What changed in this filing

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Item 1. Financial Statements

2023-09-01 compared with 2019-05-10 · 607 added, 894 removed, 223 unchanged (87% of the section changed)

4 unchanged sentences

March 31, 2023

(as Restated)

June 30, 2022

2 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $117 and $195 at March 31, 2019 and June 30, 2018, respectively

Investments - other

Marketable securities

Accounts receivable, net of allowance for credit losses of $ 125 and $ 243 as of March 31, 2023 and June 30, 2022, respectively

Inventories, net

Income tax receivable

Prepaid expenses and other current assets

Total Current Assets

Inventories - non-current

Deferred income taxes

Inventories - non-current, net

Property, plant and equipment, net

Intangible assets, net

Deferred income taxes

Operating lease asset

CURRENT LIABILITIES

4 unchanged sentences

Total Current Liabilities

Deferred income taxes

Accrued income taxes

Long term operating lease liabilities

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES (Note 13)

STOCKHOLDERS’ EQUITY

Common Stock, par value $ 0.01 per share;

40,000,000 shares authorized;

100,000,000 shares authorized as of March 31, 2023 and June 30, 2022;

39,661,495 and 39,628,197 shares issued;

2 unchanged sentences

Retained earnings

Treasury Stock, at cost (2,749,310 and 2,475,245 shares, respectively)

Treasury Stock, at cost ( 2,893,715 shares)

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

See accompanying notes to condensed consolidated

financial statements.

See accompanying notes to condensed consolidated financial statements.

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Three Months ended March 31,

(in thousands, except share data)

2023 (as Restated)

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

Equipment revenues

3 unchanged sentences

Service-related expenses

Operating expenses:

Research and development

Selling, general, and administrative expenses

Total Operating Expenses

Operating Income

Interest expense, net

Other income (expense):

Interest and other income (expense), net

Income before Provision for Income Taxes

2 unchanged sentences

Weighted average number of shares outstanding:

See accompanying notes to condensed consolidated

financial statements.

See accompanying notes to condensed consolidated financial statements.

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Nine Months Ended March 31,

(in thousands, except share data)

2023 (as Restated)

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

Equipment revenues

3 unchanged sentences

Service-related expenses

Operating expenses:

Research and development

Selling, general, and administrative expenses

Total Operating Expenses

Operating Income

Interest expense, net

Other income (expense):

Interest and other income (expense), net

Gain on extinguishment of debt

Income before Provision for Income Taxes

2 unchanged sentences

Weighted average number of shares outstanding:

See accompanying notes to condensed consolidated

financial statements.

NAPCO SECURITY TECHNOLOGIES,

See accompanying notes to condensed consolidated financial statements.

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS EQUITY (unaudited)

months ended March 31, 2019 (in thousands, except share data)

Shares Issued

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (unaudited)

Nine months ended March 31, 2023 (as Restated) (in thousands, except for share data)

Treasury Stock

Balances at June 30, 2022

Implementation of ASC606 (see Note 2)

Repurchase of Treasury Shares

Stock Options Exercised

( 2,893,715 )

Stock-based compensation expense

Balances at September 30, 2018

Repurchase of Treasury Shares

Stock options exercised

Balances at September 30, 2022

( 2,893,715 )

Stock-based compensation expense

Stock options exercised

Balances at December 31, 2022

Repurchase of Treasury Shares

( 2,893,715 )

Net income (as restated)

Stock-based compensation expense

Stock options exercised

Balances at of March 31, 2019

See accompanying notes to condensed consolidated

financial statements.

NAPCO SECURITY TECHNOLOGIES,

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS EQUITY (CONTINUED) (unaudited)

Balances at March 31, 2023

( 2,893,715 )

Nine months ended March 31, 2022 (in thousands, except share data)

1 unchanged sentence

Balances at June 30, 2021

Stock Options Exercised

( 2,893,715 )

Stock-based compensation expense

Balances at September 30, 2017

Repurchase of Treasury Shares

Stock options exercised

Balances at September 30, 2021

( 2,893,715 )

Stock-based compensation expense

Balances at December 31, 2017

Repurchase of Treasury Shares

Stock options exercised

Balances at December 31, 2021

( 2,893,715 )

Stock-based compensation expense

Balances at of March 31, 2018

See accompanying notes to condensed consolidated

financial statements.

NAPCO SECURITY TECHNOLOGIES,

Stock options exercised

Balances at March 31, 2022

( 2,893,715 )

See accompanying notes to condensed consolidated financial statements.

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS (unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months ended March 31,

2023 (as Restated)

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

Provision for doubtful accounts

Gain on disposal of fixed asset

Interest income on other investments

Unrealized loss (gain) on marketable securities

Recovery of credit losses

Change to inventory reserve

Deferred income taxes

Non-cash stock based compensation expense

Stock based compensation expense

Gain on extinguishment of debt

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses and other current assets

Income tax receivable

Accounts payable, accrued expenses, accrued salaries and wages, accrued income taxes

Net Cash Provided by Operating Activities

Net Cash Provided by (Used in) Operating Activities

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property, plant, and equipment

Proceeds from disposal of fixed asset

Purchases of marketable securities

Purchases of other investments

Redemption of other investments

Net Cash Used in Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments on long-term debt

Proceeds from stock option exercises

Cash paid for purchase of treasury stock

Net Cash Used in Financing Activities

Net Change in Cash and Cash Equivalents

Net Cash Provided by Financing Activities

Net (decrease) increase in Cash and Cash Equivalents

CASH AND CASH EQUIVALENTS - Beginning

1 unchanged sentence

SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid, net

Interest paid

Income taxes paid

Surrender of Common Shares

See accompanying notes to condensed

consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

March 31, 2023

NOTE 1 - Nature of Business

and Summary of Significant Accounting Policies

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

Nature of Business :

Napco Security Technologies, Inc.

and Subsidiaries (the "Company"

or “Napco”) is a diversified manufacturer 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

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.

The Company's fiscal year begins on July

1 and ends on June 30.

Historically, the end users of Napco's products want to install its products prior to the summer;

sales of its products historically peak in the period April 1 through June 30, the Company's fiscal fourth quarter, and are reduced

in the period July 1 through September 30, the Company's fiscal first quarter.

In addition, demand is affected by the housing and

construction markets.

Napco Security Technologies, Inc (“NAPCO”, “the Company”, “we”) is one of the leading manufacturers and designers of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions.

We offer a diversified 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.

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

Our wireless communication services have led to the substantial growth in our monthly recurring revenues.

The Company's fiscal year begins on July 1 and ends on June 30.

Historically, the end users of the Company’s hardware products want to install these products prior to the summer;

therefore, sales of these products historically peak in the period April 1 through June 30, the Company's fiscal fourth quarter, and are reduced in the period July 1 through September 30, the Company's fiscal first quarter.

In addition, demand for all of our products may be affected by the housing and construction markets.

Deterioration of the current economic conditions may also affect this trend.

The monthly recurring service revenue, which is less susceptible to these fluctuations, allows us to generate a more consistent and predictable stream of income and mitigates the risk of fluctuation in market demand for our equipment products.

Significant Accounting Policies :

Principles of Consolidation

The unaudited condensed consolidated financial statements of

the Company, including these notes, have been prepared by the Company in accordance with U.S.

generally accepted accounting principles

(“GAAP”) for interim financial information and pursuant to the rules and regulations promulgated by the U.S.

and Exchange Commission (the “SEC”).

Accordingly, certain information and disclosures normally included in financial

statements prepared in accordance with GAAP have been omitted or condensed.

However, in the opinion of management, all adjustments

(consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

These unaudited condensed

consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements

for the year ended June 30, 2018 and the notes thereto included in the Company’s Annual Report on Form 10-K filed with the

SEC on September 13, 2018.

Results of consolidated operations for the interim periods are not necessarily indicative of a full

year’s operating results.

The unaudited condensed consolidated financial statements include the accounts of Napco Security

Technologies, Inc.

and all of its wholly-owned subsidiaries.

All inter-company balances and transactions have been eliminated in

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.

In December 2021, the Company's Board of Directors approved a two -for-one stock split in the form of a 100 % stock dividend of the Company's common stock, payable to stockholders of record on December 20, 2021.

The additional shares were distributed on January 4, 2022.

All share and per share amounts (except par value) have been retroactively adjusted to reflect the stock split.

There was no net effect on stockholders’ equity as a result of the stock split.

Upon distribution of the dividend, the total number of shares outstanding increased from 18,365,878 to 36,731,756 .

Accounting Estimates

The preparation of financial statements

in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and

expenses during the reporting period.

Critical estimates include management's judgments associated with reserves for sales returns

and allowances, concentration of credit risk, inventory reserves, intangible assets and income taxes.

Actual results could differ

from those 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.

Critical estimates include management’s judgments associated with reserves for sales returns and allowances, allowance for credit losses, overhead expenses applied to inventory, inventory reserves, valuation of intangible assets, share based compensation and income taxes.

Actual results could differ from those estimates.

Fair Value of Financial Instruments

The methods and assumptions used to estimate

the fair value of the following classes of financial instruments were:

Current Assets and Current Liabilities - The carrying amount

of cash and cash equivalents, certificates of deposits, current receivables and payables and certain other short-term financial

instruments approximate their fair value as of March 31, 2019 and June 30, 2018 due to their short-term maturities.

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, current receivables and payables and

certain other short-term financial instruments approximate their fair value as of March 31, 2023 and June 30, 2022 due to their short-term maturities.

Long-term debt and lease liabilities reflect fair value based on prevailing market rates.

Cash and Cash Equivalents and Investments – other

Cash and cash equivalents include approximately $ 10,225,000 of short-term time deposits, consisting of several certificates of deposit totaling $ 10,162,000 and $ 63,000 in a money market fund as of March 31, 2023.

Cash and cash equivalents include approximately $ 63,000 of short-term time deposits, consisting of $ 63,000 in a money market fund as of June 30, 2022.

