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Item 1. Financial Statements

2026-02-02 compared with 2025-11-03 · 186 added, 294 removed, 569 unchanged (46% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2025

December 31, 2025

June 30, 2025

3 unchanged sentences

Marketable securities

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

Accounts receivable, net of allowance for credit losses of $ 27 and $ 25 as of December 31, 2025 and June 30, 2025, respectively

Income tax receivable

20 unchanged sentences

Common Stock, par value $ 0.01 per share;

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

100,000,000 shares authorized as of December 31, 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 shares as of both September 30, 2025 and June 30, 2025

Treasury Stock, at cost, 4,114,614 shares as of both December 31, 2025 and June 30, 2025

Accumulated other comprehensive income

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months ended September 30,

Three Months ended December 31,

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

11 unchanged sentences

Operating Income

Other Income (expense):

Interest income, net

Other income (expense), net

Income before Provision for Income Taxes

Provision for Income Taxes

Income Per Share:

Weighted Average Number of Shares Outstanding:

See accompanying notes to condensed consolidated financial statements.

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Six Months Ended December 31,

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

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

Total Operating Expenses

Operating Income

Other Income:

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months ended September 30,

Three Months ended December 31,

Six Months Ended December 31,

Other comprehensive income

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

Net change in unrealized gains on available-for-sale debt securities

Tax effect on net change in unrealized gains on available-for-sale debt securities

Total other comprehensive income

3 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

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

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Six months ended December 31, 2025 (in thousands, except for share data)

Treasury Stock

2 unchanged sentences

( 4,114,614 )

Other comprehensive income, net of tax

Stock-based compensation expense

1 unchanged sentence

Cash dividend ($ .14 per share)

Other comprehensive income

Balances at September 30, 2025

( 4,114,614 )

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

Other comprehensive income, net of tax

Stock-based compensation expense

Cash dividend ($ .14 per share)

Balances at December 31, 2025

( 4,114,614 )

Six months ended December 31, 2024 (in thousands, except share data)

Treasury Stock

8 unchanged sentences

( 3,086,967 )

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 )

See accompanying notes to condensed consolidated financial statements

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months ended September 30,

Six Months ended December 31,

(in thousands)

5 unchanged sentences

Realized gain on sales of marketable securities

Recovery of credit losses

Charge (recovery) of credit losses

Change to inventory reserve

59 unchanged sentences

Fair Value of Financial Instruments

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 carrying amount of cash and cash equivalents, marketable securities, current receivables and payables and certain other short-term financial instruments approximate their fair value as of December 31, 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.

4 unchanged sentences

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

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.

Cash and cash equivalents include approximately $ 75,814,000 and $ 48,249,000 of short-term time deposits money market funds as of December 31, 2025, and June 30, 2025.

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

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

September 30, 2025

December 31, 2025

June 30, 2025

Money Market Fund

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 cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of December 31, 2025.

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

13 unchanged sentences

Accounts Receivable

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.

Accounts receivable are stated net of the reserves for credit losses of $ 27,000 and $ 25,000 as of December 31, 2025 and June 30, 2025, respectively.

In accordance with ASU No.

32 unchanged sentences

Intangible assets consisted of the follows (in thousands):

September 30, 2025

December 31, 2025

June 30, 2025

Customer relationships

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 intangible assets was approximately $ 74,000 and $ 79,000 for the three months ended December 31, 2025 and 2024, respectively and was approximately $ 149,000 and $ 157,000 for the six months ended December 31, 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 13.9 years and 14.1 years at September 30, 2025 and June 30, 2025, respectively.

The weighted average remaining amortization period for intangible assets was 13.7 years and 14.1 years at December 31, 2025 and June 30, 2025, respectively.

Revenue Recognition

10 unchanged sentences

Service Revenue

Service revenue is primarily generated from the sale of monthly cellular communication services to customers.

Service revenue is primarily generated from the sale of monthly cellular communication services.

