’s management concluded that at June 30, ~~2017.~~

~~Management's review over its~~2022 the Company’s internal controls at the conclusion of fiscal 2017 identified conditions which they deemed to be material weaknesses, (as defined by standards established by the SEC and the Public Company Accounting Oversight Board): 1. The documentation of a key review control over ~~product shipments was not designed properly to evidence the operating effectiveness of the control, and a portion of the Company’s shipments~~financial reporting were not subjected to this review control due to in-process consolidation of warehouse operations. 2. Controls around subscription-based service revenue were not assessed at the transaction level because they are largely automated, but subjected only to management-level reasonableness review. 3. Management’s reviews of price lists and pricing discounts are not formally documented on a consistent basis, and 4. Review of system-based pricing for certain products and services was not performed to correct data entry errors, although no significant errors were detected. effective.

Management is currently designing and implementing additional controls and procedures to remediate these items and expects to complete these actions during fiscal ~~2018.~~2024. These actions include, but are not limited to, ~~retaining a different third-party consulting firm~~modifying its program change-management process over certain of its information technology (IT) systems that support the Company’s financial reporting processes as well as implementing changes to ~~assist~~its forecasted sales and usage data used in calculating its reserve for excess and slow-moving inventory.

In addition to the foregoing, during the Company’s closing of its books for the period ended June 30, 2023, management identified an additional material weakness related to the Company’s Cost of Goods Sold (“COGS”) and Inventory during the quarter ended March 31, 2023. COGS reflected in the ~~evaluation~~Company’s Original Form 10-Q was based on inventory costing as of June 30, 2022. However, in the period following June 30, 2022, substantial fluctuations occurred in material costs due to various macroeconomic factors. Our inventory costing process did not identify these fluctuations in a timely manner resulting in Inventory being overstated and ~~review~~COGS being understated and resulting in an overstated gross profit, operating income and net income for the three months ended March 31, 2023. While the Company has begun the process to take measures which it believes will remediate the underlying causes of this material weakness, there can be no assurance as to when the remediation plan will be fully developed and implemented and whether such measures will be effective. Until the Company’s ~~internal controls.~~remediation plan is fully implemented and effective, the Company will continue to devote time, attention and financial resources to these efforts.

During the three months ended ~~December~~March 31, ~~2017,~~2023, there were no changes in the ~~Company's~~Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the ~~Company's~~Company’s internal controls over financial ~~reporting. The Company does~~reporting except as described above. As of March 31, 2023 the Company’s controls over financial reporting were not ~~have effective disclosure controls and procedures as~~effective.

Table of ~~December 31, 2017.~~Contents

PART II: OTHER INFORMATION

~~Item 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

Information regarding the Company’s Risk Factors are set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2022. There has been no material change in the risk factors previously disclosed in the Company’s Form 10-K for the three months ended March 31, 2023 except for the following risk factor:

The Company faces risks related to the restatement of its previously issued condensed financial statements with respect to the first three quarters of fiscal year ended June 30, ~~2017 during the three months ended December 31, 2017.~~2023 (the “Affected Periods”).

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Period Total Number
of Shares
Purchased Average
Price
Paid per
Share Total Number of
Shares Purchased
as Part of
Publically
Announced Plans
or Programs Maximum
Number of Shares
that May Yet Be
Purchased Under
Plans or Programs

October 1, 2017 - October 31, 2017 — $ — — 354,185
November 1, 2017 – November 30, 2017 — $ — — 354,185
December 1, 2017 – December 31, 2017 22,600 $ 8.53 22,600 331,585

Total for the Quarter ended December 31, 2017 22,600 $ 8.53 22,600 331,585

As discussed in the Explanatory Note and in Note 1A to the condensed financial statements in this Form 10-Q/A , we determined to restate certain information in our previously issued condensed financial statements for the Affected Periods. As a result, we have become subject to a number of additional risks and uncertainties, which may affect investor confidence in the accuracy of our financial disclosures, including the following:

~~On September 16, 2014~~

•We will face litigation under the federal and state securities laws and other claims arising from the restatement. One such case has already been filed and we will likely face additional complaints. See Note 15-Subsequent Events. The cost of defending against those claims, the adequacy of our directors’ and officers’ liability insurance and the ultimate outcome of any such litigation cannot be predicted at this time

•The processes undertaken to effect the restatement may not be adequate to identify and correct all errors in our historical financial statements, and, as a result, we may discover additional errors and our financial statements remain subject to the risk of future restatement.

•The restatement has demonstrated an additional material weakness in our internal controls over financial reporting. The process of remediating that weakness and implementing new procedures and systems to correct the problems that led to the restatement will likely be time consuming and expensive and there can be no assurance how long that process will take or if the corrective measures will be successful. Furthermore, the implementation of those measures may result in an ongoing increase in administrative expenses which may adversely affect the Company’s ~~board~~profitability.