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 consists of the following as of (in thousands):

March 31, 2023

June 30, 2022

Money Market Fund

Certificates of Deposit

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

March 31, 2023

June 30, 2022

Certificates of Deposit

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

The Company’s Certificates of Deposit consist of the following as of (in thousands):

March 31, 2023

Balance Sheet Classification

Interest Rate

Maturity Date

Carrying Value

Cash and Cash Equivalents

Cash and cash equivalents include approximately

$460,000 of short-term time deposits at March 31, 2019 and June 30, 2018.

The Company considers all highly liquid investments with

original maturities of three months or less to be cash equivalents.

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, 2019 and June 30, 2018.

The Company has not historically

experienced any credit losses with balances in excess of FDIC limits.

4.55 % - 4.70 %

4/24/2023 - 5/22/2023

Investments - other

4.75 % - 4.90 %

6/23/2023 - 9/21/2023

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, 2023 and June 30, 2022.

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

Marketable Securities

The Company’s marketable securities include investments in mutual funds, which invest primarily in various government and corporate obligations, stocks and money market funds.

The Company’s marketable securities are reported at fair value with the related unrealized and realized gains and losses included in other expense (income).

Realized gains or losses on mutual funds are determined on a specific identification basis.

The Company would record an impairment charge if the cost of the available-for-sale securities exceeds the estimated fair value of the securities and the decline in value is determined to be other-than-temporary.

During the nine months ended March 31, 2023, the Company did not record an impairment charge regarding its investment in marketable securities because

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

Accounts Receivable

Accounts receivable is stated net of the

reserves for doubtful accounts of $117,000 and $195,000 as of March 31, 2019 and June 30, 2018, respectively.

Our reserves for

doubtful accounts are subjective critical estimates that have a direct impact on reported net earnings.

These reserves are based

upon the evaluation of our accounts receivable aging, specific exposures, sales levels and historical trends.

Inventories are valued at the lower of

cost or net realizable value, with cost being determined on the first-in, first-out (FIFO) method.

The reported net value of inventory

includes finished saleable products, work-in-process and raw materials that will be sold or used in future periods.

Inventory costs

include raw materials, direct labor and overhead.

The Company’s overhead expenses are applied based, in part, upon estimates

of the proportion of those expenses that are related to procuring and storing raw materials as compared to the manufacture and

assembly of finished products.

These proportions, the method of their application, and the resulting overhead included in ending

inventory, are based in part on subjective estimates and actual results could differ from those estimates.

In addition, the Company records an inventory

obsolescence reserve, which represents any excess of the cost of the inventory over its estimated market value, based on various

product sales projections.

This reserve is calculated using an estimated obsolescence percentage applied to the inventory based

on age, historical trends, requirements to support forecasted sales, and the ability to find alternate applications of its raw

materials and to convert finished product into alternate versions of the same product to better match customer demand.

and as necessary, the Company may establish specific reserves for future known or anticipated events.

There is inherent professional

judgment and subjectivity made by both production and engineering members of management in determining the estimated obsolescence

The Company also regularly reviews the

period over which its inventories will be converted to sales.

Any inventories expected to convert to sales beyond 12 months

from the balance sheet date are classified as non-current.

Accounts receivable is stated net of the reserves for credit losses of $ 125,000 and $ 243,000 as of March 31, 2023 and June 30, 2022, respectively.

Our reserves for credit losses are subjective critical estimates that have a direct impact on reported net earnings.

These reserves are based upon the evaluation of our accounts receivable aging, specific exposures, sales levels and historical trends.

Inventories are valued at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (FIFO) method.

The reported net value of inventory includes finished saleable products, work-in-process and raw materials that will be sold or used in future periods.

Inventory costs include raw materials, direct labor and overhead.

The Company’s overhead expenses are applied based, in part, upon estimates of the proportion of those expenses that are related to procuring and storing raw materials as compared to the manufacture and assembly of finished products.

These proportions, the method of their application, and the resulting overhead included in ending inventory, are based in part on subjective estimates and actual results could differ from those estimates.

In addition, the Company records an inventory obsolescence reserve, which represents any excess of the cost of the inventory over its estimated realizable value.

This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age, historical trends, product life cycle, requirements to support forecasted sales, and the ability to find alternate applications of its raw materials and to convert finished product into alternate versions of the same product to better match customer demand.

In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events.

There is inherent professional judgment and subjectivity made by both production and engineering members of management in determining the estimated obsolescence percentage.

The Company also regularly reviews the period over which its inventories will be converted to sales.

Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current.

Property, Plant, and Equipment

Property, plant, and equipment are carried

at cost less accumulated depreciation.

Property, plant, and equipment are carried at cost less accumulated depreciation.

Expenditures for maintenance and repairs are charged to expense as incurred;

costs of major

renewals and improvements are capitalized.

At the time property and equipment are retired or otherwise disposed of, the cost and

accumulated depreciation are eliminated from the asset and accumulated depreciation accounts and the profit or loss on such disposition

is reflected in income.

Depreciation is recorded over the estimated

service lives of the related assets using primarily the straight-line method.

Amortization of leasehold improvements is calculated

by using the straight-line method over the estimated useful life of the asset or lease term, whichever is shorter.

Intangible Assets

Intangible assets determined to have indefinite

lives are not amortized but are tested for impairment at least annually.

Intangible assets with definite lives are amortized over

their useful lives.

Infinite-lived intangible assets are reviewed for impairment at least annually at the Company’s fiscal

year end of June 30 or more often whenever there is an indication that the carrying amount may not be recovered.

The Company’s acquisition of substantially

all of the assets and certain liabilities of G.

Marks Hardware, Inc.

(“Marks”) in August 2008 included intangible assets

recorded at fair value on the date of acquisition.

The customer relationships are amortized over their estimated useful lives of

twenty years.

The Marks trade name was deemed to have an indefinite life.

Changes in intangible assets are as follows

(in thousands):

costs of major renewals and improvements are capitalized.

At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts and the profit or loss on such disposition is reflected in income.

Depreciation is recorded over the estimated service lives of the related assets using primarily the straight-line method.

Amortization of leasehold improvements is calculated by using the straight-line method over the estimated useful life of the asset or lease term, whichever is shorter.

Long-Lived and Intangible Assets

Long-lived assets are amortized over their useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets in question may not be recoverable.

Impairment would be recorded in circumstances

where undiscounted cash flows expected to be generated by an asset are less than the carrying value of that asset.

Intangible assets determined to have indefinite lives were not amortized but were tested for impairment at least annually.

Intangible assets consisted of the follows (in thousands):

March 31, 2023

1 unchanged sentence

Customer relationships

expense for intangible assets subject to amortization was approximately $78,000 and $93,000 for the three months ended March

31, 2019 and 2018, respectively.

Amortization expense for intangible assets

subject to amortization was approximately $235,000 and $278,000 for the nine months ended March 31, 2019 and

2018, respectively.

Amortization expense for intangible assets subject to amortization was approximately $ 90,000 and $ 98,000 for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense for intangible assets subject to amortization was approximately $ 271,000 and $ 293,000 for the nine months ended March 31, 2023 and 2022, respectively.

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

4 unchanged sentences

and 2027 - $ 283,000 .

The weighted average amortization period for intangible

assets was 9.4 years and 10.4 years at March 31, 2019 and

2018, respectively.

Long-Lived Assets

Long-lived assets are reviewed for impairment

whenever events or changes in circumstances indicate that the carrying amount of the assets in question may not be recoverable.

Impairment would be recorded in circumstances where undiscounted cash flows expected to be generated by an asset are less than

the carrying value of that asset.

The weighted average remaining amortization period for intangible assets was 15.7 years and 16.2 years at March 31, 2023 and June 30, 2022, respectively.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting

Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers , which the Company adopted

effective July 1, 2018.

Accordingly, the Company recognizes revenue when its customers obtain control of its products or services,

in an amount that reflects the consideration that the Company expects to receive in exchange for those goods and services.

Note 2 –

Revenue Recognition for additional accounting policies and transition disclosures.

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

For product sales, the Company typically transfers control at a point in time upon shipment or delivery of the product.

For monthly communication services the Company satisfies its performance obligation as the services are rendered and therefore recognizes revenue over the monthly period.

Typically timing of revenue recognition coincides with the timing of invoicing to the customers, at which time the Company has an unconditional right to consideration.

As such, the Company typically records a receivable when revenue is recognized.

The contract with the customer states the final terms of the sale, including the description, quantity, and price of each product purchased.

Payment for product sales is typically due within 30 and 180 days of the delivery date.

Payment for monthly communication services is billed on a monthly basis and is typically due at the beginning of the month of service or in 30 days for customers with an open account.

The Company provides limited standard warranty for defective products, usually for a period of 24 to 36 months.

The Company accepts returns for such defective products as well as for other limited circumstances.

The Company also provides rebates to customers for meeting specified purchasing targets and other coupons or credits in limited circumstances.

The Company establishes reserves for the estimated returns, rebates and credits and measures such variable consideration based on the expected value method using an analysis of historical data.

Changes to the estimated variable consideration in subsequent periods are not material.

The Company analyzes sales returns and is able to make reasonable and reliable estimates of product returns based on the Company’s past history.

Estimates for sales returns are based on several factors including actual returns and based on expected return data communicated to it by its customers.

Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns.

Actual results could differ from those estimates.

Advertising and Promotional Costs

Advertising and promotional costs are included

in "Selling, General and Administrative"

Advertising and promotional costs are included in "Selling, General and Administrative"

expenses in the consolidated statements of income and are expensed as incurred.

Advertising expense for the three months ended March 31, 2023 and 2022 was $ 926,000 and

$ 655,000 , respectively.

Advertising expense for the three months ended March 31, 2023 and 2022 was $ 2,185,000 and $ 2,253,000 , respectively.

Advertising expense

for the nine months ended March 31, 2019 and 2018 was $1,275,000 and $1,274,000, respectively.

Research and Development Costs

Research and development costs incurred

by the Company are charged to expense as incurred and are included in operating expenses in the consolidated statements of operations.

Company-sponsored research and development expense for the three months ended March 31, 2019 and 2018 was $1,851,000 and $1,669,000,

respectively.

Company-sponsored research and development expense for the nine months ended March 31, 2019 and 2018 was $5,358,000

and $4,915,000, respectively.

These amounts, previously recorded in cost of sales have been reclassified to research and development

to conform with the current period presentation.

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

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.