Those sales predominantly contain a single performance obligation and revenue is recognized ratably with the delivery of cellular communication service over the related monthly period, and when ownership, risks and rewards transfer to the customer.

5 unchanged sentences

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 ($ 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).

Shipping and Handling Revenues and Costs

The Company records the amount billed to customers for shipping and handling in net revenue ($ 132,000 and $ 80,000 in the three months ended December 31, 2025 and 2024, respectively and $ 274,000 and $ 186,000 in the six months ended December 31, 2025 and 2024, respectively) and classifies the costs associated with these revenues in cost of sales ($ 365,000 and $ 353,000 in the three months ended December 31, 2025 and 2024, respectively and $ 844,000 and $ 743,000 in the six months ended December 31, 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 September 30, 2025 and 2024 was $ 935,000 and $ 890,000 , respectively.

Advertising expense for the three months ended December 31, 2025 and 2024 was $ 916,000 each period.

Advertising expense for the six months ended December 31, 2025 and 2024 was $ 1,851,000 and $ 1,806,000 , respectively.

Research and Development Costs

16 unchanged sentences

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 September 30, 2025 and 2024 (in thousands, except per share data):

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

Weighted Average Shares

2 unchanged sentences

Stock Options

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.

Options to purchase 20,000 and 120,000 shares of common stock were excluded for the three months ended December 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 six months ended December 31, 2025 and 2024 (in thousands, except per share data):

Net Income per

Weighted Average Shares

Effect of Dilutive Securities:

Stock Options

Options to purchase 70,000 shares of common stock were excluded for the both the six months ended December 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.

Stock-Based Compensation

The Company has established five share incentive programs as discussed in Note 10.

Stock-based awards exchanged for services are accounted for under the fair value method.

Accordingly, stock-based compensation cost is measured at the grant date based on the estimated fair value of the award.

The expense for awards is recognized over the requisite service period (generally the vesting period of the award).

The Company has elected to treat awards with only service conditions and with graded vesting as one award.

Consequently, the total compensation expense is recognized straight-line over the entire vesting period, so long as the compensation cost recognized at any date at least equals the portion of the grant date fair value of the award that is vested at that date.

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 $ 309,000 and $ 371,000 were recognized for the three months ended September 30, 2025 and 2024, respectively.

The Company measures stock-based compensation at the grant date based on the fair value of the award, and estimates the fair value of each option granted on the date of the grant using the Black-Scholes option-pricing model, which contains uncertainties and requires us to estimate the risk-free interest rate, expected term, expected stock price volatility and dividend yield.

The expected term for options granted is estimated using our historical experience, including information related to options we have granted.

The Company has elected to treat awards with only service conditions and with graded vesting as one award, and recognizes compensation costs for share-based awards on a straight-line basis, net of actual forfeitures, over the requisite service period of the award, usually the vesting period, which is generally four or five years .

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 ended September 30, 2025 or 2024.

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

Segment Reporting

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 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.

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.

33 unchanged sentences

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.

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.

13 unchanged sentences

The Company is engaged in the development, manufacture, and distribution of security products, encompassing access control systems, door security products, intrusion and fire alarm systems, alarm communication services, and video surveillance products for commercial and residential use.

The Company also provides wireless communication service for intrusion and fire alarm systems on a monthly basis.

The Company also provides wireless communication service, on a monthly basis, to dealers and installers of intrusion and fire alarm systems.

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

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

As of 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.

As of December 31, 2025 and June 30, 2025, the Company included refund liabilities of approximately $ 3,707,000 and $ 4,790,000 , respectively, in current liabilities.

As of December 31, 2025 and June 30, 2025, the Company included return-related assets of approximately $ 1,003,000 and $ 1,152,000 , respectively, in other current assets.

As a percentage of gross revenue, returns, rebates and allowances were 4 % for both the three months ended December 31, 2025 and 2024, respectively.

As a percentage of gross revenue, returns, rebates and allowances were 4 % and 7 % for the six months ended December 31, 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 September 30,

Three months ended December 31,

Six months ended December 31,

Major Product Lines:

5 unchanged sentences

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.

