What changed in this filing

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Item 1. Financial Statements

2025-11-03 compared with 2025-05-05 · 317 added, 359 removed, 546 unchanged (55% of the section changed)

Financial Statements

Financial Statements (unaudited)

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

March 31, 2025

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2025

June 30, 2025

2 unchanged sentences

Cash and cash equivalents

Investments - other

Marketable securities

Accounts receivable, net of allowance for credit losses of $ 20 and $ 32 as of March 31, 2025 and June 30, 2024, respectively

Accounts receivable, net of allowance for credit losses of $ 24 and $ 25 as of September 30, 2025 and June 30, 2025, respectively

Income tax receivable

6 unchanged sentences

Operating lease - Right-of-use asset

Liabilities and Stockholders' Equity

Current Liabilities

2 unchanged sentences

Accrued salaries and wages

Dividend payable

Dividends payable

Accrued income taxes

Total Current Liabilities

5 unchanged sentences

Common Stock, par value $ 0.01 per share;

100,000,000 shares authorized as of March 31, 2025 and June 30, 2024;

100,000,000 shares authorized as of September 30, 2025 and June 30, 2025;

39,778,938 and 39,771,035 shares issued;

2 unchanged sentences

Retained earnings

Treasury Stock, at cost ( 4,114,614 and 2,893,715 shares as of March 31, 2025 and June 30, 2024, respectively)

Treasury Stock, at cost, 4,114,614 shares as of both September 30, 2025 and June 30, 2025

Accumulated other comprehensive income

4 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Three Months ended March 31,

(in thousands, except for share and per share data)

Equipment revenues

Service revenues

Cost of sales:

Equipment related expenses

Service-related expenses

Operating expenses:

Research and development

Selling, general, and administrative expenses

Total Operating Expenses

Operating Income

Other income:

Interest and other income, net

Income before Provision for Income Taxes

Provision for Income Taxes

Income per share:

Weighted average number of shares outstanding:

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Nine Months Ended March 31,

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months ended September 30,

(in thousands, except for share and per share data)

Equipment revenues

Service revenues

Cost of sales:

Equipment-related expenses

Service-related expenses

Equipment revenue

Service revenue

Total revenue

Cost of Revenue:

Cost of equipment revenue

Cost of service revenue

Total cost of revenue

Operating Expenses:

Research and development

Selling, general, and administrative expenses

Selling, general, and administrative

Total Operating Expenses

1 unchanged sentence

Other Income:

Interest and other income, net

Interest income, net

Other income, net

Income before Provision for Income Taxes

5 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Three Months ended March 31,

Nine Months Ended March 31,

Other comprehensive income, net of tax

Net change in unrealized gains on available-for-sale debt securities, net of taxes of $ 13 and $ 20 , respectively

Other comprehensive income, net of tax

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months ended September 30,

Other comprehensive income

Net change in unrealized gains on available-for-sale debt securities, net of taxes of $ 13

Total other comprehensive income

Comprehensive income

See accompanying notes to condensed consolidated financial statements.

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (unaudited)

Nine months ended March 31, 2025 (in thousands, except for share data)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

Three months ended September 30, 2025 (in thousands, except for share data)

Treasury Stock

4 unchanged sentences

Stock options exercised

Purchase of treasury shares

Cash dividend ($ .14 per share)

Other comprehensive income

Balances at September 30, 2025

( 4,114,614 )

Other comprehensive income, net of tax

Stock-based compensation expense

Purchase of treasury shares

Cash dividend ( $ .125 per share)

Balances at December 31, 2024

( 3,369,614 )

Other comprehensive income, net of tax

Stock-based compensation expense

Purchase of treasury shares

Cash dividend ( $ .125 per share)

Balances at March 31, 2025

( 4,114,614 )

Nine months ended March 31, 2024 (in thousands, except share data)

Three months ended September 30, 2024 (in thousands, except share data)

Treasury Stock

3 unchanged sentences

Stock-based compensation expense

Cash dividend ( $ .08 per share)

Balances at September 30, 2023

( 2,893,715 )

Stock-based compensation expense

Stock options exercised

Cash dividend ( $ .08 per share)

Balances at December 31, 2023

( 2,893,715 )

Stock-based compensation expense

Stock options exercised

Purchase of treasury shares

Cash dividend ($ .125 per share)

Balances at March 31, 2024

Balances at September 30, 2024

( 3,086,967 )

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months ended March 31,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months ended September 30,

(in thousands)

2 unchanged sentences

Depreciation and amortization

Interest (income) expense on other investments

Unrealized (gain) loss on marketable securities

Change in accrued interest on other investments

Unrealized gain on marketable securities

Realized gain on sales of marketable securities

Recovery of credit losses

11 unchanged sentences

Purchases of marketable securities

Proceeds from sales of marketable securities

Purchases of other investments

Redemption of other investments

Net Cash Provided by (Used in) Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES

Net Cash Provided by Investing Activities

Cash Flows from Financing Activates

Proceeds from stock option exercises

Cash paid for dividend

Cash paid for purchase of treasury shares

Dividends paid

Repurchase of common stock

Net Cash Used in Financing Activities

6 unchanged sentences

Non-Cash Investing and Financing Transactions

Cash dividends declared and not paid

Dividends declared and not paid

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

March 31, 2025

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

September 30, 2025

NOTE 1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies

Nature of Business :

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We offer a diversified array of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance 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.

These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold principally to independent distributors, dealers and installers of security equipment.

We have established a national network of trusted independent security dealers and integrators that are experts at selling, installing and supporting our various technologies.

These dealers and installers are dependent on our platform for communication services to our radio communicators and smart security devices, and they pay us a monthly fee for these services to operate and manage their businesses efficiently.

Basis of Presentation:

The consolidated financial statements include the accounts of Napco Security Technologies, Inc.

and its wholly-owned subsidiaries.

All inter-company balances and transactions have been eliminated in consolidation.

The accompanying unaudited Condensed Consolidated Financial Statements of Napco Security Technologies, Inc.

(Napco) have been prepared in accordance with U.S.

GAAP as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X.

have been prepared in accordance with U.S.

Generally Accepted Accounting Principles (“GAAP”) as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by U.S.

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Significant Accounting Policies :

Principles of Consolidation

The consolidated financial statements include the accounts of Napco Security Technologies, Inc.

and its wholly-owned subsidiaries.

All inter-company balances and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of financial statements in conformity with 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.

Use of Estimates

The preparation of financial statements in conformity with 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.

We continuously evaluate our estimates and judgments based on historical experience, as well as other factors that we believe to be reasonable under the circumstances.

3 unchanged sentences

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 and cash equivalents, certificates of deposits, marketable securities, current receivables and payables and certain other short-term financial instruments approximate their fair value as of March 31, 2025 and June 30, 2024 due to their short-term maturities.

Cash and Cash Equivalents and Investments – other

The carrying amount of cash and cash equivalents, certificates of deposits, marketable securities, current receivables and payables and certain other short-term financial instruments approximate their fair value as of September 30, 2025 and June 30, 2025 due to their short-term maturities.

The fair value of debt for footnote disclosure purposes, including current maturities, if any, is estimated using recently quoted market prices of the instrument, or if not available, a discounted cash flow analysis based on the estimated current incremental borrowing rates for similar types of instruments.