Net Income Per Share

Basic net income per common share (Basic

EPS) is computed by dividing net income by the weighted average number of common shares outstanding.

Diluted net income per common

share (Diluted EPS) is computed by dividing net income by the weighted average number of common shares and dilutive common share

equivalents and convertible securities then outstanding.

The following provides a reconciliation

of information used in calculating the per share amounts for the three months ended March 31 (in thousands, except per share data):

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.

Company-sponsored R&D expense for the three months ended March 31, 2023 and 2022 was $ 2,314,000 and $ 2,009,000 , respectively.

Company-sponsored R&D expense for the nine months ended March 31, 2023 and 2022 was $ 6,964,000 and $ 5,918,000 , respectively.

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.

Net Income per Share (2023 amounts as restated)

Basic net income per common share (Basic EPS) is computed by dividing net income by the weighted average number of common shares outstanding.

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

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

Weighted Average Shares

2 unchanged sentences

Stock Options

No options to purchase shares of common stock were excluded

for the three months ended March 31, 2019 and 2018.

The following provides a reconciliation

of information used in calculating the per share amounts for the nine months ended March 31 (in thousands, except per share data):

Weighted Average Shares

Net Income per Share

Options to purchase 0 and 388,000 shares of common stock were excluded for the three months ended March 31, 2023 and 2022, respectively, and were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive.

These options were still outstanding at the end of the period.

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

Weighted Average

Net Income per

Effect of Dilutive Securities:

Stock Options

Options to purchase 3,942 and 290 shares

of common stock were excluded for the nine months ended March 31, 2019 and 2018, respectively, and were not included in the computation

of Diluted EPS because their inclusion would be anti-dilutive.

These options were still outstanding at the end of the respective

Options to purchase 8,379 and 156,145 shares of common stock were excluded for the nine months ended March 31, 2023 and 2022, respectively, and were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive.

These options were still outstanding at the end of the period.

Stock-Based Compensation

The Company has established three share

incentive programs as discussed in Note 8.

Stock-based compensation cost is measured

at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period.

Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility

and forfeiture rates, among other factors.

Stock-based compensation costs of $0 and

$5,000 were recognized for the three months ended March 31, 2019 and 2018, respectively.

Stock-based compensation costs of $152,000

and $141,000 were recognized for the nine months ended March 31, 2019 and 2018, respectively.

The Company has established four share incentive programs as discussed in Note 9.

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period.

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

Stock-based compensation costs of $ 322,000 and $ 35,000 were recognized for the three months ended March 31, 2023 and 2022, respectively.

Stock-based compensation costs of $ 1,134,000 and $ 1,379,000 were recognized for the nine months ended March 31, 2023 and 2022, respectively.

Foreign Currency

The Company has determined the functional currency of all foreign

subsidiaries is the U.S Dollar.

All foreign operations are considered a direct and integral part or extension of the Company's

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

Therefore, no realized and unrealized gains and losses associated with foreign currency translation is recorded for the three and

nine months ended March 31, 2019 or 2018.

The Company has determined the functional currency of all foreign subsidiaries is the U.S.

All foreign operations are considered a direct and integral part or extension of the Company’s operations.

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 or nine months ended March 31, 2023 or 2022.

Comprehensive Income

For the three and nine months ended March

31, 2019 and 2018, the Company's operations did not give rise to material items includable in comprehensive income, which were

not already included in net income.

Accordingly, the Company's comprehensive income approximates its net income for all periods

For the three and nine months ended March 31, 2023 and 2022, the Company’s operations did not give rise to material items includable in comprehensive income, which were not already included in net income.

Accordingly, the Company’s comprehensive income approximates its net income for all periods presented.

Segment Reporting

The Company’s reportable operating

segments are determined based on the Company's management approach.

The management approach is based on the way that the chief

operating decision maker organizes the segments within an enterprise for making operating decisions and assessing performance.

The Company's results of operations are reviewed by the chief operating decision maker on a consolidated basis and the Company

operates in only one segment.

The Company’s reportable operating segments are determined based on the Company’s management approach.

The management approach is based on the way that the chief operating decision maker organizes the segments within an enterprise for making operating decisions and assessing performance.

The Company’s results of operations are reviewed by the chief operating decision maker on a consolidated basis and the Company operates in only one segment.

The Company has presented required geographical data in Note 14.

Shipping and Handling Revenues and Costs

The Company records the amount billed to

customers for shipping and handling in net sales ($109,000 and $105,000 in the three months ended March 31, 2019 and 2018, respectively

and $313,000 and $352,000 in the nine months ended March 31, 2019 and 2018, respectively) and classifies the costs associated with

these revenues in cost of sales ($280,000 and $247,000 in the three months ended March 31, 2019 and 2018, respectively and $827,000

and $706,000 in the nine months ended March 31, 2019 and 2018, respectively).

Recently Issued and Adopted Accounting

In May 2014, the Financial Accounting Standards Board (FASB)

issued Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amended

the accounting standards for revenue recognition.

This standard superseded all prior revenue recognition standards and requires

entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the

consideration to which the entity expects to be entitled in exchange for those goods or services.

The standard also requires more

detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue

and cash flows arising from contracts with customers.

The Company adopted this ASU effective

July 1, 2018.

See Note 2, Revenue Recognition for additional accounting policy and transition disclosures.

In February 2016, the FASB issued authoritative guidance

that requires lessees to account for most leases on their balance sheets with the liability being equal to the present value of

the lease payments.

The right-of-use asset will be based on the lease liability adjusted for certain costs such as direct

Lease expense will be recognized similar to current accounting guidance with operating leases resulting in a straight-line

expense and financing leases resulting in a front-loaded expense similar to the current accounting for capital leases.

guidance becomes effective for the Company’s fiscal 2020 first quarter, with early adoption permitted.

This guidance

must be adopted using a modified retrospective transition approach for leases that exist or are entered into after the beginning

of the earliest comparative period in the financial statements, and provides for certain practical expedients.

is currently evaluating the timing, impact and method of applying this guidance on its consolidated financial statements.

NOTE 2 –

Revenue Recognition and Contracts with Customers

On July 1, 2018, the Company adopted new guidance on revenue

from contracts with customers using the modified retrospective method applied to contracts that were not completed as of July 1,

Results for reporting periods beginning after July 1, 2018 are presented under the new guidance, while prior period amounts

are not adjusted and continue to be reported in accordance with previous guidance.

The Company recorded a net decrease to opening retained earnings

of approximately $719,000 (net of tax benefit of $191,000) as of July 1, 2018, for the cumulative impact of adopting the new guidance.

The impact primarily related to the change in the recognition and measurement of certain types of variable consideration, which

resulted in the increase in sales allowance reserves (i.e.

refund liabilities) by a net of $1,627,000 and increased other assets

return related assets) by approximately $716,000.

Also, due to the adoption of the new standard, the Company classified

certain reserves in respect of refund liabilities that were previously presented as a reduction from receivables, to current liabilities

amounting to approximately $3,203,000 as of March 31, 2019.

Further, amounts related to promotion payments to customers are now

classified as a reduction of sales.

The impact of applying this ASU for the three and nine months

ended March 31, 2019 resulted in an immaterial change in product sales.

Shipping and Handling Sales and Costs

The Company records the amount billed to customers for shipping and handling in net sales ($ 106,000 and $ 106,000 in the three months ended March 31, 2023 and 2022, respectively, and $ 346,000 and $ 318,000 in the nine months ended March 31, 2023 and 2022, respectively);

and classifies the costs associated with these sales in cost of sales ($ 437,000 and $ 339,000 in the three months ended March 31, 2023 and 2022, respectively, and $ 1,285,000 and $ 1,033,000 in the nine months ended March 31, 2023 and 2022, respectively).

The Company records lease assets and corresponding lease liabilities for the operating lease on our Consolidated Balance Sheets, excluding short-term leases (leases with terms of 12 months or less) as described under ASU No.

2016-02, Leases (Topic 842) .

Lease payments are discounted using a third-party secured incremental borrowing rate based on information available at lease commencement.

The Company analyzes whether or not amendments to existing leases classify as a Lease Modification or a full or partial termination of the existing lease.

See Note 13 – Commitments and Contingencies;

Leases for additional accounting policies and disclosures.

Recently Issued Accounting Standards

Reference Rate Reform (ASC Topic 848)

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

The Company’s bank has notified the Company that its LIBOR option will continue to be available to it through June 30, 2023, at which time the option will shift to the Benchmark Replacement as defined in the agreement with the bank (see Note 8).

The Company does not believe that this transition will have a material impact on its financial condition.

NOTE 1A – Restatement of Previously Issued Financial Statements

During the preparation of the Company’s consolidated financial statements for the fiscal year ended June 30, 2023, management of the Company identified certain errors related to the Company’s calculation of cost of goods sold (“COGS”) and inventory for each of the first three quarters of fiscal 2023.

Specifically, the costs of several raw materials fluctuated significantly during fiscal 2023, the Company’s costing procedures did not appropriately account for such fluctuations.

As a result, inventories were overstated and COGS was understated, resulting in overstated gross profit, operating income and net income for each period.

The effects of the restatement resulted in a decrease to overall inventory (current and non-current inventory) and increase to cost of sales of $ 10,101,000 , a decrease to the provision for income taxes of $ 975,000 and a decrease to net income and retained earnings of $ 9,126,000 as of and for the nine months ended March 31, 2023.

Net cash provided by operating activities remained the same.

The effects of the restatement resulted in an increase to cost of sales of $ 1,392,000 , a decrease to the provision for income taxes of $ 101,000 and a decrease to net income of $ 1,291,000 for the three months ended March 31, 2023.

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

As of March 31, 2023

Inventory - Current

Income Tax Receivable

Inventory - Non-Current

Accrued Income Taxes

Retained earnings

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

Three Months ended March 31, 2023

(in thousands, except for per share data)

Equipment-related expenses

Cost of sales

Operating income

Income before provision for income taxes

Provision for income taxes

Income per share:

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

Nine Months ended March 31, 2023

(in thousands, except for per share data)

Equipment-related expenses

Cost of sales

Operating income

Income before provision for income taxes

Provision for income taxes

Income per share:

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

Nine Months ended March 31, 2023

(in thousands)

Change to inventory obsolescence reserve

Income tax receivable

Accounts payable, accrued expenses, accrued salaries and wages, accrued income taxes

Net Cash Provided by Operating Activities

In addition to the restated consolidated financial statements, the information contained in notes 1, 5, 7 and 14 have been restated.