Table of directors authorized the repurchase of up to 1 million of the approximately 19.4 million shares of the Company’s common stock then outstanding. The repurchase will be made from time to time in the open market or in privately negotiated transactions subject to market conditions and the market price of the common stock.Contents

~~Item 6.~~

~~Exhibits~~

Item 6. Exhibits

~~31.1~~
31.1	Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Richard L. Soloway, Chairman of the Board and President
31.2
~~31.2~~		Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Kevin S. Buchel, ~~Senior~~Executive Vice President ~~of Operations~~ and ~~Finance~~Chief Financial Officer
32.1
~~32.1~~		Section 1350 Certifications
101.INS
~~101.INS~~		Inline XBRL Instance Document(the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH
~~101.SCH~~		Inline XBRL Taxonomy Extension Schema Document
101.CAL
~~101.CAL~~		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
~~101.LAB~~		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
~~101.PRE~~		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
~~101.DEF~~		Inline XBRL Taxonomy Extension Definition Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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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.

September 1, 2023

~~February 8, 2018~~NAPCO SECURITY TECHNOLOGIES, INC.

(Registrant)

~~NAPCO SECURITY TECHNOLOGIES, INC.~~
~~(Registrant)~~ By:

~~By:~~	/s/ RICHARD L. SOLOWAY

	Richard L. Soloway
	Chairman of the Board of Directors, President and Secretary
	(Chief Executive Officer)

~~By:~~
By:	/s/ KEVIN S. BUCHEL

	Kevin S. Buchel
	~~Senior~~ Executive Vice President ~~of Operations~~ and ~~Finance and Treasurer~~	Chief Financial Officer
	(Principal Financial and Accounting Officer)

	December 31, 2017 (unaudited)			June 30, 2017
	(in thousands, except for share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3,949		$	3,454
Accounts receivable, net of allowance for doubtful accounts of $175 and $155 at December 31, 2017 and June 30, 2017, respectively, and other reserves		17,361			20,275
Inventories, net		26,687			26,212
Prepaid expenses and other current assets		1,139			1,330

Total Current Assets		49,136			51,271

Inventories - non-current, net		5,179			4,367
Deferred income taxes		1,461			644
Property, plant and equipment, net		6,710			6,543
Intangible assets, net		7,731			7,916
Other assets		270			121

TOTAL ASSETS	$	70,487		$	70,862

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	4,488		$	5,653
Accrued expenses		2,177			2,209
Accrued salaries and wages		1,876			2,322
Accrued income taxes		976			289
Total Current Liabilities		9,517			10,473
Long-term debt, net of current maturities		2,000			3,500

Total Liabilities		11,517			13,973

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Common Stock, par value $0.01 per share; 40,000,000 shares authorized; 21,179,192 and 21,174,507 shares issued; and 18,826,742 and 18,844,657 shares outstanding, respectively		212			212
Additional paid-in capital		16,790			16,638
Retained earnings		53,894			51,771
		70,896			68,621
Less: Treasury Stock, at cost (2,352,450 and 2,329,850 shares, respectively)		(11,926	)		(11,732	)

TOTAL STOCKHOLDERS' EQUITY		58,970			56,889

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	70,487		$	70,862

	Options outstanding						Options exercisable
Range of exercise prices	Number outstanding		Weighted average remaining contractual life		Weighted average exercise price		Number exercisable		Weighted average exercise price

$4.29-$9.63		88,100		7.3	$	6.53		60,300	$	6.03
		88,100		7.3	$	6.53		60,300	$	6.03

	Three months ended December 31, (dollars in thousands)									Six months ended December 31, (dollars in thousands)
	2017			2016			% Increase/ (decrease)			2017			2016			% Increase/ (decrease)

Net sales	$	21,112		$	20,715			1.9	%	$	42,286		$	40,883			3.4	%

Gross profit		6,840			6,617			3.4	%		13,719			13,069			5.0	%
Gross profit as a % of net sales		32.4	%		31.9	%		1.6	%		32.4	%		32.0	%		1.3	%

Selling, general and administrative		5,674			5,553			2.2	%		11,494			11,289			1.8	%
Selling, general and administrative as a percentage of net sales		26.9	%		26.8	%		0.4	%		27.2	%		27.6	%		(1.4	)%

Operating income		1,166			1,064			9.6	%		2,225			1,780			25.0	%
Interest expense, net		22			18			22.2	%		48			42			14.3	%
Provision (benefit) for income taxes		(89	)		189			(147.1	)%		54			313			(82.7	)%

Net income		1,233			857			43.9	%		2,123			1,425			49.0	%

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publically Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs

October 1, 2017 - October 31, 2017		—	$	—		—		354,185
November 1, 2017 – November 30, 2017		—	$	—		—		354,185
December 1, 2017 – December 31, 2017		22,600	$	8.53		22,600		331,585

Total for the Quarter ended December 31, 2017		22,600	$	8.53		22,600		331,585