Cash and Cash Equivalents

All financial instruments purchased with an original maturity of three months or less at the time of purchase are considered cash equivalents.

2 unchanged sentences

Investments that are classified as cash equivalents are carried at cost, which approximates fair value.

Certificate of deposits with an original maturity greater than three months are classified as Investments – other.

Cash and cash equivalents include approximately $ 59,685,000 of short-term time deposits money market funds as of March 31, 2025.

Cash and cash equivalents include approximately $ 46,518,000 of short-term time deposits, consisting of certificates of deposit totaling $ 5,402,000 and $ 41,116,000 in a money market fund as of June 30, 2024.

Cash and cash equivalents include approximately $ 62,196,000 and $ 48,249,000 of short-term time deposits money market funds as of September 30, 2025, and June 30, 2025.

The Company classifies these highly liquid investments with original maturities of three months or less as cash equivalents.

Certificates of deposit with an original maturity greater than three months are classified as Investments-other.

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

March 31, 2025

September 30, 2025

June 30, 2025

Money Market Fund

Certificate of Deposits

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

March 31, 2025

June 30, 2024

Certificate of Deposits

Certificates of deposit are recorded at the original cost plus accrued interest.

There were no certificate of deposits outstanding at March 31, 2025.

The Company’s certificates of deposits as of June 30, 2024 consist of the following (in thousands):

June 30, 2024

Balance Sheet Classification

Interest Rate

Maturity Date

Carrying Value

Cash and Cash Equivalents

Investments - other

4.55 % - 4.75 %

7/25/2024 - 10/24/2024

The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of March 31, 2025 and June 30, 2024.

The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of September 30, 2025.

The Company has not historically experienced any credit losses with balances in excess of FDIC limits.

6 unchanged sentences

In addition, specific adverse conditions are considered related to the financial health of, and business outlook for, the investee.

charge in other income (expense), net and a new cost basis in the investment is established.

If the Company plans to sell the security or it is more likely than not that the Company will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in other income (expense), net and a new cost basis in the investment is established.

If market, industry, and/or investee conditions deteriorate, we may incur future impairments.

4 unchanged sentences

Accounts Receivable

Accounts receivable is stated net of the reserves for credit losses of $ 20,000 and $ 32,000 as of March 31, 2025 and June 30, 2024, respectively.

Accounts receivable are stated net of the reserves for credit losses of $ 24,000 and $ 25,000 as of September 30, 2025 and June 30, 2025, respectively.

In accordance with ASU No.

1 unchanged sentence

Such allowance is based on the credit losses expected to arise over the life of the asset which includes consideration of past events and historical loss experience, current events and also future events based on our expectation as of the balance sheet date.

Receivables are written off when the Company determined that such receivables are deemed uncollectible.

Receivables are written off when the Company determines that such receivables are deemed uncollectible.

The Company pools its receivables based on similar risk characteristics in estimating its expected credit losses.

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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.

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.

4 unchanged sentences

Intangible assets consisted of the follows (in thousands):

March 31, 2025

September 30, 2025

June 30, 2025

Customer relationships

Amortization expense for intangible assets subject to amortization was approximately $ 79,000 and $ 84,000 for the three months ended March 31, 2025 and 2024, respectively.

Amortization expense for intangible assets subject to amortization was approximately $ 236,000 and $ 253,000 for the nine months ended March 31, 2025 and 2024, respectively.

Amortization expense for intangible assets subject to amortization was approximately $ 74,000 and $ 79,000 for the three months ended September 30, 2025 and 2024, respectively.

Amortization expense for each of the next five fiscal years is estimated to be as follows:

4 unchanged sentences

and 2031 - $ 202,000 .

The weighted average remaining amortization period for intangible assets was 14.3 years and 14.8 years at March 31, 2025 and June 30, 2024, respectively.

The weighted average remaining amortization period for intangible assets was 13.9 years and 14.1 years at September 30, 2025 and June 30, 2025, 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.

Revenue from contracts with customers 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.

Revenue from all sales types is recognized at the transaction price, which is the amount we expect to be entitled to in exchange for transferring goods or providing services.

Equipment Revenue

10 unchanged sentences

The services are billed monthly, and customers have the right to cancel the cellular communication services at any time, however the contract with the customer does not provide for a refund.

Cost of Sales

Equipment Cost of Sales

Equipment cost of sales is primarily comprised of direct materials and supplies consumed in the manufacturing of products, as well as manufacturing labor, depreciation expense and direct and indirect overhead expenses necessary to acquire and convert the purchased materials and supplies into finished products.

Service Cost of Sales

Service cost of sales includes the cost of operating our network operations center to manage and deliver telecommunication services.

Cost of Revenue

Cost of Equipment Revenue

Cost of equipment revenue is primarily comprised of direct materials and supplies consumed in the manufacturing of products, as well as manufacturing labor, depreciation expense and direct and indirect overhead expenses necessary to acquire and convert the purchased materials and supplies into finished products.

Cost of Service Revenue

Cost of service revenue includes the cost of operating our network operations center to manage and deliver telecommunication services.

Shipping and Handling Sales and Costs

The Company records the amount billed to customers for shipping and handling in net sales ($ 91,000 and $ 93,000 in the three months ended March 31, 2025 and 2024, respectively, and $ 261,000 and $ 279,000 in the nine months ended March 31, 2025 and 2024, respectively);

and classifies the costs associated with these sales in cost of sales ($ 330,000 and $ 421,000 in the three months ended March 31, 2025 and 2024, respectively and $ 1,073,000 and $ 1,181,000 in the nine months ended March 31, 2025 and 2024, respectively).

The Company records the amount billed to customers for shipping and handling in net sales ($ 142,000 and $ 89,000 in the three months ended September 30, 2025 and 2024, respectively) and classifies the costs associated with these sales in cost of sales ($ 479,000 and $ 390,000 in the three months ended September 30, 2025 and 2024, respectively).

Advertising and Promotional Costs

Advertising and promotional costs are included in "Selling, General and Administrative" (“SG&A”) expenses in the consolidated statements of income and are expensed as incurred.

Advertising expense for the three months ended March 31, 2025 and 2024 was $ 526,000 and $ 395,000 , respectively.

Advertising expense for the nine months ended March 31, 2025 and 2024 was $ 2,332,000 and $ 1,852,000 , respectively.

Advertising expense for the three months ended September 30, 2025 and 2024 was $ 935,000 and $ 890,000 , 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 operating expenses in the consolidated statements of income.

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 deferred tax assets and liabilities of a change in tax rates is recognized in income in the 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.

Treasury Stock

Treasury stock is accounted for using the cost method and recorded as a reduction to Stockholders’ equity on the Consolidated Balance Sheets.

Incremental direct costs to purchase treasury stock are included in the cost of the shares acquired.

To determine the cost of treasury stock that is either sold or re-issued, we use the first in, first out method.

When treasury stock is re-issued at a price higher than its cost, the increase is recorded in additional paid-in capital on the Consolidated Balance Sheets.

When treasury stock is re-issued at a price lower than its cost, the decrease is recorded in additional paid-in capital to the extent that there are previously recorded increases to offset the decrease.

Any decreases in excess of that amount are recorded in retained earnings on the Consolidated Balance Sheets.

The Company records provisions for income taxes in the consolidated financial statements using the asset and liability method.