NOTE 2 – Revenue Recognition and Contracts with Customers

The Company is engaged in one major line of business:

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.

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

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

The Company has customers worldwide with major concentrations in North America.

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

For product sales the Company typically transfers control at

a point in time upon shipment or delivery of the product.

For monthly communication services the Company satisfies its performance

obligation as the services are rendered and therefore recognizes revenue over the monthly period.

Typically timing of revenue recognition coincides with the timing

of invoicing to the customers, at which time the Company has an unconditional right to consideration.

As such, the Company typically

records a receivable when revenue is recognized.

The contract with the customer states the final terms of the

sale, including the description, quantity, and price of each product purchased.

Payment for product sales is typically due within

30 and 180 days of the delivery date.

Payment for monthly communication services is billed on a monthly basis and is typically

due at the beginning of the month of service.

The Company provides limited standard warranty for defective

products, usually for a period of 24 to 36 months.

The Company accepts returns for such defective products as well as for other

limited circumstances.

The Company also provides rebates to customers for meeting specified purchasing targets and other coupons

or credits in limited circumstances.

The Company establishes reserves for the estimated returns, rebates and credits and measures

such variable consideration based on the expected value method using an analysis of historical data.

Changes to the estimated variable

consideration in subsequent periods are not material.

The Company analyzes sales returns and

is able to make reasonable and reliable estimates of product returns based on the Company’s past history.

Estimates for sales

returns are based on several factors including actual returns and based on expected return data communicated to it by its customers.

Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns.

Actual results could differ from those estimates.

As a percentage of gross sales, sales returns, rebates and allowances were 8%

and 7% for the three months ended March 31, 2019 and 2018, respectively.

As a percentage of gross sales, sales returns, rebates

and allowances were 7% and 8% for the nine months ended March 31, 2019 and 2018, respectively.

In accordance with ASC 606-10-50, the Company

disaggregates revenue from contracts with customers into major product lines.

The Company determines that disaggregating revenue

into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and

cash flows are affected by economic factors.

As noted in the accounting policy footnote, the Company’s business consists

of one operating segment.

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.

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

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

As of March 31, 2023 and June 30, 2022, the Company included refund liabilities of approximately $ 4,841,000 and $ 5,863,000 , respectively, in current liabilities.

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

As a percentage of gross sales, returns, rebates and allowances were 8 % and 10 % for the three months ended March 31, 2023 and 2022, respectively.

As a percentage of gross sales, returns, rebates and allowances were 6 % and 11 % for the nine months ended March 31, 2023 and 2022, respectively.

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

The Company determines that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

As noted in the accounting policy footnote, the Company’s business consists of one operating segment.

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

5 unchanged sentences

Total Revenues

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.

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 one customer with an accounts receivable balance that comprised 26% and 22% of the Company’s accounts receivable

at March 31, 2019 and June 30, 2018, respectively.

Sales to this customer comprised 14% and 12% of net sales in the three and

nine months ended March 31, 2019, respectively.

Sales to this customer did not exceed 10% of net sales in either of the three

or nine months ended March 31, 2018.

The Company had another customer with an accounts receivable balance that comprised 12% and

11% of the Company’s accounts receivable at March 31, 2019 and June 30, 2018, respectively.

Sales to this customer did not

exceed 10% of net sales in either of the three or nine months ended March 31, 2019 or 2018.

4 - Inventories

Inventories, net of reserves are valued

at lower of cost (first-in, first-out method) or net realizable value.

The Company regularly reviews parts and finished goods inventories

on hand and, when necessary, records a provision for excess or obsolete inventories.

The Company also regularly reviews the period

over which its inventories will be converted to sales.

Any inventories expected to convert to sales beyond 12 months from

the balance sheet date are classified as non-current.

Inventories, net of reserves consist of

the following (in thousands):

The Company had one customer with an accounts receivable balance that comprised of 12 % of the Company’s overall accounts receivable as of March 31, 2023.

As of June 30, 2022, the accounts receivable balance with this

respective customer did not exceed 10% of the Company’s overall accounts receivable.

Sales to this customer did not exceed 10% of the Company’s net sales during the three and nine months ended March 31, 2023 and 2022.

The Company had another customer with an accounts receivable balance that comprised 16 % of the Company’s overall accounts receivable at June 30, 2023.

This customer’s accounts receivable balance did not exceed 10% of the Company’s overall accounts receivable at March 31, 2023.

Sales to this customer did not exceed 10% of the Company’s net sales during the three and nine months ended March 31, 2023 and 2022.

The Company had another customer with an accounts receivable balance that comprised 19 % and 22 % of the Company’s overall accounts receivable as of March 31, 2023 and June 30, 2022, respectively.

Sales to this customer was 12 % and 10 % of the Company’s net sales for the three and nine months ended March 31, 2023, respectively.

Sales to this customer did not exceed 10% of the Company’s net sales for the three and nine months ended March 31, 2022.

NOTE 4 – Marketable Securities

The Company’s marketable securities include investments in fixed income mutual funds, which invest primarily in various government and corporate obligations, stocks and money market funds, and are reported at their fair values.

The disaggregated net gains and losses on the marketable securities recognized within the accompanying condensed consolidated statements of income for the three and nine months ended March 31, 2023 and 2022, are as follows (in thousands):

Three months ended March 31,

Nine months ended March 31,

Net gains recognized during the period on marketable securities

Net gains recognized during the period on marketable securities sold during the period

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

The fair values of the Company’s marketable securities are determined as being the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, the Company utilizes the three-tier value hierarchy, as prescribed by US GAAP, which prioritizes the inputs used in measuring fair value as follows:

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

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

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

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

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

March 31, 2023

June 30, 2022

Mutual Funds - Level 1

Investment income is recognized when earned and consists principally of interest income from fixed income mutual funds.

Realized gains and losses on sales of investments are determined on a specific identification basis.

NOTE 5 - Inventories

Inventories, net of reserves are valued at lower of cost (first-in, first-out method) or net realizable value.

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

2023 (as Restated)

Component parts

1 unchanged sentence

Finished product

Classification of inventories, net of reserves (in thousands):

NOTE 5 –

Property, Plant and Equipment

Classification of inventories, net of reserves:

NOTE 6 – Property, Plant, and Equipment

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

March 31, 2023

June 30, 2022

Useful Life in Years

2 unchanged sentences

Machinery and equipment

Leasehold improvements

Building improvements

Shorter of the lease term or life of asset

accumulated depreciation and amortization

Depreciation and amortization expense

on property, plant, and equipment was approximately $281,000 and $259,000 for the three months ended March 31, 2019 and 2018,

respectively.

Depreciation and amortization expense on property, plant, and equipment was approximately $787,000 and $743,000

for the nine months ended March 31, 2019 and 2018, respectively.

NOTE 6 - 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.

On December 22, 2017, the U.S.

government passed the Tax Cuts

and Jobs Act (the “Tax Act”).

The Tax Act is comprehensive tax legislation effective January 1, 2018 that implements

complex changes to the U.S.

tax code including, but not limited to, the reduction of the corporate tax rate from 35% to 21% and

includes provisions to tax GILTI.

We are subject to the GILTI provisions effective for fiscal year ended June 30, 2019.

Act also imposed a one-time transition tax on its unremitted foreign earnings.

ASC 740 requires filers to record the effects of

tax law changes in the period enacted.

However, the SEC issued Staff Accounting Bulletin No.

118 (“SAB 118”), that

permits filers to record provisional amounts during a measurement period ending no later than one year from the date of the Act’s

As of March 31, 2019, the Company finalized its accounting for the income tax effects of the Tax Act and no additional

expense was recorded since the final transition tax expense was equal to the $381,000 provisional expense reported in the fiscal

year ended June 30, 2018.

The net section 965 tax liability was $442,000 which is payable over 8 years.

For the nine months ended March 31, 2019,

the Company recognized a net income tax expense of $1,187,000.

During the nine months ended March 31, 2019, the Company increased

its reserve for uncertain income tax positions by $35,000.

The Company’s practice is to recognize interest and penalties

related to income tax matters in income tax expense and accrued income taxes.

As of March 31, 2019, the Company had accrued interest

totaling $0 and $256,000 of unrecognized net tax benefits that, if recognized, would favorably affect the Company’s effective

income tax rate in any future period.

The Company claims R&D tax credits on eligible development R&D expenditures.

R&D tax credits are recognized as a reduction to income tax expense.

The Company does not expect that our unrecognized

tax benefits will significantly change within the next twelve months.

We file a consolidated U.S.

income tax return and tax returns

in certain state and local and foreign jurisdictions.

As of March 31, 2019 we remain subject to examination in all tax jurisdictions

for all relevant jurisdictional statutes for fiscal years 2016 and thereafter.

In November 2018, the Company received

a Notice of Proposed Adjustment ("NOPA") from the Internal Revenue Service (“IRS”) proposing an adjustment

to income for the fiscal 2016 tax year regarding deemed dividends based on its interpretation under Internal Revenue Code (“IRC”)

Section 956 arising from the intercompany balances on the books of the Company.

The incremental tax liability associated with the

income adjustment proposed in the NOPA would be approximately $1.8 million, excluding any interest and penalties.

The Company strongly

believes that the position of the IRS with regard to this matter is inconsistent with the provisions of the IRC Section 956 and

management believes that the Company will prevail, and that the tax originally paid in fiscal 2016 is correct, as such no additional

reserve for this tax uncertainty has been recognized.

However, there can be no assurance that this matter will ultimately be resolved

in the Company's favor.

The Company has identified its U.S.

income tax return and its State return in New York as its major tax jurisdictions.

Depreciation and amortization expense on property, plant, and equipment was approximately $ 380,000 and $ 338,000 for the three months ended March 31, 2023 and 2022, respectively.

Depreciation and amortization expense on property, plant, and equipment was approximately $ 1,127,000 and $ 1,028,000 for the nine months ended March 31, 2023 and 2022, respectively.