The Company had one customer that comprised 15 % and 13 % of the accounts receivable balance as of December 31, 2025 and June 30, 2025, respectively.

The Company had one additional customer that comprised 16 % accounts receivable balance as of December 31, 2025 and a different customer that comprised of 11 % accounts receivable balance as of June 30, 2025.

Sales to any customer did not exceed 10% of net revenues during the three and six months ended December 31, 2025 and 2024, respectively.

NOTE 4 – Fair Value Measurement

7 unchanged sentences

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 September 30, 2025 and June 30, 2025, respectively (in thousands):

September 30, 2025

The following table presents the Company’s assets that were measured at fair value on a recurring basis at December 31, 2025 and June 30, 2025, respectively (in thousands):

December 31, 2025

Cash equivalents

8 unchanged sentences

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 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.

For the three ending December 31, 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 September 30, 2025 and June 30, 2025 is as follows:

September 30, 2025

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

December 31, 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 months ended September 30, 2025 and 2024, are as follows (in thousands):

Three months ended September 30,

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

Three months ended December 31,

Six months ended December 31,

Net gains recognized during the period on equity securities

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

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 December 31, 2025 and June 30, 2025, respectively (in thousands):

December 31, 2025

June 30, 2025

2 unchanged sentences

Investments in Debt Securities

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

September 30, 2025

The following tables summarize the Company’s investments in debt securities at December 31, 2025 and June 30, 2025 (in thousands):

December 31, 2025

Amortized Cost

9 unchanged sentences

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.

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 and six months ended December 31, 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 $ 5,281,000 and $ 5,515,000 as of September 30, 2025 and June 30, 2025, respectively.

The reserve for excess and slow-moving inventory, which reduces inventory in our consolidated balance sheets were $ 5,388,000 and $ 5,515,000 as of December 31, 2025 and June 30, 2025, respectively.

NOTE 7 – Property, Plant, and Equipment

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

September 30, 2025

December 31, 2025

June 30, 2025

6 unchanged sentences

accumulated depreciation and amortization

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.

Depreciation and amortization expense on property, plant, and equipment was approximately $ 488,000 and $ 506,000 for the three months ended December 31, 2025 and 2024, respectively.

Depreciation and amortization expense on property, plant, and equipment was approximately $ 986,000 and $ 976,000 for the six months ended December 31, 2025 and 2024, respectively

NOTE 8 - Income Taxes

1 unchanged sentence

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

Three months ended September 30,

Three months ended December 31,

Six months ended December 31,

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.

(1) Net discrete income tax expense (benefit) $ 0 and ($ 44,000 ) and $ 342,000 and ($ 27,000 ) , are included in the provision for income taxes for the three and six months ended December 31, 2025 and 2024, respectively.

The difference between the U.S.

8 unchanged sentences

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

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

As of December 31, 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 - 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”).

The Amended Agreement extends the term of the Agreement from June 28, 2024, to February 9, 2029.

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 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.

The Company’s obligations under the Amended Agreement continue to be secured by substantially all its domestic assets, including but not limited to, deposit accounts, accounts receivable, inventory, equipment and fixtures and intangible assets.

In addition, the Company’s wholly owned subsidiaries, except for the Company’s foreign subsidiaries, have issued guarantees and pledges of all their assets to secure the Company’s obligations under the Amended Agreement.

All the outstanding common stock of the Company’s domestic subsidiaries and 65% of the common stock of the Company’s foreign subsidiaries have been pledged to secure the Company’s obligations under the Amended Agreement.

The Amended Agreement contains various restrictions and covenants including, but not limited to, compliance with certain financial rations, restrictions on payment of dividends and restrictions on borrowings.

The Company has available a $ 20 million revolving credit line (the “Line”) with its primary bank, HSBC Bank USA National Association (“HSBC”), which expires on February 9, 2029.

Borrowings on the Line bear interest at the Secured Overnight Financing Rate ( SOFR ) benchmark rate plus 1.2645 % to 1.3645 %, depending on the Fixed Charge Coverage Ratio (as defined), which is to be measured and adjusted quarterly.