Under this method, income tax liabilities or receivables are recognized for the current year, in addition deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled.

When necessary, a valuation allowance is recorded to reduce deferred tax assets to the net amount that is believed is more likely than not to be realized.

That assessment considers the recognition of deferred tax assets on a jurisdictional basis.

Accordingly, in assessing the future taxable income on a jurisdictional basis, the Company considers the effect of the transfer pricing policies on that income.

The Company recognizes tax benefits from uncertain tax positions only if it believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

The Company’s policy is to adjust these unrecognized tax benefits in the period when facts and circumstances change, such as the closing of a tax audit, the expiration of statute of limitation for a relevant taxing authority to examine a tax position, or when additional information becomes available.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on the financial condition and operating results.

The provision for income taxes includes the effects of any accruals that we believe are appropriate, as well as the related interest and penalties.

Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act introduced the global intangible low-taxed income (“GILTI”) provisions effective in 2018, which generally impose a tax on the net income earned by foreign subsidiaries of a U.S.

company in excess of a deemed return on their tangible assets.

The Company recognizes the tax on GILTI as a period cost when the tax is incurred.

Net Income per Share

1 unchanged sentence

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 March 31, 2025 and 2024 (in thousands, except share and per share data):

The following provides a reconciliation of information used in calculating the per share amounts for the three months ended September 30, 2025 and 2024 (in thousands, except per share data):

Weighted Average Shares

2 unchanged sentences

Stock Options

Options to purchase 125,000 and 0 shares of common stock were excluded for the three months ended March 31, 2025 and 2024, 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 period.

The following provides a reconciliation of information used in calculating the per share amounts for the nine months ended March 31, 2025 and 2024 (in thousands, except share and per share data):

Net Income per

Weighted Average Shares

Effect of Dilutive Securities:

Stock Options

Options to purchase 88,333 and 24,167 shares of common stock were excluded for the nine months ended March 31, 2025 and 2024, respectively, and were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive.

Options to purchase 120,000 and 20,000 shares of common stock were excluded for the three months ended September 30, 2025 and 2024, 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 period.

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Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility, among other factors.

Stock-based compensation costs of $ 386,000 and $ 266,000 were recognized for the three months ended March 31, 2025 and 2024, respectively.

Stock-based compensation costs of $ 1,143,000 and $ 876,000 were recognized for the nine months ended March 31, 2025 and 2024, respectively.

Stock-based compensation costs of $ 309,000 and $ 371,000 were recognized for the three months ended September 30, 2025 and 2024, respectively.

Foreign Currency

2 unchanged sentences

The day-to-day operations of all foreign subsidiaries are dependent on the economic environment of the U.S.

Therefore, no realized and unrealized gains and losses associated with foreign currency translation are recorded for the three and nine months ended March 31, 2025 or 2024.

Therefore, no realized and unrealized gains and losses associated with foreign currency translation are recorded for the three ended September 30, 2025 or 2024.

Segment Reporting

The Company operates and measures its results in one operating segment and therefore has one reportable segment:

the development, manufacture and sales of high-tech security devices and related cellular communication services for the devices.

The Company’s Chief Operating Decision Maker, (the President, Chief Operating Officer, and Chief Financial Officer) evaluates performance of the Company and makes decisions regarding the allocation of resources based on total Company results.

The Company has presented required geographical data in Note 14.

The Company operates its business under one operating segment, which is also its reportable segment.

The Company's Chief

Operating Decision maker (“CODM”), who is our President and Chief Operating Officer, reviews financial information presented at

the consolidated level and decides how to allocate resources based on financial metrics, including net income.

The measure of

segment assets is reported on the balance sheet as total consolidated assets.

The CODM uses such financial metrics, including net

income, to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits or allocate to other

parts of the organization, such as working capital needs, mandatory and discretionary capital expenditures or other growth

opportunities that may arise that are in the Company’s best interest and the best interest of the stockholders.

See Note 14 – Segment and geographical data for additional accounting policies and disclosures.

The Company determines at contract inception if an arrangement is a lease, or contains a lease, of an identified asset for which the Company has the right to obtain substantially all of the economic benefits from its use and the right to direct its use.

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See Note 13 – Commitments and Contingencies;

Leases for additional accounting policies and disclosures.

for additional accounting policies and disclosures.

Legal and Other Contingencies

4 unchanged sentences

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The update expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.

It further requires disclosure of the amount and description of its composition for other segment items, and interim disclosures of both a reportable segment’s profit or loss and assets.

The guidance requires disclosure of the title and position of the chief operating decision maker and how reported measures of segment profit or loss are used to assess performance and allocate resources.

This pronouncement is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative , which modifies the disclosure or presentation requirements of a variety of Topics in the Codification.

Among the various codification amendments, Topic 470 Debt is applicable to the Company which requires the disclosure of amounts, terms and weighted-average interest rates of unused lines of credit.

The effective date is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirement by that date, with early adoption prohibited.

The adoption of this new standard will not have a material impact on our financial statements and related disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes:

Improvements to Income Tax Disclosures , which requires on an annual basis to (1) disclose specific categories in the rate reconciliation, (2) provide additional information for reconciling items that meet a quantitative threshold, and (3) income taxes paid disaggregated by jurisdiction.

This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact that this guidance may have on its financial statements and related disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement:

Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses , which improves disclosure requirements and mandates enhanced transparency about the types of expenses in commonly presented expense captions in financial statements.

This guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted and is effective on either a prospective basis or retrospective basis.

The Company is currently evaluating the impact that this guidance may have on our financial statements and related disclosures.

In July 2025, the FASB issued ASU No.

2025-05 Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends the manner in which credit losses for accounts receivable and contract assets are determined.

For public companies, the guidance introduces a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets.

Under this expedient, entities may assume that conditions existing at the balance sheet date will persist for the remaining life of the asset, which simplifies the estimation process by eliminating the need to forecast future economic conditions for these short-term assets.

This guidance is effective for fiscal years beginning after December 15, 2025, with early adoption permitted.

The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.

In September 2025, the FASB issued ASU No.

2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting tor Internal-Use Software.

The amendments update the framework for recognizing and disclosing costs related to software developed for internal use, including costs associated with website development.

The amendments are effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual periods.

Early adoption is permitted as of the beginning of an annual reporting period.

The Company is currently evaluating the impact of this guidance on its financial statements and related disclosures.

The Company is evaluating other pronouncements recently issued but not yet adopted.

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Sales to unaffiliated customers are primarily shipped from the United States.

As of March 31, 2025 and June 30, 2024, the Company included refund liabilities of approximately $ 4,973,000 and $ 6,295,000 , respectively, in current liabilities.

As of March 31, 2025 and June 30, 2024, the Company included return-related assets of approximately $ 1,215,000 and $ 1,586,000 , respectively, in other current assets.

As a percentage of gross sales, returns, rebates and allowances were 6 % for both the three months ended March 31, 2025 and 2024, respectively.

As a percentage of gross sales, returns, rebates and allowances were 7 % and 6 % for the nine months ended March 31, 2025 and 2024, respectively.

As of September 30, 2025 and June 30, 2025, the Company included refund liabilities of approximately $ 4,288,000 and $ 4,790,000 , respectively, in current liabilities.

As of September 30, 2025 and June 30, 2025, the Company included return-related assets of approximately $ 1,043,000 and $ 1,152,000 , respectively, in other current assets.

