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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 accountscredit losses of $175,000$107,000 and $131,000 as of December 31, 2017September 30, 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, 2017.2023, respectively. Our reserves for doubtful accounts and for returns and other allowancescredit 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

IntangibleLong-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 assetslives 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):

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):

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Amortization expense for intangible assets subject to amortization was approximately $84,000 and $90,000 for the three months ended September 30, 2023 and 2022, respectively. Amortization expense for each of the next five fiscal years is estimated to be as follows: 2024 - $336,000; 2025 - $315,000; 2026 - $297,000; 2027 - $283,000; and 2028 - $269,000. The weighted average remaining amortization period for intangible assets was 15.3 years and 15.5 years at September 30, 2023 and June 30, 2023, 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 evidenceprovides limited standard warranty for defective products, usually for a period of an agreement exists, (ii) there is a fixed24 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 priceother coupons or credits in limited circumstances. The Company establishes reserves for the Company's product or service, (iii) shipmentestimated returns, rebates and passagecredits 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 deliveredhistorical data. Changes to the customer pursuant to the terms of the sale. Revenues for servicesestimated 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

Table of gross sales, sales returns, rebates and allowances were 8% for the each of the six months ended December 30, 2017 and 2016, respectively.Contents

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 31, 2017September 30, 2023 and 20162022 was $462,000$761,000 and $498,000,$754,000, respectively. Advertising expense for the six months ended December 31, 2017 and 2016 was $1,103,000 and $1,172,000, respectively.

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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 developmentR&D expense for the three months ended December 31, 2017September 30, 2023 and 20162022 was $1,639,000$2,437,000 and $1,609,000,$2,428,000, respectively. Company-sponsored research and development expense for the six months ended December 31, 2017 and 2016 was $3,246,000 and $3,237,000, 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 theof a change in tax raterates is recognized in income in the three and six month periods ending December 31, 2017 whichperiod 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 Perper Share

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 31September 30, 2023 and 2022 (in thousands, except share and per share data):

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Options to purchase 8705,000 and 5,00062,500 shares of common stock were excluded for the three months ended December 31, 2017September 30, 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.

The following provides a reconciliationTable of information used in calculating the per share amounts for the six months ended December 31 (in thousands, except per share data):Contents

Options to purchase 435 and 5,000 shares of common stock for the six months ended December 31, 2017 and 2016, respectively, 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.

Stock-Based Compensation

The Company has established twofive share incentive programs as discussed in Note 7.

9.

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$307,000 and $65,000$477,000 were recognized for the three months ended December 31, 2017September 30, 2023 and 2016,2022, respectively. Stock-based compensation costs of $136,000 and $98,000 were recognized for six months ended December 31, 2017 and 2016, 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 assetsforeign operations are considered a direct and liabilitiesintegral part or extension of the Company’s operations. The day-to-day operations of all foreign subsidiaries are translated intodependent 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. TheDollar. Therefore, no realized and unrealized gains and losses associated with foreign currency translation as well as related other comprehensive income, were not significantare recorded for the either of the three and six months ended December 31, 2017 and 2016.

September 30, 2023 or 2022.

Comprehensive Income

For the three and six months ended December 31, 2017September 30, 2023 and 2016,2022, the Company'sCompany’s operations did not give rise to significantmaterial items includable in comprehensive income, which were not already included in net income. Accordingly, the Company'sCompany’s comprehensive income approximates its net income for all periods presented.