As of December 31, 2025 and June 30, 2025, the Company has no outstanding borrowings on the Line.

The Line is secured by substantially all the Company’s domestic assets, including but not limited to, deposit accounts, accounts receivable, inventory, equipment and fixtures and intangible assets.

The Line contains various restrictions and covenants including, but not limited to, compliance with certain financial rations, restrictions on payment of dividends and restrictions on borrowings.

NOTE 10 - Stock Options

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 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.

The Company recognized stock-based compensation of $ 185,000 and $ 386,000 for the three months ended December 31, 2025 and 2024, respectively and recognized stock-based compensation of $ 494,000 and $ 757,000 for the six months ended December 31, 2025 and 2024, respectively.

Stock-based compensation is included in Selling, General and Administrative expense in the consolidated statements of income.

The Company has five stock option plans, two of the plans are available to grant stock options to employees (“Employee Plans”), and three of the plans are available to issue stock options to non-employee directors and consultants (“Non-Employee Plans”).

The Employee Plans provide for the Company to grant stock options, which are intended to qualify as incentive stock options (“ISOs”) or non-incentive stock options.

Plan participants who are granted ISOs and possess more than 10 % of the voting rights of the Company’s

outstanding common stock must be granted options with an exercise price of at least 110 % of the fair market value on the date of grant.

Options granted under the Employee Plans have a term of up to 10 years , from date of grant, at an exercise price equal to or greater than the fair market value on the date of grant.

The Employee Plans provide a cash-less exercise option for the participants, and options granted vest in full upon a “change in control” as defined in the plans.

The Non-Employee Plans provide for the Company to grant stock options with a term of up to 10 years , from date of grant, at an exercise price equal to or greater than the fair market value on the date of grant.

The Non-Employee Plans provide a cash-less exercise option for the participants, and options granted vest in full upon a “change in control” as defined in the plans.

The following table reflects provisions of each of the stock option plans:

Options available to be granted at plan inception

Plan termination date

Options available for grant as of December 31, 2025

2012 Employee Stock Option plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (the 2012 Employee Plan).

The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 1,900,000 shares of the Company’s common stock to be acquired by the holders of such awards.

Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (“ISOs”) or non-incentive stock options, to employees.

Any plan participant who is granted ISOs and possesses more than 10 % of the voting rights of the Company’s outstanding common stock must be granted an option with a price of at least 110 % of the fair market value on the date of grant and a term of 10 years .

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

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

At 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

exercise price

Outstanding, beginning of year

Forfeited/Lapsed

Outstanding, end of period

Exercisable, end of period

Weighted average fair value at grant date of options granted

Total intrinsic value of options exercised

Total intrinsic value of options outstanding

Total intrinsic value of options exercisable

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.

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

Options exercisable

Weighted average

Range of exercise prices

contractual life

exercise price

$ 10.02 ‑ $ 26.94

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.

December 2022

2022 Employee Stock Option plan

December 2032

2012 Non-Employee Stock Option plan

In December 2012, the stockholders approved the 2012 Non-Employee Stock Option Plan (the 2012 Non-Employee Plan).

This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 100,000 shares of the Company’s common stock to be acquired by the holders of such awards.

Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

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

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

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

exercise price

Outstanding, beginning of year

Forfeited/Lapsed

Outstanding, end of period

Exercisable, end of period

Weighted average fair value at grant date of options granted

Total intrinsic value of options exercised

Total intrinsic value of options outstanding

Total intrinsic value of options exercisable

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

Options exercisable

Weighted average

average exercise

Range of exercise prices

contractual life

$ 4.35 - $ 22.93

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.

December 2022

2018 Non-Employee Stock Option plan

In December 2018, the stockholders approved the 2018 Non-Employee Stock Option Plan (the “2018 Non-Employee Plan”).

This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 100,000 shares of the Company's common

stock to be acquired by the holders of such awards.

Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2018 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20 % per year beginning on the date of grant.

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

At 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 three months ended September 30:

Weighted average

exercise price

Outstanding, beginning of year

Forfeited/Lapsed

Outstanding, end of period

Exercisable, end of period

Weighted average fair value at grant date of options granted

Total intrinsic value of options exercised

Total intrinsic value of options outstanding

Total intrinsic value of options exercisable

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

Options exercisable

Weighted average

average exercise

Range of exercise prices

contractual life

$ 8.10 - $ 22.93

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.

December 2028

2020 Non-Employee Stock Option plan

In May 2020, the stockholders approved the 2020 Non-Employee Stock Option Plan (the “2020 Non-Employee Plan”).

This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 100,000 shares of the Company's common stock to be acquired by the holders of such awards.

Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2020 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20 % per year beginning on the date of grant.

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

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 three months ended September 30:

Weighted average

exercise price

Outstanding, beginning of year

Forfeited/Lapsed

Outstanding, end of period

Exercisable, end of period

Weighted average fair value at grant date of options granted

Total intrinsic value of options exercised

Total intrinsic value of options outstanding

Total intrinsic value of options exercisable

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 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

Options exercisable

Weighted average

The following table reflects the total activity for the stock option plans for the six months ended December 31:

Weighted average

Range of exercise prices

Contractual Life

exercise price

$ 11.40 - $ 30.71

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

In December 2022, the stockholders approved the 2022 Employee Stock Option Plan (the “2022 Employee Plan”).

The plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 950,000 shares of the Company’s common stock to be acquired by the holders of such awards.

Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (“ISOs”) or non-incentive stock options, to valued employees.

Under the 2022 Employee Plan, stock options may be granted to valued employees with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable, in whole or in part, at 20 % per year beginning on the date of grant.

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

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

Weighted average

exercise price

Intrinsic Value

exercise price

(in thousands)

Outstanding, beginning of year

1 unchanged sentence

Outstanding, end of period

Exercisable, end of period

Vested and Exercisable, end of period

Weighted average fair value at grant date of options granted

Total intrinsic value of options exercised

Total intrinsic value of options outstanding

Total intrinsic value of options exercisable

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

Options exercisable

Weighted average

Range of exercise prices

contractual life

exercise price

$ 21.60 - $ 49.39

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.

There were no stock options granted during the three and six months ended December 31, 2025 and 2024, respectively.

The total fair value of stock options vested during the three and six months ended December 31, 2025 and 2024 was $ 711,000 and $ 864,000 , and $ 770,000 and $ 961,000 , respectively.

The aggregate intrinsic value of stock options exercised during the three and six months ended December 31, 2025 and 2024 was $ 0 and $ 325,000 and $ 0 and $ 67,000 , respectively.

As of December 31, 2025, the total compensation cost related to nonvested awards not yet recognized was $ 1,354,000 .

Cash received from exercises of stock options during the three and six months ended December 31, 2025 and 2024 was $ 0 and $ 0 , and $ 0 and $ 54,000 , respectively.

NOTE 11 – Stockholders’ Equity Transactions

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:

The following table summarizes information about dividends declared by the Company for the six months ended December 31, 2025 and the fiscal year ended June 30, 2025:

Dividend Declaration Date

2 unchanged sentences

Per Share Cash Dividend Amount

January 29, 2026

March 12, 2026

April 3, 2026

October 30, 2025

18 unchanged sentences

In December of Fiscal 2018, the board of directors authorized the repurchase of up to an additional 1 million shares.

In November of Fiscal 2025, the board authorized the repurchase of up to an additional 1 million shares.

In November 2024, the board authorized the repurchase of up to an additional 1 million shares.

During the first quarter of the fiscal year ended June 30, 2025, the Company repurchased 193,252 shares of its outstanding common stock at a weighted average price of $ 37.67 .

3 unchanged sentences

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

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:

There were no common stock was repurchases during the three and six months ended December 31, 2025.

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

Total Number of

10 unchanged sentences

Total for the 9 months ended March 31, 2025

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.