As a percentage of gross sales, returns, rebates and allowances were 5 % and 9 % for the three months ended September 30, 2025 and 2024, respectively.

The Company disaggregates revenue from contracts with customers into major product lines.

2 unchanged sentences

Following is the disaggregation of revenues based on major product lines (in thousands):

Three months ended March 31,

Nine months ended March 31,

Three months ended September 30,

Major Product Lines:

3 unchanged sentences

NOTE 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 that comprised of 16 % and 13 % of the accounts receivable balance as of March 31, 2025.

The Company had two customers that comprised of 17 % and 12 % of the accounts receivable balance as of June 30, 2024.

Sales to any customers did not exceed 10% of net sales during the three or nine months ended March 31, 2025 and 2024, respectively.

Financial instruments that potentially subject the Company to a concentration of credit risk mainly consist of cash equivalents, short-term investments and accounts receivable.

Our cash equivalents and short-term investments primarily consist of government securities and money market funds which are held and managed by high credit quality financial institutions.

The Company had two customers that comprised of 13 % and 11 % of the accounts receivable balance as of both September 30, 2025 and June 30, 2025.

Sales to any customers did not exceed 10% of net sales during the three months ended September 30, 2025 and 2024, respectively.

NOTE 4 – Fair Value Measurement

5 unchanged sentences

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company has evaluated the estimated fair value of financial instruments using available market information and

valuations as provided by third-party sources.

The Company has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources.

The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts.

The following table presents the Company’s assets that were measured at fair value on a recurring basis at March 31, 2025 and June 30, 2024, respectively:

March 31, 2025

The following table presents the Company’s assets that were measured at fair value on a recurring basis at September 30, 2025 and June 30, 2025, respectively (in thousands):

September 30, 2025

Cash equivalents

Treasury Securities

Money market funds

3 unchanged sentences

Cash equivalents

Certificate of deposits

Money market funds

Short-term investments

Certificate of deposits

Marketable securities

Treasury Securities

The Company’s investments classified as Level 1 are based on quoted prices that are available in active markets, as well as certificates of deposits and time deposits that are classified as Level 1 due to their short-term nature.

For the three and nine months ending March 31, 2025 and 2024, there were no transfers between Levels 1 and 2 investments and no transfers in or out of Level 3.

For the three ending September 30, 2025 and 2024, there were no transfers between Levels 1 and 2 investments and no transfers in or out of Level 3.

NOTE 5 – Marketable Securities

A summary of the fair value of the Company’s investment in marketable securities as of March 31, 2025 and June 30, 2024 is as follows:

March 31, 2025

A summary of the fair value of the Company’s investment in marketable securities as of September 30, 2025 and June 30, 2025 is as follows:

September 30, 2025

June 30, 2025

2 unchanged sentences

Investments in Equity Securities

The disaggregated net gains and losses on the equity securities recognized within the accompanying condensed consolidated statements of income for the three and nine months ended March 31, 2025 and 2024, are as follows (in thousands):

Three months ended March 31,

Nine months ended March 31,

The disaggregated net gains and losses on the equity securities recognized within the accompanying condensed consolidated statements of income for the three months ended September 30, 2025 and 2024, are as follows (in thousands):

Three months ended September 30,

Net gains recognized during the period on equity securities

Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date

The following tables summarize the Company’s investments in equity securities at March 31, 2025 and June 30, 2024, respectively (in thousands):

March 31, 2025

Unrealized gains recognized during the reporting period on equity securities still held at the reporting date

The following tables summarize the Company’s investments in equity securities at September 30, 2025 and June 30, 2025, respectively (in thousands):

September 30, 2025

June 30, 2025

2 unchanged sentences

Investments in Debt Securities

The Company had no investment in debt securities at June 30, 2024.

The following tables summarize the Company’s investments in debt securities at March 31, 2025 (in thousands):

The following tables summarize the Company’s investments in debt securities at September 30, 2025 and June 30, 2025 (in thousands):

September 30, 2025

Amortized Cost

3 unchanged sentences

Treasury Securities

The debt investments all mature within one year or less, and the Company did not recognize any credit or non-credit related losses related to its debt securities during the three and nine months ended March 31, 2025.

June 30, 2025

Amortized Cost

Unrealized Gains

Unrealized Losses

Aggregate Fair Value

Treasury Securities

The debt investments all mature within one year or less, and the Company did no t recognize any credit or non-credit related losses related to its debt securities during the three months ended September 30, 2025 and 2024.

NOTE 6 - Inventories

1 unchanged sentence

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

September 30,

Component parts

2 unchanged sentences

Classification of inventories:

The reserve for excess and slow-moving inventory, which reduces inventory in our consolidated balance sheets were $ 5,139,000 and $ 5,026,000 as of March 31, 2025 and June 30, 2024, respectively.

The reserve for excess and slow-moving inventory, which reduces inventory in our consolidated balance sheets were $ 5,281,000 and $ 5,515,000 as of September 30, 2025 and June 30, 2025, respectively.

NOTE 7 – Property, Plant, and Equipment

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

March 31, 2025

September 30, 2025

June 30, 2025

6 unchanged sentences

accumulated depreciation and amortization

Depreciation and amortization expense on property, plant, and equipment was approximately $ 493,000 and $ 454,000 for the three months ended March 31, 2025 and 2024, respectively.

Depreciation and amortization expense on property, plant, and equipment was approximately $ 1,469,000 and $ 1,374,000 for the nine months ended March 31, 2025 and 2024, respectively.

Depreciation and amortization expense on property, plant, and equipment was approximately $ 496,000 and $ 470,000 for the three months ended September 30, 2025 and 2024, respectively.

NOTE 8 - Income Taxes

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 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.

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, 2025 the Company recognized total pre-tax book income of $ 37,100,000 , comprised of $ 5,325,000 and $ 31,775,000 of domestic and foreign pre-tax book income, respectively.

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, 2025, the Company had accrued interest totaling $ 268,000 , as well as $ 754,000 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, 2025, additional tax liability and interest expense were accrued for in the amount of $ 54,000 and $ 50,000 , respectively.

The company has FIN 48 liabilities accrued due to historic Section 956 positions.

These positions would not be reversed until the earlier of when the statute of limitation lapses noting that Section 956 adjustments are subject to a 6-year period under the constructive dividend rules, or the position is effectively settled via an IRS audit.

Based on the tax returns filed in April of 2019, the six year statute of limitations would expire during Q4 of June 30, 2025.

The income tax provision is calculated using an estimated annual effective tax rate based upon estimates of annual income, permanent items, statutory tax rates and planned tax strategies in the various jurisdictions in which the Company operates, except that certain discrete items such as the resolution of uncertain tax positions and stock-based accounting income tax benefits are treated separately.

Income tax expense included on our accompanying consolidated statements of income is as follows:

Three months ended September 30,

Provision for income taxes (1)

Effective tax rate

(1) Net discrete income tax expense of $ 342,000 and $ 16,000 , are included in the provision for income taxes for the three months ended September 30, 2025 and 2024, respectively.

The difference between the U.S.

statutory tax rate of 21 % and the effective tax rate in both periods is primarily due to lower tax rates in foreign jurisdictions and the related effect of global intangible low-taxed income (“GILTI”), tax benefit of R&D credits, offset by state and local income taxes and certain nondeductible expenses income.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA").