NOTE 7 - Income Taxes (2023 amounts as restated)

The provision for income taxes represents Federal, foreign, and state and local income taxes.

The effective rate differs from statutory rates due to the effect of state and local income taxes, tax rates in foreign jurisdictions, global intangible low-taxed income (“GILTI”), tax benefit of R&D credits, and certain nondeductible expenses.

The Company’s effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, and state and local income taxes.

In addition, changes in judgment from the evaluation of new information resulting in the recognition de-recognition or re-measurement of a tax position taken in a prior annual period is recognized separately in the quarter of the change.

For the nine months ended March 31, 2023 and March 31, 2022, the Company recognized net income tax expense of $ 2,475,000 and $ 1,771,000 , respectively.

During the nine months ended March 31, 2023, the Company’s reserve for uncertain income tax positions increased by $ 36,000 .

The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense and accrued income taxes.

As of March 31, 2023, the Company had accrued interest totaling $ 124,000 , as well as $ 678,000 of unrecognized net tax benefits that, if recognized, would favorably affect the Company’s effective income tax rate in any future period.

For the nine months ended March 31, 2023, additional interest expense was accrued for in the amount of $ 36,000 .

The Company does not expect that its unrecognized tax benefits will change within the next twelve months due to statute of limitation lapses.

The Company files a consolidated U.S.

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

As of March 31, 2023, the Company remains subject to examination in all tax jurisdictions for all relevant jurisdictional statutes for fiscal years 2018 and thereafter.

In December 2022, the Company received a letter from the IRS (“IRS”) notifying it that the IRS has closed its examination of the Company’s income tax return for fiscal year ended June 30, 2020.

There has been no changes proposed in relation to this examination.

NOTE 8 - Long-Term Debt

As of December 31, 2022 and June 30, 2022, the Company had a revolving line of credit of $ 11,000,000 (the “Revolver Agreement”) which expires in June 2024.

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

March 31, 2023

June 30, 2022

Interest Rate

Revolving line of credit:

Current maturities

Long-term debt

As of March 31, 2019, long-term debt consisted

of a revolving line of credit of $11,000,000 (“Agreement”) which expires in June 2021.

were no outstanding borrowings under the revolving line of credit at March 31, 2019 or June 30, 2018.

The Agreement provides for a LIBOR-based

interest rate option of LIBOR plus 1.15% to 2.00%, depending on the ratio of outstanding debt to EBITDA, which is to be measured

and adjusted quarterly, a prime rate-based option of the prime rate plus 0.25% and other terms and conditions as more fully described

in the Agreement.

In addition, the Agreement provides for availability to be limited to the lesser of $11,000,000 or the result

of a borrowing base formula based upon the Company’s Accounts Receivables and Inventory values net of certain deductions.

The Company’s obligations under the Agreement continue to be secured by all of its assets, including but not limited to,

deposit accounts, accounts receivable, inventory, and the Company’s corporate headquarters in Amityville, NY, equipment and

fixtures and intangible assets.

In addition, the Company’s wholly-owned subsidiaries, with the exception of the Company’s

foreign subsidiaries, have issued guarantees and pledges of all of their assets to secure the Company’s obligations under

the Agreement.

All of the outstanding common stock of the Company’s domestic subsidiaries and 65% of the common stock of

the Company’s foreign subsidiaries has been pledged to secure the Company’s obligations under the Agreement.

The Agreement contains various restrictions

and covenants including, among others, restrictions on payment of dividends, restrictions on borrowings and compliance with certain

financial ratios, as defined in the Agreement.

8 - 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.

Company recorded non-cash compensation expense relating to stock-based compensation of $0 and $5,000 for the three months ended

March 31, 2019 and 2018, respectively ($0.00 per basic and diluted share for each period) and $152,000 and $141,000 for the nine

months ended March 31, 2019 and 2018, respectively ($0.01 per basic and diluted share each period).

The Revolver Agreement also provides for a LIBOR-based interest rate option of LIBOR plus 1.15 % to 2.00 %, depending on the ratio of outstanding debt to EBITDA, which is to be measured and adjusted quarterly, a prime rate-based option of the prime rate plus 0.25 % and other terms and conditions as more fully described in the Revolver Agreement.

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

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

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

The Revolver Agreement contains various restrictions and covenants including, among others, restrictions on payment of dividends, restrictions on borrowings and compliance with certain financial ratios, as defined in the Revolver Agreement.

In September 2020, the Company and its lender amended the Revolver Agreement, which had an expiration date of June 2021, to expire in June 2024.

The amended Revolver Agreement also removed certain requirements and restrictions on the Company as well as removing the mortgage on the Company’s Amityville facility.

During the fourth quarter of fiscal 2020, the Company received the proceeds of promissory notes dated between April 17, 2020 and May 7, 2020 (the "PPP Loan Agreement"), entered into between the Company and HSBC Bank USA N.A., as lender (the "Lender”).

The Lender made the loans pursuant to the Paycheck Protection Program (the "PPP"), created by Section 1102 of the CARES Act and governed by the CARES Act, Section 7(a)(36) of the Small Business Act, any rules or guidance that has been issued by the Small Business Association (“SBA”) implementing the PPP and acting as guarantor, or any other applicable loan program requirements, as defined in 13 CFR § 120.10, as amended from time to time.

Pursuant to the PPP Loan Agreement, the Lender made loans to the Company with an aggregate principal amount of $ 3,904,000 (the "PPP Loan").

The PPP Loan and related extinguishment was accounted for in accordance with ASC 470 “Debt”.

Pursuant to the CARES Act, the loans may be forgiven by the SBA.

During the year ended June 30, 2022, the PPP Loans were forgiven, in their entirety, in accordance with guidelines set forth in the PPP loan documents.

The Company recognized a gain on the extinguishment of debt during the quarter ended September 30, 2021 in the amount of $ 3,904,000 within the other (expense) income section in the accompanying condensed consolidated statements of income.

The SBA reserves the right to audit PPP forgiveness applications for a period of six years from the date of forgiveness.

It has indicated that it will audit all of those that are in excess of $2 million.

NOTE 9 - Stock Option

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, 2023 and 2022, the Company recorded non-cash compensation expense of $ 322,000 ($ 0.01 per basic and diluted share) and $ 35,000 ($ 0.00 per basic and diluted share), respectively, relating to stock-based compensation.

For the nine months ended March 31, 2023 and 2022, the Company recorded non-cash compensation expense of $ 1,134,000 ($ 0.03 per basic and diluted share) and $ 1,379,000 ($ 0.04 per basic and diluted share), respectively, relating to stock-based compensation.

2022 Employee Stock Option Plan

In December 2012, the stockholders approved

the 2012 Employee Stock Option Plan (the “2012 Employee Plan”).

The 2012 Employee Plan authorizes the granting of awards,

the exercise of which would allow up to an aggregate of 950,000 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”), to valued 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.

Under the 2012 Employee Plan, stock options

may be granted to valued employees with a term of up to 10 years at an exercise price equal to or greater than the fair market

value on the date of grant and are exercisable, in whole or in part, at 20% per year beginning on the date of grant.

granted under this plan shall vest in full upon a “change in control”

as defined in the plan.

At March 31, 2019, 68,000

stock options were outstanding, 33,300 stock options were exercisable and 797,900 stock options were available for grant under

The fair value of each option granted during

the nine months ended March 31, 2019 was estimated on the date of grant using the Black-Scholes option-pricing model with the following

weighted average assumptions:

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.

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.

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, 2022, no stock options were granted or outstanding under the 2022 Employee Plan.

2012 Employee Stock Option Plan

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

The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 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 valued employees.

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

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

At March 31, 2023, 522,580 stock options were outstanding, 236,652 stock options were exercisable and no further stock options were available for grant under this plan.

0 and 37,500 options were granted during the three and nine months ended March 31, 2023.

0 and 338,000 options were granted during the three and nine months ended March 31, 2022, respectively.

No further options may be granted under this plan after December 2022.

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates

2 unchanged sentences

Expected dividend yields

The following table reflects activity under

the 2012 Employee Plan for the nine months ended March 31,:

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

Weighted average

exercise price

Weighted average

exercise price

Outstanding, beginning of year

Terminated/Lapsed

Forfeited/Lapsed

Outstanding, end of period

4 unchanged sentences

Total intrinsic value of options exercisable

3,700 and 18,100 stock options were exercised

during the three months ended March 31, 2019 and 2018, respectively.

$3,000 and $45,000 of cash was received from option exercises

during the three months ended March 31, 2019 and 2018, respectively, and the actual tax benefit realized for the tax deductions

from option exercises was $3,000 and $0, respectively.

13,200 and 20,600 stock options were exercised during the nine months ended

March 31, 2019 and 2018, respectively.

$27,000 and $61,000 of cash was received from option exercises during the nine months ended

March 31, 2019 and 2018, respectively, and the actual tax benefit realized for the tax deductions from option exercises was $7,000

and $0, respectively.

The following table summarizes information

about stock options outstanding under the 2012 Employee Plan at March 31, 2019:

30,800 and 38,000 stock options were exercised during the three and nine months ended March 31, 2023, respectively.

27,600 of the 30,800 options that were exercised during the three months ended March 31, 2023, were settled by exchanging 9,943 shares of the Company’s common stock which were retired and returned to unissued status upon receipt.

29,600 of the 38,000 options that were exercised during the nine months ended March 31, 2023, were settled by exchanging 10,150 shares of the Company’s common stock which were retired and returned to unissued status upon receipt.

$ 36,000 and $ 81,000 cash was received from the option exercises during the three and nine months ended March 31, 2023, respectively.

The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2023 was $ 0 and $ 0 , respectively.

1,000 and 29,000 stock options were exercised during the three and nine months ended March 31, 2022, respectively.

1,000 options that were exercised during the three and nine months ended March 31, 2023, were settled by exchanging 153 shares of the Company’s common stock which were retired and returned to unissued status upon receipt.

$ 0 and $ 155,000 cash was received from the option exercises during the three and nine months ended March 31, 2022, respectively.

The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2022 was $ 3,000 for both periods.