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

1 unchanged sentence

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 $ 70,000 and $ 69,000 for the three months ended September 30, 2025 and 2024, respectively.

Company contributions to this plan are discretionary and totaled $ 74,000 and $ 69,000 for the three months ended December 31, 2025 and 2024, respectively and totaled $ 144,000 and $ 138,000 for the six months ended December 31, 2025 and 2024, respectively.

NOTE 13 - Commitments and Contingencies

5 unchanged sentences

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 September 30, 2025 and 2024 cash payments against operating lease liabilities totaled $ 86,000 and $ 57,000 , respectively.

For the three months ended December 31, 2025 and 2024 cash payments against operating lease liabilities totaled $ 87,000 and $ 115,000 , respectively.

For the six months ended December 31, 2025 and 2024 cash payments against operating lease liabilities totaled $ 173,000 and $ 172,000 , respectively.

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

1 unchanged sentence

Weighted-average discount rate

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

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

Year Ending June 30,

1 unchanged sentence

Imputed interest

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

Operating lease expense totaled approximately $ 124,000 and $ 144,000 for the three months ended December 31, 2025 and 2024, respectively.

Operating lease expense totaled approximately $ 249,000 and $ 239,000 for the six months ended December 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 former Chief Financial Officer (who is currently the President and Chief Operating Officer).

1 unchanged sentence

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.

2 unchanged sentences

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.

On April 11, 2025, the Court granted in part and

denied in part the motion to dismiss.

The Section 11 and Section 12 claims brought against the individual defendants were dismissed;

13 unchanged sentences

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.

Oral argument on that motion is scheduled for May 7, 2026.

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

The SEC’s subpoena and inquiry is principally focused on the Company’s previously disclosed restatements and related material weakness determination.

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

The SEC’s subpoena and inquiry was principally focused on the Company’s previously disclosed restatements and related material weakness determination.

The Company produced documents responsive to the SEC subpoena.

On January 27, 2026, the Company received a termination letter from the SEC concluding the investigation without further action.

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 former Chief Financial Officer (who is currently the President and Chief Operating Officer).

12 unchanged sentences

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

incentive compensation as may be approved by the Board of Directors from time to time and a termination payment in an amount up to 299 % of the average of

the prior five calendar year’s compensation, subject to certain limitations, as defined in the agreement.

incentive compensation as may be approved by the Board of Directors from time to time and a termination payment in an amount up to 299 % of the average of the prior five calendar year’s compensation, subject to certain limitations, as defined in the agreement.

The employment agreement renews annually in August unless either party gives the other notice of non-renewal at least six months prior to the end of the applicable term.

The employment agreement with the 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.

The employment agreement with the EVP of Engineering expires in August 2026 and provides for an annual salary of $ 495,000 , and, if terminated by the Company without cause, severance of nine months’ salary and continued company-sponsored health insurance for six months from the date of termination.

The severance agreement with the Company’s President and COO 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 months’ salary, continued company-sponsored health insurance for six months from the date of termination and certain non-compete and other restrictive provisions.

NOTE 14 – Segment and Geographical Data

6 unchanged sentences

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,

Three months ended December 31,

Six months ended December 31,

(in thousands)

Cost of revenue

13 unchanged sentences

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.

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.

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,

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 Revenue.

The following table presents net revenue by geographic area.

Three months ended December 31,

Six months ended December 31,

Sales to external customers:

United States

Total Net Sales

Total Net Revenue

Geographic Information for Long-Lived Assets

2 unchanged sentences

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

September 30, 2025

December 31, 2025

June 30, 2025

5 unchanged sentences

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 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 .

On January 27, 2026, the Company received a termination letter from the SEC concluding the investigation without further action.

On January 29, 2026 , the Company’s Board of Directors declared a cash dividend of $ .15 per share payable on April 3, 2026 , to stockholders of record on March 12, 2026 .

On January 29, 2026, the Company’s Board of Directors appointed a Chief Revenue Officer for the Company.

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