The OBBBA preserves the 21 % U.S.

Federal statutory tax rate and makes a favorable change to the business interest expense limitation.

Further, the OBBBA also makes key elements of the Tax Cuts and Jobs Act permanent, including 100% bonus depreciation, domestic research cost expensing, and various expiring international provisions (with some modifications).

Pursuant to ASC 740, changes in tax rates and tax law are required to be recognized in the period in which the legislation is enacted.

The Company has completed its evaluation of the impact of this legislation and has determined that the OBBBA will defer the payment of a significant portion of our current federal tax but will not have a material impact on its Fiscal 2026 financial statements.

We file a consolidated U.S.

income tax return and tax returns in certain state and local and foreign jurisdictions.

As of March 31, 2025, fiscal years 2021 and forward are still open for examination, in addition to fiscal year 2018, which is subject to a six year statute of limitations.

As of September 30, 2025, fiscal years 2022 and forward are still open for examination.

In addition, the Company has a wholly-owned subsidiary which operates in a Free Zone in the Dominican Republic (“DR”) and is exempt from DR income tax.

NOTE 9 - Long-Term Debt

NOTE 9 - Debt

On February 9, 2024, the Company and its primary bank, HSBC Bank USA National Association (“HSBC”), agreed to amend and restate the existing Third Amended and Restated Credit Agreement (“Agreement”) dated June 29, 2012, as amended, between the Registrant and HSBC with the Fourth Amended and Restated Credit Agreement (“Amended Agreement”).

1 unchanged sentence

The Amended Agreement also increases the available revolving credit line from $ 11,000,000 to $ 20,000,000 and replaces the LIBOR benchmark rate with the Secured Overnight Financing Rate (SOFR) benchmark rate.

As of March 31, 2025 and June 30, 2024, the Company has no outstanding debt.

As of September 30, 2025 and June 30, 2025, the Company has no outstanding debt.

The Amended Agreement provides for a SOFR-based interest rate option of SOFR plus 1.2645 % to 1.3645 %, depending on the Fixed Charge Coverage Ratio, which is to be measured and adjusted quarterly, a prime rate-based interest rate option of the prime rate, as defined in the Amended Agreement, and other terms and conditions as more fully described in the Amended Agreement.

5 unchanged sentences

The Company follows ASC 718 (“Share-Based Payment”), which requires that all 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.

For the three months ended March 31, 2025 and 2024, the Company recorded non-cash compensation expense of $ 386,000 ($ 0.01 per basic and diluted share) and $ 266,000 ($ 0.01 per basic and diluted share), respectively, relating to stock-based compensation which are included in SG&A in the consolidated statements of income.

For the nine months ended March 31, 2025 and 2024, the Company recorded non-cash compensation expense of $ 1,143,000 ($ 0.03 per basic and diluted share) and $ 876,000 ($ 0.02 per basic and diluted share), respectively, relating to stock-based compensation which are included in SG&A in the consolidated statements of income.

For the three months ended September 30, 2025 and 2024, the Company recorded non-cash compensation expense of

$ 309,000 ($ 0.01 per basic and diluted share) and $ 371,000 ($ 0.01 per basic and diluted share), respectively, relating to stock-based compensation which are included in SG&A in the consolidated statements of income.

2012 Employee Stock Option Plan

5 unchanged sentences

An option granted under this plan shall vest in full upon a “change in control” as defined in the plan.

At March 31, 2025, 361,036 stock options were outstanding, 265,660 stock options were exercisable and no further stock options were available for grant under this plan after December 2022.

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

At September 30, 2025, 337,036 stock options were outstanding, 267,136 stock options were exercisable and no further stock options were available for grant under this plan after December 2022.

The following table reflects activity under the 2012 Employee Plan for the three months ended September 30:

Weighted average

10 unchanged sentences

Total intrinsic value of options exercisable

No stock options were exercised during the three months ended March 31, 2025.

A total of 2,000 stock options were exercised during the nine months ended March 31, 2025.

$ 54,000 cash was received from the option exercises during the nine months ended March 31, 2025.

The actual tax benefit realized for the tax deductions from option exercises during the nine months ended March 31, 2025 was $ 0 .

A total of 115,944 and 147,544 stock options were exercised during the three and nine months ended March 31, 2024.

77,944 of the 115,944 options that were exercised during the three months ended March 31, 2024 were settled by the Company withholding 26,002 from the shares issuable on exercise of the options.

109,544 of the 147,544 options that were exercised during the nine months ended March 31, 2024 were settled by the Company withholding 46,570 from the shares issuable on exercise of the options.

A total of 18,000 and 2,000 stock options were exercised during the three months ended September 30, 2025 and 2024, respectively.

All 18,000 stock options that were exercised during the three months ended September 30, 2025, were settled by the Company withholding 10,097 from the shares issuable on exercise of the options.

The withheld shares of common stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid.

For the remaining 38,000 stock options exercised during the three and nine months ended March 31, 2024.

$ 427,000 cash was received from the option exercises.

The actual tax benefit realized for the tax deductions from option exercises during both the three and nine months ended March 31, 2024 was $ 67,000 and $ 119,000 .

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at March 31, 2025:

No cash was received from the option exercises during the three months ended September 30, 2025.

$ 54,000 cash was received from the option exercises during the three months ended September 30 ,2024.

The actual tax benefit realized for the tax deductions from option exercises during the three months ended September 30, 2025 and 2024 was $ 48,000 and $ 0 , respectively.

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at September 30, 2025:

Options outstanding

8 unchanged sentences

$ 10.02 ‑ $ 26.94

As of March 31, 2025, there was $ 468,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan.

0 and 76,700 options vested during the three and nine months ended March 31, 2025.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2025 was $ 0 and $ 782,000 , respectively.

5,200 and 89,900 options vested during the three and nine months ended March 31, 2024.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 was $ 33,000 and $ 881,000 , respectively.

As of September 30, 2025, there was $ 83,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan.

7,500 and 9,100 options vested during the three months ended September 30,

2025 and 2024, respectively.

The total grant date fair value of the options vesting during the three months ended September 30, 2025 and 2024 was $ 100,000 and $ 112,000 , respectively.

2012 Non-Employee Stock Option Plan

4 unchanged sentences

An option granted under this plan shall vest in full upon a “change in control” as defined in the plan.

At March 31, 2025, 20,400 stock options were outstanding, 18,480 stock options were exercisable and no further stock options were available for grant under this plan after December 2022.

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

At September 30, 2025, 20,400 stock options were outstanding, 18,480 stock options were exercisable and no further stock options were available for grant under this plan after December 2022.

The following table reflects activity under the 2012 Non-Employee Plan for the three months ended September 30:

Weighted average

10 unchanged sentences

Total intrinsic value of options exercisable

No stock options were exercised during the three and nine months ended March 31, 2025 and 2024, respectively.

No cash was received from option exercises during the three and nine months ended March 31, 2025 and 2024, 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, 2025:

No stock options were exercised during the three months ended September 30, 2025 and 2024, respectively.

No cash was received from option exercises during the three months ended September 30, 2025 and 2024, 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 September 30, 2025:

Options outstanding

6 unchanged sentences

$ 4.35 - $ 22.93

As of March 31, 2025, there was $ 10,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan.