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

Options outstanding

Options exercisable

exercise prices

Weighted average

contractual life

Weighted average

exercise price

Weighted average

Range of exercise prices

contractual life

exercise price

As of March 31, 2019, there was $253,000

of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan.

0 and 5,000 options were granted during the three months ended March 31, 2019 and 2018, respectively.

24,000 and 25,000 options

were granted during the nine months ended March 31, 2019 and 2018, respectively.

0 and 1,000 options vested during the three months

ended March 31, 2019 and 2018, respectively.

The total fair value of the options vesting during the nine months ended March 31,

2019 and 2018 under this plan was $86,000 and $84,000, respectively.

exercise price

$ 3.15 ‑ $ 26.94

As of March 31, 2023, there was $ 2,208,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan.

0 and 37,500 Options were granted during the three and nine months ended March 31, 2023, respectively.

5,200 and 97,900 options vested during the three and nine months ended March 31, 2023, respectively.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2023 under this plan was $ 33,000 and $ 916,000 , respectively.

0 and 338,000 options were granted during the three and nine months ended March 31, 2022.

5,200 and 95,600 options vested during the three and nine months ended March 31, 2022, respectively.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2022 under this plan was $ 36,000 and $ 975,000 , respectively.

2012 Non-Employee Stock Option Plan

In December 2012, the stockholders approved

the 2012 Non-Employee Stock Option Plan (the “2012 Non-Employee Plan”).

This plan authorizes the granting of awards,

the exercise of which would allow up to an aggregate of 50,000 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 March 31, 2019, 13,200 stock options

were outstanding, 4,200 stock options were exercisable and no further stock options were available for grant under this plan.

The following table reflects activity under

the 2012 Non-Employee Plan for the nine months ended March 31,:

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.

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

At March 31, 2023, 20,400 stock options were outstanding, 13,920 stock options were exercisable and no further stock options were available for grant under this plan.

There were no options granted during the three and nine months ended March 31, 2023.

0 and 9,600 Options were granted during the three and nine months ended March 31, 2022.

No options may be granted under this plan after December 2022.

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates

Expected lives

Expected volatility

Expected dividend yields

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

Weighted average

exercise price

Weighted average

exercise price

Outstanding, beginning of year

Terminated/Lapsed

Forfeited/Lapsed

Outstanding, end of period

4 unchanged sentences

Total intrinsic value of options exercisable

3,600 and 0 stock options were exercised

during the three months ended March 31, 2019 and 2018, respectively.

No cash was received from option exercises during either of

the three months ended March 31, 2019 or 2018 and the actual tax benefit realized for the tax deductions from option exercises

was $10,000 and $0, respectively.

14,600 and 0 stock options were exercised during the nine months ended March 31, 2019 and 2018,

respectively.

No cash was received from option exercises during either of the nine months ended March 31, 2019 or 2018 and the

actual tax benefit realized for the tax deductions from option exercises was $35,000 and $0, respectively.

The following table summarizes information

about stock options outstanding under the 2012 Non-Employee Plan at March 31, 2019:

No stock options were exercised during the three and nine months ended March 31, 2023 and 2022, respectively.

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

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

Options outstanding

Options exercisable

exercise prices

Weighted average

contractual life

average exercise

Range of exercise prices

contractual life

$ 4.35 - $ 22.93

As of March 31, 2019, there was $50,000

of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee

No options were granted during either of the three months ended March 31, 2019 or 2018.

0 and 15,000 options were granted

during the nine months ended March 31, 2019 and 2018, respectively.

No options vested during either of the three months ended March

31, 2019 or 2018.

No options vested during either of the nine months ended March 31, 2019 or 2018.

As of March 31, 2022, there was $ 52,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan.

No options were granted during the three and nine months ended March 31, 2023, respectively.

720 and 2,640 options vested during the three and nine months ended March 31, 2023, respectively.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2023 under this plan was $ 5,000 and $ 24,000 , respectively.

0 and 9,600 Options were granted during the three and nine months ended March 31, 2022.

720 and 6,240 options vested during the three and nine months ended March 31, 2022, respectively.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2022 under this plan was $ 5,000 and $ 39,000 , respectively.

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 50,000 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 March 31, 2019, 20,000 stock options

were outstanding, 4,000 stock options were exercisable and 30,000 stock options were available for grant under this plan.

The fair value of each option granted during

the nine months ended March 31, 2019 was estimated on the date of grant using the Black-Scholes option-pricing model with the following

weighted average assumptions:

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 March 31, 2023, 77,500 stock options were outstanding, 53,220 stock options were exercisable and no further stock options were available for grant under this plan.

There were no options granted during the three and nine months ended March 31, 2023.

0 and 23,500 Options were granted during the three and nine months ended March 31, 2022.

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

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates

2 unchanged sentences

Expected dividend yields

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 nine months ended March 31:

Weighted average

exercise price

Weighted average

exercise price

Outstanding, beginning of year

Terminated/Lapsed

Forfeited/Lapsed

Outstanding, end of period

4 unchanged sentences

Total intrinsic value of options exercisable

No stock options were exercised during

the three months ended March 31, 2019 or 2018.

No stock options were exercised during the nine months ended March 31, 2019 or 2018.

No cash was received from option exercises during either of the three or nine months ended March 31, 2019 or 2018 and the actual

tax benefit realized for the tax deductions from option exercises was $0 for each of these periods.

The following table summarizes information

about stock options outstanding under the 2018 Non-Employee Plan at March 31, 2019:

1,600 and 11,500 options were exercised during the three and nine months ended March 31, 2023, respectively.

The 1,600 options that were exercised during the three months ended March 31, 2023 were settled by exchanging 395 shares of the Company’s common stock which were retired and returned to unissued status upon receipt.

The 11,500 options that were exercised during the nine months ended March 31, 2023 were settled by exchanging 6,052 shares of the Company’s common stock which were retired and returned to unissued status upon receipt.

No cash was received from option exercises during the three and nine months ended March 31, 2023.

and the actual tax benefit realized for the tax deductions from option exercises was $ 8,000 and $ 34,000 , respectively.

1,600 and 4,600 options were exercised during the three and nine months ended March 31, 2022, respectively.

The 1,600 options that were exercised during the three months ended March 31, 2022, were settled by exchanging 663 shares of the Company’s common stock which were retired and returned to unissued status upon receipt.

The 4,600 options that were exercised during the nine months ended March 31, 2022, were settled by exchanging 2,075 shares of the Company’s common stock which were retired and returned to unissued status upon receipt.

No cash was received from option exercises during the three and nine months ended March 31, 2022.

For the three and nine months ended March 31, 2022 the actual tax benefit realized for the tax deductions from option exercises was $ 4,000 and $ 12,000 , respectively.

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

Options outstanding

Options exercisable

exercise prices

Weighted average

contractual life

average exercise

Range of exercise prices

contractual life

$ 8.10 - $ 22.93

As of March 31, 2019, there was $164,000

of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee

No options were granted during the three months ended March 31, 2019 or 2018.

20,000 and 0 options were granted during the

nine months ended March 31, 2019 and 2018, respectively.

No options vested during either of the three months ended March 31, 2019

The total fair value of the options vesting during the nine months ended March 31, 2019 and 2018 under this plan was $41,000

and $0, respectively.

2002 Employee Stock Option Plan

In December 2002, the stockholders approved

the 2002 Employee Stock Option Plan (the “2002 Employee Plan”).

This plan expired in October 2012.

This plan authorized

the granting of awards, the exercise of which would allow up to an aggregate of 1,836,000 shares of the Company's common stock

to be acquired by the holders of such awards.

Under this plan, the Company may have granted stock options, which were intended

to qualify as incentive stock options (ISOs), to key employees.

Any plan participant who was granted ISOs and possessed more than

10% of the voting rights of the Company's outstanding common stock must have been granted an option with a price of at least 110%

of the fair market value on the date of grant.

Under the 2002 Employee Plan, stock options

have been granted to key employees with a term of 10 years at an exercise price equal to the fair market value on the date of grant

and are exercisable in whole or in part at 20% per year from the date of grant.

At March 31, 2019, no stock options were outstanding

or exercisable and no further stock options were available for grant under this plan after the plan expired in October 2012.

No options were exercised during either

of the three months ended March 31, 2019 or 2018.

0 and 5,000 stock options were exercised during the nine months ended March 31,

2019 and 2018, respectively.

The 5,000 exercises were settled in cashless exercises by exchanging 2,815 shares of the Company’s

common stock which were retired and returned to unissued status.

No cash was received from option exercises during either of the

three or nine months ended March 31, 2019 and 2018 and the actual tax benefit realized for the tax deductions from option exercises

was $0 for each of these periods.

NOTE 9 –

Stockholders’

On September 16, 2014 the Company’s

board of directors authorized the repurchase of up to 1 million of the approximately 19.4 million shares of the Company’s

common stock then outstanding.

On December 21, 2018 the Company’s board of directors authorized the repurchase of up to an

additional 500,000 shares.

As of March 31, 2019 there was an aggregate 434,725 shares that may yet be purchased under the two repurchase

The repurchases will be made from time to time in the open market or in privately negotiated transactions subject to market

conditions and the market price of the common stock.

The Company repurchased 274,065 shares at a weighted average price of $14.59

under these plans during the nine months ended March 31, 2019.

Shares repurchased through March 31, 2019 are included in the Company’s

Treasury Stock as of March 31, 2019.

10 - 401(k) Plan

The Company maintains a 401(k) plan (“the

Plan”) that covers all U.S.

non-union employees with one or more years of service and is qualified under Sections 401(a)

and 401(k) of the Internal Revenue Code.

Company contributions to this plan are discretionary and totaled $34,000 and $35,000

for the three months ended March 31, 2019 and 2018, respectively, and $99,000 and $99,000 for the nine months ended March 31,

2019 and 2018, respectively.

11 - Commitments and Contingencies

The Company is committed under various

operating leases, not including the land lease discussed below, which do not extend beyond fiscal 2023 .

Rent expense, with the exception of the

land lease referred to below, totaled approximately $12,000 and $11,000 for the three months ended March 31, 2019 and 2018, respectively

and $34,000 and $24,000 for the nine months ended March 31, 2019 and 2018, respectively.