0 and 1,920 options vested during the three and nine months ended March 31, 2025, respectively.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2025 was $ 0 and $ 19,000 , respectively.

720 and 2,640 options vested during the three and nine months ended March 31, 2024, respectively.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 under this plan was $ 5,000 and 24,000 , respectively.

As of September 2025, there was no remaining unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan.

No options vested during the three months ended September 30, 2025 and 2024, respectively.

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.

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.

1 unchanged sentence

An option granted under this plan shall vest in full upon a “change in control” as defined in the plan.

At March 31, 2025, 64,900 stock options were outstanding, 62,200 stock options were exercisable and 4,000 further stock options were available for grant under this plan.

There were no options granted during the nine months ended March 31, 2025 and 2024.

At September 30, 2025, 64,900 stock options were outstanding, 62,200 stock options were exercisable and 4,000 further stock options were available for grant under this plan.

There were no options granted during the three months ended September 30, 2025 and 2024.

No options may be granted under this plan after December 2028.

The following table reflects activity under the 2018 Non-Employee Plan for the nine months ended March 31:

The following table reflects activity under the 2018 Non-Employee Plan for the three months ended September 30:

Weighted average

10 unchanged sentences

Total intrinsic value of options exercisable

No stock options were exercised during both the three and nine months ended March 31, 2025.

No cash was received from option exercises during both the three and nine months ended March 31, 2025, and the actual tax benefit realized for the tax deductions from option exercises was $ 0 .

A total of 1,500 and 3,100 stock options were exercised during the three and nine months ended March 31, 2024, respectively.

The 1,500 options that were exercised during the three months ended March 31, 2024 were settled by the Company withholding 792 from the shares issuable on exercise of the options.

The 3,100 options that were exercised during the nine months ended March 31, 2024 were settled by the Company withholding 1,532 from the shares issuable on exercise of the options.

The withheld shares of Common Stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid.

No cash was received from the option exercises during the three and nine months ended March 31, 2024.

The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2024 was $ 6,000 and $ 12,000 , respectively.

The following table summarizes information about stock options outstanding under the 2018 Non-Employee Plan at March 31, 2025:

No stock options were exercised during the three months ended September 30, 2025 and 2024.

No cash was received from option exercises during the three months ended September 30, 2025, and the actual tax benefit realized for the tax deductions from option exercises was $ 0 .

The actual tax benefit realized for the tax deductions from option exercises during the three months ended September 30, 2025 and 2024 was $ 0 for both periods.

The following table summarizes information about stock options outstanding under the 2018 Non-Employee Plan at September 30, 2025:

Options outstanding

6 unchanged sentences

$ 8.10 - $ 22.93

As of March 31, 2025, there was $ 14,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee Plan.

0 and 2,700 options vested during both the three and nine months ended March 31, 2025, respectively.

The total grant date fair value of the options vesting during both the three and nine months ended March 31, 2025 was $ 0 and $ 27,000 .

5,380 and 14,880 options vested during the three and nine months ended March 31, 2024, respectively.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 under this plan was $ 35,000 and $ 124,000 , respectively.

As of September 30, 2025, there was no remaining unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee Plan.

No options vested during the three months ended September 30, 2025 and 2024, respectively.

2020 Non-Employee Stock Option Plan

4 unchanged sentences

option granted under this plan shall vest in full upon a “change in control” as defined in the plan.

At March 31, 2025, 51,900 stock options were outstanding, 38,520 stock options were exercisable and 45,100 stock options were available for grant under this plan.

No options were granted during the nine months ended March 31, 2025 and 2024, respectively.

At September 30, 2025, 51,900 stock options were outstanding, 42,520 stock options were exercisable and 45,100 stock options were available for grant under this plan.

No options were granted during the three months ended September 30, 2025 and 2024, respectively.

No options may be granted under this plan after May 2030.

The following table reflects activity under the 2020 Non-Employee Plan for the nine months ended March 31:

The following table reflects activity under the 2020 Non-Employee Plan for the three months ended September 30:

Weighted average

10 unchanged sentences

Total intrinsic value of options exercisable

A total of 0 and 3,000 stock options were exercised during the three and nine months ended March 31, 2025, respectively.

3,000 stock options exercised during the nine months ended March 31, 2025 were settled by the company withholding 2,151 shares from the shares issuable on exercise of the options.

A total of 0 and 3,000 stock options were exercised during the three months ended September 30, 2025 and 2024, respectively.

3,000 stock options exercised during the three months ended September 30, 2024 were settled by the company withholding 2,151 shares from the shares issuable on exercise of the options.

The withheld shares of common stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid.

The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2025 was $ 0 and $ 7,000 , respectively.

No stock options were exercised during both the three and nine months ended March 31, 2024.

No cash was received from option exercises during either of the three and nine months ended March 31, 2024 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 2020 Non-Employee Plan at March 31, 2025:

The actual tax benefit realized for the tax deductions from option exercises during the three months ended September 30, 2025 and 2024 was $ 0 and $ 7,000 , respectively.

The following table summarizes information about stock options outstanding under the 2020 Non-Employee Plan at September 30, 2025:

Options outstanding

8 unchanged sentences

$ 11.40 - $ 30.71

As of March 31, 2025, there was $ 111,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan.

1,000 and 11,380 options vested during both of the three and nine months ended March 31, 2025 and 2024, respectively.

The total grant date fair value of the options vesting during both the three and nine months ended March 31, 2025 and 2024 was $ 16,000 and $ 129,000 , respectively.

As of September 30, 2025, there was $ 60,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan.

4,000 and 7,000 options vested during the three months ended September 30, 2025 and 2024, respectively.

The total grant date fair value of the options vesting during both the three months ended September 30, 2025 and 2024 was $ 53,000 and $ 79,000 , respectively.

2022 Employee Stock Option Plan

5 unchanged sentences

An option granted under this plan shall vest in full upon a “change in control” as defined in the plan.

At March 31, 2025, 130,000 stock options were outstanding, 28,000 stock options were exercisable and 820,000 stock options were available for grant under this plan.

No stock options were granted during the nine months ended March 31, 2025.

No stock options were granted during the three months ended March 31, 2024.

There were 10,000 options granted during the nine months ended March 31, 2024.

At September 30, 2025, 130,000 stock options were outstanding, 52,000 stock options were exercisable and 820,000 stock options were available for grant under this plan.

No options were granted during the three months ended September 30, 2025 and 2024, respectively.

No options may be granted under this plan after December 2032.

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:

Risk-free interest rates

Expected lives

Expected volatility

Expected dividend yields

The following table reflects activity under the 2022 Employee Plan for the nine months ended March 31:

The following table reflects activity under the 2022 Employee Plan for the three months ended September 30:

Weighted average

10 unchanged sentences

Total intrinsic value of options exercisable

No options were exercised during both the three and nine months ended March 31, 2025 and 2024, respectively.

No cash was received from option exercises during both the three and nine months ended March 31, 2025 and 2024 and the actual tax benefit realized for the tax deductions from option exercises was $ 0 .

The following table summarizes information about stock options outstanding under the 2022 Employee Plan at March 31, 2025:

No options were exercised during the three months ended September 30, 2025 and 2024, respectively.

No cash was received from option exercises during both the three months ended September 30, 2025 and 2024 and the actual tax benefit realized for the tax deductions from option exercises was $ 0 .

The following table summarizes information about stock options outstanding under the 2022 Employee Plan at September 30, 2025:

Options outstanding

8 unchanged sentences

$ 21.60 - $ 49.39

As of March 31, 2025, there was $ 1,676,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2022 Employee Plan.

0 and 2,000 options vested during the three and nine months ended March 31, 2025 and 2024, respectively.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2025 and 2024 under this plan was $ 19,500 , respectively.

As of September 30, 2025, there was $ 1,396,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2022 Employee Plan.

No options vested during the three months ended September 30, 2025 and 2024, respectively.

NOTE 11 – Stockholders’ Equity Transactions

The following tables summarizes information about dividends declared by the Company for the nine months ended March 31, 2025 and the fiscal year ended June 30, 2024:

The following tables summarizes information about dividends declared by the Company for the three months ended September 30, 2025 and the fiscal year ended June 30, 2025:

Dividend Declaration Date

2 unchanged sentences

Per Share Cash Dividend Amount

January 30, 2025

March 12, 2025

April 3, 2025

November 1, 2024

October 30, 2025

December 12, 2025

4 unchanged sentences

June 12, 2025

February 1, 2024

March 1, 2024

January 30, 2025

March 12, 2025

April 3, 2025

November 1, 2024

December 12, 2024

December 22, 2023

January 3, 2025

August 22, 2024

September 12, 2024

September 22, 2023

October 3, 2024

Common Share Repurchases

On September 16, 2014 the Company’s board of directors authorized the repurchase of up to 2 million of the approximately 38.8 million shares of the Company’s common stock then outstanding.

5 unchanged sentences

During the third quarter of the fiscal year ended June 30, 2025, the Company repurchased 745,000 shares of its outstanding common stock at a weighted average price of $ 25.22 .

Shares repurchased through the nine months ended March 31, 2025, are included in the Company’s Treasury Stock as of March 31, 2025.

Shares repurchased through the fiscal year ended June 30, 2025, are included in the Company’s Treasury Stock as of June 30, 2025.

The Company currently has available 359,741 shares that can be repurchased under this authorization.

The following tables summarizes information about shares repurchased by the Company for the nine months ended March 31, 2025:

None of the Company’s common stock was repurchased during the three months ended September 30, 2025.

The following tables summarizes information about shares repurchased by the Company for the fiscal year ended June 30, 2025:

Total Number of

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Total for the 9 months ended March 31, 2025

During the nine months ended March 31, 2025, certain employees and directors exercised stock options under the Company's 2012 Employee and 2020 Non-Employee Stock Option Plans totaling 5,000 shares.

Of the 5,000 shares exercised, 3,000 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.

During the three months ended September 30, 2025, certain employees and directors exercised stock options under the Company's 2012 Employee Stock Option Plans totaling 12,000 shares.

All of the 12,000 shares exercised 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 withheld by the Company was 6,576 and was based upon the aggregate fair market value on the date of exercise equal to the purchase price being paid.

There were no stock option exercises from certain employees and directors during the three months ended March 31, 2025.

During the three months ended September 30, 2024, certain employees and directors exercised stock options under the Company's 2012 Employee and 2020 Non-Employee Stock Option Plans totaling 5,000 shares.

Of the 5,000 shares exercised, 3,000 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 withheld by the Company was 2,151 and was based upon the aggregate fair market value on the date of exercise equal to the purchase price being paid.

NOTE 12 - 401(k) Plan

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employees and is qualified under Sections 401(a) and 401(k) of the Internal Revenue Code.

Company contributions to this plan are discretionary and totaled $ 73,000 and $ 72,000 for the three months ended March 31, 2025 and 2024, respectively.

Company contributions to this plan are discretionary and totaled $ 211,000 and $ 191,000 for the nine months ended March 31, 2025 and 2024, respectively.

Company contributions to this plan are discretionary and totaled $ 70,000 and $ 69,000 for the three months ended September 30, 2025 and 2024, respectively.

NOTE 13 - Commitments and Contingencies

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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.

For the three months ended March 31, 2025 and 2024 cash payments against operating lease liabilities totaled $ 86,000 and $ 57,000 , respectively.

For the nine months ended March 31, 2025 and 2024 cash payments against operating lease liabilities totaled $ 258,000 and $ 228,000 , respectively.

For the three months ended September 30, 2025 and 2024 cash payments against operating lease liabilities totaled $ 86,000 and $ 57,000 , respectively.

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

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Weighted-average discount rate

The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2025 (in thousands):

The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2025 (in thousands):

Year Ending June 30,

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Imputed interest

Operating lease expense totaled approximately $ 124,000 and $ 127,000 for the three months ended March 31, 2025 and 2024, respectively.

Operating lease expense totaled approximately $ 363,000 and $ 380,000 for the nine months ended March 31, 2025 and 2024, respectively.

On August 29, 2023, a purported class action, brought on behalf of a putative class who acquired publicly traded NAPCO securities between November 7, 2022 and August 18, 2023, was filed in the United States District Court for the Eastern District of New York against the Company, its Chairman and Chief Executive Officer, and its Chief Financial Officer.

Operating lease expense totaled approximately $ 124,000 and $ 95,000 for the three months ended September 30, 2025 and 2024, respectively.

The action, captioned Zornberg v.

NAPCO Security Technologies, Inc.

et al., asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with statements made in the Company’s quarterly reports and earnings releases during the period of November 7, 2022 through May 8, 2023.

et al., asserts claims under

Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with statements made in the Company’s quarterly reports and earnings releases during the period of November 7, 2022 through May 8, 2023.

A lead plaintiff was appointed in November 2023 and lead plaintiff filed an Amended Complaint on February 16, 2024.

The Amended Complaint added claims under Sections 11, 12, and 15 of the Securities Act of 1933 in connection with the secondary public offering in February 2023.

These additional claims are brought against the defendants named in the initial complaint, as well as the directors who allegedly signed the offering materials (prospectuses and registration statement in connection with the offering), and the underwriters for the offering.

The Company filed a motion to dismiss the Amended Complaint on April 26, 2024.

These additional claims were brought against the defendants named in the initial complaint, as well as the directors who allegedly signed the offering materials (prospectuses and a registration statement in connection with the offering), and the underwriters for the offering.

Defendants filed a motion to dismiss the Amended Complaint on April 26, 2024.

On April 11, 2025, the Court granted in part and denied in part the motion to dismiss.

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the remaining claims survived the motion to dismiss.

The Company intends to vigorously defend against the action.

On May 12, 2025, Defendants filed Answers to the Amended Complaint.

On September 29, 2025, the plaintiffs moved for class certification of both the Exchange Act and remaining Securities Act claims.

On October 17, 2025, pursuant to a joint letter and stipulation filed by all the parties, the Court dismissed the Securities Act claims with prejudice and certified a class with respect to the Exchange Act claims.

The Company believes it has meritorious defenses and intends to vigorously defend against the Action.

On November 26, 2024, a putative derivative lawsuit captioned Minzer v.

Soloway, et al., Case No.

2024-1218, was filed in the Court of Chancery in the State of Delaware against the Company’s Chairman and Chief Executive Officer, Chief Financial Officer, and certain current and former directors.