On April 26, 1993, one of the Company's

foreign subsidiaries entered into a 99 year lease, expiring in 2092, for approximately four acres of land in the Dominican Republic

at an annual cost of $288,000, on which the Company's principal production facility is located.

In the normal course of business, the Company

is a party to claims and/or litigation.

Management believes that the settlement of such claims and/or litigation, considered in

the aggregate, will not have a material adverse effect on the Company's financial position and results of operations.

As of March 31, 2023, there was $ 166,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee Plan.

No options were granted during the three and nine months ended March 31, 2023, respectively.

5,380 and 19,680 options vested during the three and nine months ended March 31, 2023, respectively.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2023 under this plan was $ 35,000 and $ 149,000 , respectively.

0 and 23,500 options were granted during the three and nine months ended March 31, 2022.

5,380 and 19,680 options vested during the three and nine months ended March 31, 2022.

The total grant date fair value of the options vesting during the three and nine months ended December 31, 2021 under this plan was $ 35,000 and $ 160,000 , respectively.

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.

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

At March 31, 2023, 56,900 stock options were outstanding, 18,760 stock options were exercisable and 43,100 stock options were available for grant under this plan.

5,000 and 30,000 Options were granted during the three and nine months ended March 31, 2023 under the 2020 Non-Employee Plan.

0 and 16,900 Options were granted during the three and nine months ended March 31, 2022.

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

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates

Expected lives

7.23 - 7.27 Years

Expected volatility

Expected dividend yields

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

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 and nine months ended March 31, 2023 and 2022 under the 2020 Non-Employee Plan.

No cash was received from option exercises during either of the three and nine months ended March 31, 2023 or 2022 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, 2023:

Options outstanding

Options exercisable

Weighted average

Range of exercise prices

contractual life

exercise price

$ 11.40 - $ 30.71

As of March 31, 2023, there was $ 376,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan.

5,000 and 30,000 options were granted during the three and nine months ended March 31, 2023, respectively.

1,000 and 11,380 options vested during the three and nine months ended March 31, 2023.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2023 under this plan was $ 16,000 and $ 129,000 .

0 and 5,380 options vested during the three and nine months ended March 31, 2022.

The total grant date fair value of the options vesting during the three and nine months ended March 31, 2022 under this plan was $ 0 and $ 55,000 .

NOTE 10 – Stockholders’ Equity Transactions

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.

Such repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions and the market price of the common stock.

Relative to the Revolver Agreement described in Note 8, the Company’s lender gave its consent to this stock repurchase plan.

During the three and nine months ended March 31, 2023 and the fiscal year ended June 30, 2022, the Company did not repurchase any shares of its outstanding common stock.

Pursuant to the PPP loan described in Note 8, the Company was not allowed to repurchase any of its shares of common stock until 12 months after the termination of the term loans described therein which occurred between August, 2021 and September, 2021.

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

In December 2021, the Company's Board of Directors approved a two -for-one stock split in the form of a 100 % stock dividend of the Company’s common stock payable to stockholders of record on December 20, 2021.

The additional shares were distributed on January 4, 2022.

All share and per share amounts (except par value) have been retroactively adjusted to reflect the stock split.

There was no net effect on total stockholders' equity as a result of the stock split.

During the three months ended March 31, 2023, certain employees and directors exercised stock options under the Company's 2012 Employee and 2018 Non-Employee Stock Option Plans totaling 32,400 shares.

29,200 of the 32,400 of these exercises were completed as cashless exercises as allowed for under the plans, where the exercise shares are issued by the Company in exchange for shares of the Company’s common stock that are owned by the optionees.

The number of shares surrendered by the optionees was 10,338 and was based upon the per share price on the effective date of the option exercise.

$ 36,000 cash was received from the other 3,200 options exercised.

During the nine months ended March 31, 2023, certain employees and directors exercised stock options under the Company's 2012 Employee and 2018 Non-Employee Stock Option Plans totaling 49,500 shares.

41,100 of these exercises were completed as cashless exercises as allowed for under the plans, where the exercise shares are issued by the Company in exchange for shares of the Company’s common stock that are owned by the optionees.

The number of shares surrendered by the optionees was 16,202 and was based upon the per share price on the effective date of the option exercise.

$ 81,000 cash was received from the other 8,400 shares exercised.

During fiscal 2022, certain employees and directors exercised stock options under the Company's 2012 Employee and Non-Employee and 2018 Non-employee Stock Option Plans totaling 34,800 shares.

6,800 of these exercises were completed as cashless exercises as allowed for under the plans, where the exercise shares are issued by the Company in exchange for shares of the Company's common

stock that are owned by the optionees.

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

NOTE 11 – Related Party Transaction

On February 13, 2023, the Company's President and Chairman and the Company’s Executive Vice President and Chief Financial Officer sold 2,012,500 and 87,500 shares of our common stock, respectively, as selling stockholders in an underwritten secondary public offering at a public offering price of $ 31.50 per share.

In connection with such offering, the selling stockholders granted the underwriters an option to purchase additional shares (the “Greenshoe Option”).

On February 15, 2023, the underwriters exercised in full the Greenshoe Option, pursuant to which the selling stockholders sold a total of 300,000 additional shares of common stock at the same public offering price.

The Company did not sell any shares in the offering and received no proceeds from the offerings, but the Company incurred $ 496,000 in offering expenses, which are recorded in selling, general, and administrative expenses in the accompanying condensed consolidated statements of income.

NOTE 12 - 401(k) Plan

The Company maintains a 401(k) plan (“the Plan”) that is available to all U.S.

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

Company contributions to this plan are discretionary and totaled $ 64,000 and $ 187,000 for the three and nine months ended March 31, 2023.

Company contributions to this plan are discretionary and totaled $ 59,000 and $ 132,000 for the three and nine months ended March 31, 2022.

NOTE 13 - Commitments and Contingencies

Our lease obligation consists of a 99 -year lease, entered into by one of the Company’s foreign subsidiaries, for approximately four acres of land in the Dominican Republic on which the Company’s principal production facility is located.

The lease, which commenced on April 26, 1993 and expires in 2092, initially had an annual base rent of approximately $ 235,000 plus $ 53,000 in annual service charges.

On September 14, 2022, a lease modification was executed which provides for an annual base rent of $ 235,000 plus $ 105,000 in annual service charges.

The service charges increase 2 % annually over the remaining life of the lease.

The modification resulted in a remeasurement of the operating lease asset and liability, and the effect was a reduction to the asset and liability of $ 1.3 million.

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

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

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

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

Weighted-average remaining lease term

Weighted-average discount rate

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

Year Ending June 30,

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

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

In the normal course of business, the Company is a party to claims and/or litigation.

Management believes that the settlement of such claims and/or litigation, considered in the aggregate, will not have a material adverse effect on the Company’s financial position and results of operations.

Employment Agreements

As of March 31, 2019, the Company was obligated under three

employment agreements and one severance agreement.

The employment agreements are with the Company’s CEO, Senior Vice President

of Sales and Marketing (“the SVP of Sales”) and the Senior Vice President of Engineering (“the SVP of Engineering”).

As of September 30, 2022, the Company was obligated under two employment agreements and one severance agreement.

The employment agreements are with the Company’s CEO and the Senior Vice President of Engineering (“the SVP of Engineering”).

The severance agreement is with the Company’s CFO.

The employment agreement with the CEO provides for an annual salary of $ 872,000 , as adjusted for inflation;

incentive compensation

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

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

The employment agreement

renews annually in August unless either party gives the other notice of non-renewal at least six months prior to the end of the

applicable term.

The employment agreement with the SVP of Sales expires in October 2020 and provides for an annual salary of $334,000,

a bonus arrangement for fiscal 2019 and, if terminated by the Company without cause, severance of nine months’

continued company-sponsored health insurance for six months from the date of termination.

The employment agreement with the SVP

of Engineering expires in August 2020 and provides for an annual salary of $302,000, a bonus arrangement for fiscal 2019 and, if

terminated by the Company without cause, severance of nine month’s salary and continued company-sponsored health insurance

for six months from the date of termination.

The severance agreement is with the Senior Vice President of Operations and Finance

and provides for, if terminated by the Company without cause or within three months of a change in corporate control of the Registrant,

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 12 –

Geographical Data

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 years’ compensation, subject to certain limitations, as defined in the agreement.

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

The employment agreement with the SVP of Engineering expires in August 2024 and provides for an annual salary of $ 361,000 , and, if terminated by the Company without cause, severance of nine months’ salary and continued company-sponsored health insurance for six months from the date of termination.

The severance agreement is with the Executive Vice President of Operations and Chief Financial Officer and provides for, if terminated by the Company without cause or within three months of a change in corporate control of the 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 – Geographical Data

The Company is engaged in one major line of business:

the development,

manufacture, and distribution of security products, encompassing access control systems, door security products, intrusion and

fire alarm systems, alarm communication services, and video surveillance products for commercial and residential use.

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 development, manufacture, and distribution of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance products for commercial and residential use.

The Company also provides wireless communication service for intrusion and fire alarm systems.

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)

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

Three months ended March 31,

2 unchanged sentences

Total Net Sales

March 31, 2023

June 30, 2022

(as Restated)

Identifiable assets:

2 unchanged sentences

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.

(1) All of the Company’s sales originate in the United States and are shipped primarily from the Company’s facilities in the United States.

There were no sales into any one foreign country in excess of 10% of total Net Sales.

(2) Consists primarily of inventories (March 31, 2023 = $ 34,428 ;

31, 2019 = $22,630, June 30, 2018 = $16,592) and long-lived assets (March 31, 2019 = $3,411, June 30, 2018 = $3,462) located at

the Company's principal manufacturing facility in the Dominican Republic.

Management’s

Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q and

the information incorporated by reference may include "Forward-Looking Statements"

within the meaning of Section 27A

of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934.

The Company intends the Forward-Looking Statements to

be covered by the Safe Harbor Provisions for Forward-Looking Statements.

All statements regarding the Company's expected financial

position and operating results, its business strategy, its financing plans and the outcome of any contingencies are Forward-Looking

The Forward-Looking Statements are based on current estimates and projections about our industry and our business.

Words such as "anticipates,"

"expects,"

"intends,"

"plans,"

"believes,"

"seeks,"

"estimates,"

or variations of such words and similar expressions are intended to identify such Forward-Looking Statements.

The Forward-Looking Statements are subject to risks and uncertainties that could cause actual results to differ materially from

those set forth or implied by any Forward-Looking Statements.

For example, the Company is highly dependent on its Chief Executive

Officer for strategic planning.

If he is unable to perform his services for any significant period of time, the Company's ability

to grow could be adversely affected.

In addition, factors that could cause actual results to differ materially from the Forward-Looking

Statements include, but are not limited to, uncertain economic, military and political conditions in the world, our ability to

maintain and develop competitive products, adverse tax consequences of offshore operations, the ability to maintain adequate financing

and significant fluctuations in the exchange rate between the Dominican Peso and the U.S.

The Company’s Risk Factors

are discussed in more detail in Item 1A in the Company’s 2018 Annual Report on Form 10-K.

The Company is a diversified manufacturer 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.

These products are used for commercial, residential, institutional,

industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers

of security equipment.

International sales accounted for approximately 2% of our revenues for each of the three months ended March

31, 2019 and 2018 and 2% and 3% for the nine months ended March 31, 2019 and 2018, respectively.

The Company owns and operates manufacturing

facilities in Amityville, New York and the Dominican Republic.

A significant portion of our operating costs are fixed, and do not

fluctuate with changes in production levels or utilization of our manufacturing capacity.

As production levels rise and factory

utilization increases, the fixed costs are spread over increased output, which may contribute to increasing profit margins.

when production levels decline our fixed costs are spread over reduced levels, which may contribute to decreasing margins.

The security products market is characterized

by constant incremental innovation in product design and manufacturing technologies.

Generally, the Company typically devotes 6-8%

of revenues to research and development (“R&D”) on an annual basis.

The Company does not expect products resulting

from our R&D investments in fiscal 2019 to contribute materially to revenue during fiscal 2019, but may benefit the Company

over future years.

In general, the new products introduced by the Company are initially shipped in limited quantities, and increase

Prices and manufacturing costs tend to decline over time as products and technologies mature.

Economic and Other Factors

We are subject to the effects of general

economic and market conditions.

In the event that the U.S.

or international economic conditions deteriorate, our revenue, profit

and cash-flow levels could be materially adversely affected in future periods.

In the event of such deterioration, many of our

current or potential future customers may experience serious cash flow problems and as a result may, modify, delay or cancel purchases

of our products.

Additionally, customers may not be able to pay, or may delay payment of, accounts receivable that are owed to

If such events do occur, they may result in our expenses being too high in relation to our revenues and cash flows.

The Company's fiscal year begins on July

1 and ends on June 30.

Historically, the end users of the Company’s products want to install its products prior to the summer;

therefore sales of its products historically peak in the period April 1 through June 30, the Company's fiscal fourth quarter, and

are reduced in the period July 1 through September 30, the Company's fiscal first quarter.

In addition, demand is affected by the

housing and construction markets.

Deterioration of the current economic conditions may also affect this trend.

Critical Accounting Policies and Estimates

The Company's significant accounting policies

are fully described in Note 1 to the Company's consolidated financial statements included in its 2018 Annual Report on Form 10-K.

believes these critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation

of its consolidated financial statements.

Results of Operations

Three months ended March 31,

(dollars in thousands)

Nine months ended March 31,

(dollars in thousands)

Gross profit as a % of net sales

Research and development

Selling, general and administrative

Selling, general and administrative as a percentage of net sales

Operating income

Interest expense, net

Provision for income taxes

Sales for the three months ended March

31, 2019 increased by $2,943,000 to $25,143,000 as compared to $22,200,000 for the same period a year ago.

The increase in sales

for the three months ended March 31, 2019 was due primarily to increased communication service revenues ($1,388,000), sales of

intrusion and access products ($1,254,000) and door-locking products ($301,000).

Sales for the nine months ended March 31, 2019

increased by $8,862,000 to $73,348,000 as compared to $64,486,000 for the same period a year ago.

The increase in sales for the

nine months ended March 31, 2019 was due primarily to increased sales of communication services ($3,916,000), intrusion and access

products ($2,917,000) and door-locking products ($2,029,000).

Gross profit for the three months ended

March 31, 2019 increased to $10,729,000 or 42.7% of sales as compared to $8,892,000 or 40.1% of sales for the same period a year

Gross profit for the nine months ended March 31, 2019 increased to $30,959,000 or 42.2% of sales as compared to $25,857,000

or 40.1% of sales for the same period a year ago.

The increase in gross profit and gross profit as a percentage of net sales for

the three and nine months was primarily due to the increase in sales as described above.

Research and development expenses for the

three months ended March 31, 2019 increased by $182,000 to $1,851,000 as compared to $1,669,000 for the same period a year ago.

Research and development expenses for the nine months ended March 31, 2019 increased by $443,000 to $5,358,000 as compared to $4,915,000

for the same period a year ago.

The increase was due primarily to increased salaries and additional personnel.

Selling, general and administrative expenses

for the three months ended March 31, 2019 remained relatively constant at $5,231,000 as compared to $5,311,000 for the same period

Selling, general and administrative expenses for the nine months ended March 31, 2019 remained relatively constant

at $16,901,000 as compared to $16,805,000 for the same period a year ago.

Selling, general and administrative expenses as a percentage

of net sales decreased to 20.8% for the three months ended March 31, 2019 as compared to 23.9% for the same period a year ago.

Selling, general and administrative expenses as a percentage of net sales decreased to 23.0% for the nine months ended March 31,

2019 as compared to 26.1% for the same period a year ago.

The decrease as a percentage of sales for the three and nine months ended

March 31, 2019 was due primarily to the increase in net sales.

Interest expense, net for the three months

ended March 31, 2019 decreased by $14,000 to $5,000 as compared to $19,000 for the same period a year ago.

Interest expense, net

for the nine months ended March 31, 2019 decreased by $49,000 to $18,000 as compared to $67,000 for the same period a year ago.

The decrease in interest expense for the three and nine months ended March 31, 2019 resulted from reduced outstanding debt.

The Company’s provision for income

taxes for the three months ended March 31, 2019 increased by $456,000 to $520,000 as compared to $64,000 for the same period a

The Company’s provision for income taxes for the nine months ended March 31, 2019 increased by $1,069,000 to $1,187,000

as compared to $118,000 for the same period a year ago.

The increase in the provision for income taxes for the three and nine months

was caused primarily by an increase in Income before Provision for Income Taxes.

Additionally the March 31, 2018 rate was positively

impacted by the reduction in the federal tax rate;

conversely the March 31, 2019 rate was negatively impacted due to the GILTI

provision applying for the first time.

As a result, the Company’s effective rate for income tax was 14% and 3% for the three

months ended March 31, 2019 and 2018, respectively, and 14% and 3% for the nine months ended March 31, 2019 and 2018, respectively.

Net income for the three months ended March

31, 2019 increased by $1,293,000 to $3,122,000 or $0.17 per diluted share as compared to $1,829,000 or $0.10 per diluted share

for the same period a year ago.

Net income for the nine months ended March 31, 2019 increased by $3,543,000 to $7,495,000 or $0.40

per diluted share as compared to $3,952,000 or $0.21 per diluted share for the same period a year ago.

The change in net income

for the three and nine months ended March 31, 2019 was primarily due to the items described above.

Liquidity and Capital Resources

During the nine months ended March 31,

2019 the Company utilized a portion of its cash generated from operations ($5,596,000 of $5,763,000) to purchase property, plant

and equipment ($1,598,000), and repurchase Company common stock ($3,998,000).

The Company believes its current working capital,

cash flows from operations and its revolving credit agreement will be sufficient to fund the Company’s operations through

the next twelve months.

Accounts receivable at March 31, 2019 decreased

by $2,134,000 as compared to June 30, 2018.

This decrease is primarily the result of the higher sales volume during the quarter

ended June 30, 2018, which is typically the Company’s highest, as compared to the quarter ended March 31, 2019, as well as

the adoption of ASC 606 in the first quarter of fiscal 2019.

Inventories at March 31, 2019 increased

by $5,640,000 as compared to June 30, 2018.

This increase is primarily the result of the Company increasing inventory on certain

new devices relating to its service revenues as well as the Company’s level-loading its production output throughout the

year, whereas the Company’s sales are typically highest in the fourth quarter.

Accounts payable and accrued expenses other

than accrued income taxes decreased by $275,000 as of March 31, 2019 as compared to June 30, 2018.

This decrease was due primarily

to lower wage and salary accruals which was due to the timing of payment of payroll in relation to the periods ending March 31,

2019 and June 30, 2018 as partially offset by increased inventory purchases as discussed above.

As of March 31, 2019, the Company maintained

a revolving credit facility of $11,000,000 which expires in June 2021.

As of March 31, 2019, the Company had no outstanding borrowings

and $11,000,000 in availability under this facility.

The Company’s long-term debt is described more fully in Note 7 to the

condensed consolidated financial statements.

The facility contains various restrictions and covenants including, among others,

restrictions on borrowings and compliance with certain financial ratios, as defined in the restated agreement.

As of March 31, 2019 the Company had no

material commitments for capital expenditures or inventory purchases other than purchase orders issued in the normal course of

June 30, 2022 = $ 38,755 ), operating lease assets (March 31, 2023 = $ 5,878 ;

June 30, 2022 = $ 7,350 ) and fixed assets (March 31, 2023 = $ 4,083 ;

June 30, 2022 = $ 3,253 ) located at the Company’s principal manufacturing facility in the Dominican Republic.

NOTE 15 - Subsequent Events

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

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

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

On August 29, 2023, a purported class action was filed in the United States District Court for the Eastern District of New York against the Company, its Chairman and Chief Executive Officer, and its Chief Financial Officer, alleging violations of the Securities Exchange Act of 1934 in connection with statements made in the Company’s quarterly reports on Form 10-Q for the quarters ended September 30, 2022, December 31, 2022 and March 31, 2023 (the “10-Q’s”).

The Company previously announced that it was going to restate the financial statements contained in the 10-Qs.

The Company intends to vigorously defend against the action.

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/A

Item 1. Financial Statements