2024-1218, was filed in the Court of Chancery in the State of Delaware against the Company’s Chairman and Chief Executive Officer, former Chief Financial Officer (who is currently the President and Chief Operating Officer), and certain current and former directors.

The Company is a “Nominal Defendant” in the lawsuit.

The complaint alleges, among other things, that the defendants breached their fiduciary duties and aided and abetted breach of fiduciary duties by allowing the Company to remain with ineffective internal controls over financial reporting and inventory and by allowing for the dissemination of false and misleading financial information in public filings.

The complaint also brings breach of fiduciary duty and unjust enrichment claims in connection with stock sales by the Company’s Chairman and Chief Executive Officer and its Chief Financial Officer and seeks indemnity and contribution.

After the Company and the individual defendants moved to dismiss or stay the action, plaintiffs filed an Amended Complaint on June 12, 2025.

The Amended Complaint alleges, among other things, that the individual defendants breached their fiduciary duties and aided and abetted breach of fiduciary duties by allowing the Company to remain with ineffective internal controls over financial reporting and inventory and by allowing for the dissemination of false and misleading financial information in public filings.

The Amended Complaint also brings breach of fiduciary duty and unjust enrichment claims in connection with stock sales by the Company’s Chairman and Chief Executive Officer and its former Chief Financial Officer (who is currently the President and Chief Operating Officer) and seeks indemnity and contribution.

The Company’s status as a “Nominal Defendant” in the action reflects the fact that the lawsuit is maintained by the named plaintiff on behalf of the Company and that the plaintiff seeks damages on the Company’s behalf.

Defendants believe that there are substantial defenses to the claims asserted and filed a motion to dismiss and/or stay the case on February 28, 2025.

Plaintiff must file an opposition to Defendants’ motion or amend her complaint on or before June 12, 2025.

Defendants believe that there are substantial defenses to the claims asserted and filed a second motion to dismiss or stay the case on August 22, 2025.

On March 31, 2025, the Company received a subpoena from the Securities and Exchange Commission (“SEC”).

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The Company has produced, and will continue to produce documents, responsive to the SEC subpoena.

On April 25, 2025, a purported class action, brought on behalf of a putative class who acquired publicly traded NAPCO securities between February 5, 2024 and February 3, 2025, was filed in the United States District Court for the Eastern District of New York against the Company, its Chairman and Chief Executive Officer, and its Chief Financial Officer.

The action, captioned Patel v.

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et al., asserts securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with statements made in quarterly earnings releases and calls during the period of February 5, 2024 through February 3, 2025.

The Company intends to vigorously defend against the action.

The Court has not yet appointed a lead plaintiff.

The Company believes it has meritorious defenses and intends to vigorously defend against the Action.

With respect to all litigation and related matters, the Company records a liability when the Company believes it is probable that a liability has been incurred and the amount can be reasonably estimated.

As of the end of the period covered by this report, the Company has not recorded a liability for the matters disclosed in this note.

It is possible that the Company could be required to pay damages, incur other costs or establish accruals in amounts that could not be reasonably estimated as of the end of the period covered by this report.

As of the end of the period covered by this report, due to the early stage of the case the Company is not able to estimate any range of potential loss related to this matter and has not recorded any liability.

It is possible that the Company could be required to pay damages (in excess of insurance coverages), incur other costs or establish accruals in amounts that could not be reasonably estimated as of the end of the period covered by this report.

Employment Agreements

The Company is obligated under three employment agreements and one severance agreement with executive officers of the Company.

The employment agreements are with the Company’s CEO, Senior Vice President of Finance and Chief Accounting Officer (“SVP of Finance”) and the Senior Vice President of Engineering and Chief Technology Officer (“the SVP of Engineering”) and the severance agreement is with the Company’s President, Chief Operating Officer and Chief Financial Officer (“CFO”).

The Company is obligated under two employment agreements and one severance agreement.

The employment agreements are with the Company’s Chief Executive Officer (“CEO”) and the Company’s Executive Vice President of Engineering and Chief Technology Officer (“the EVP of Engineering”).

The severance agreement is with the Company’s President and Chief Operating Officer.

The employment agreement with the CEO provides for an annual salary of $ 1,019,000 , as adjusted for inflation;

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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 Finance expires in June 2025 and provides for an annual salary of $ 350,000 .

Upon the anniversary date, if terminated by the Company without cause, the SVP of Finance is entitled to severance of six months’ salary and continued company-sponsored health insurance for six months from the date of termination.

The employment agreement with the EVP of Engineering expires in August 2026 and provides for an annual salary of $ 476,000 , 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 President and CFO and provides for, if terminated by the Company without cause or within three months of a change in corporate control of the Company, severance of nine month’s salary, continued company-sponsored health insurance for six months from the date of termination and certain non-compete and other restrictive provisions.

NOTE 14 – Geographical Data

NOTE 14 – Segment and Geographical Data

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker.

We have one operating and reportable segment.

The Company’s CODM, (the President and Chief Operating Officer) evaluates performance of the Company and makes decisions regarding the allocation of resources based on total Company results.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

The consolidated net income is the measure of segment profit that is most consistent with U.S.

Segment profit is used in developing the overall strategy and during the annual budget process, as well as considered in budget-to-actual variances on a monthly basis when making decisions about the allocation of operating and capital resources.

The CODM is regularly provided with not only the consolidated expenses as noted on the face of the income statement, but also the significant segment expenses as below:

Three months ended September 30,

(in thousands)

Cost of revenue

Compensation-related expenses (1)

Commission expenses

Marketing, advertising and other promotional expenses

Research and development (excluding compensation related benefits)

Selling, general, and administrative expenses (2)

Interest and other (income), net

Provision for Income Taxes

Segment Profit

(1) Excludes stock based compensation.

(2) Excludes compensation-related expenses, commission expenses and marketing, advertising and other promotional expenses.

Geographic Information for Revenue

The Company is engaged in one major line of business:

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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.

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

Three months ended March 31,

Nine months ended March 31,

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.

The following table presents net sales by geographic area.

Three months ended September 30,

Sales to external customers:

United States

Total Net Sales

March 31, 2025

Geographic Information for Long-Lived Assets

Long-lived assets include property and equipment, net and operating lease right-of-use assets, net.

Our long-lived assets are based on the physical location of the assets.

The following table presents long-lived assets by geographic area.

September 30, 2025

June 30, 2025

Identifiable assets:

Long-lived assets:

United States

Dominican Republic

Total Identifiable Assets

(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, 2025 = $ 30,790 ;

June 30, 2024 = $ 33,584 ), operating lease right of use (March 31, 2025 = $ 5,261 ;

June 30, 2024 = $ 5,487 ) and fixed assets (March 31, 2025 = $ 4,112 ;

June 30, 2024 = $ 3,623 ) located at the Company’s principal manufacturing facility in the Dominican Republic.

Total Long-lived assets

NOTE 15 - Subsequent Events

The Company has evaluated subsequent events occurring after the end of the period covered by the condensed consolidated financial statements for events requiring recording or disclosure in the condensed consolidated financial statements.

On May 2, 2025 , the Company’s Board of Directors declared a cash dividend of $ .14 per share payable on July 3, 2025 to stockholders of record on June 12, 2025 .

On October 30, 2025 , the Company’s Board of Directors declared a cash dividend of $ .14 per share payable on January 2, 2026 , to stockholders of record on December 12, 2025 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements