NAPCO SECURITY TECHNOLOGIES, INC 10-K

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ​ a. Financial Statements: Financial statements required pursuant to this Item are presented on pages FS-1 through FS-27 of this report as follows: ​ NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES ​ Page Management Report on Internal Control FS-1 Report of Independent Registered Public Accounting Firm (PCAOB ID 23 ) FS-2 Consolidated Financial Statements: Consolidated Balance Sheets as of June 30, 2023 and 2022 FS-6 Consolidated Statements of Income for the Fiscal Years Ended June 30, 2023, 2022 and 2021 FS-7 Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended June 30, 2023, 2022 and 2021 FS-8 Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 2023, 2022 and 2021 FS-9 Notes to Consolidated Financial Statements FS-10 ​ Management Report on Internal Control Management has prepared and is responsible for our consolidated financial statements and related notes. Management is also responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Napco Technologies, Inc. (the “Company”) internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with the authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management conducted an assessment of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) as issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that as of June 30, 2023, the Company identified three material weaknesses in internal control. FS-1 Table of Contents ITEM 4: Controls and Procedures One material weakness in internal control related to ineffective information technology general controls (ITGCs) in the area of user access and lack of effective program change-management over certain information technology (IT) systems that support the Company’s financial reporting processes. Our business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. We believe that these control deficiencies were a result of: IT control processes lacking sufficient documentation and risk-assessment procedures to assess changes in the IT environment and program change management of personnel that could impact internal controls over financial reporting. The second material weakness in internal control related to the reserve for excess and slow-moving inventory. This control deficiency was a result of a lack of effective review and reconciliation controls over the forecasted sales and usage data. In addition to the foregoing, during the Company’s closing of its books for the period ended June 30, 2023, management identified a third material weakness related to the Company’s Cost of Goods Sold (“COGS”) and Inventory during the first three quarters of fiscal 2023. COGS reflected in the Company’s Original Form 10-Q was based on inventory costing as of June 30, 2022. However, in the period following June 30, 2022, substantial fluctuations occurred in certain material costs. Our inventory costing process did not identify these fluctuations in a timely manner resulting in Inventory being overstated and COGS being understated and resulting in an overstated gross profit, operating income, income before the provision for income taxes and net income for the first three quarters of fiscal 2023. While the Company has begun the process to take measures which it believes will remediate the underlying causes of this material weakness, there can be no assurance as to when the remediation plan will be fully developed and implemented and whether such measures will be effective. Until the Company’s remediation plan is fully implemented and effective, the Company will continue to devote time, attention and financial resources to these efforts. ​ Based on these material weaknesses, the Company’s management has concluded that at June 30, 2023 the Company’s internal controls over financial reporting were not effective. Management is currently designing and implementing additional controls and procedures to remediate these items and expects to complete these actions during fiscal 2024. While the Company has begun the process to take measures which it believes will remediate the underlying causes of these material weaknesses, there can be no assurance as to when the remediation plans will be fully developed and implemented and whether such measures will be effective. Until the Company’s remediation plans are fully implemented and effective, the Company will continue to devote time, attention and financial resources to these efforts. During the three months ended June 30, 2023, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting except as described above. The effectiveness of our internal control over financial reporting as of June 30, 2023 has been audited by Baker Tilly US, LLP , an independent registered public accounting firm, as stated in their report included herein. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the board of directors of Napco Security Technologies, Inc. and Subsidiaries: Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Napco Security Technologies, Inc. and Subsidiaries (the "Company") as of June 30, 2023 and 2022, the related consolidated statements of income, stockholders’ equity, and cash flows, for each of the three years in the period ended June 30, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company’s internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, because of the FS-2 Table of Contents effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company did not maintain, in all material respects, effective internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in the accompanying Management’s Report on Internal Control Over Financial Reporting appearing on page FS-1 and under Item 9A: There were ineffective information technology general controls (ITGCs) in the areas of user access and program change-management over certain information technology (IT) systems that support the Company’s financial reporting processes. As a result, business process automated and manual controls that were dependent on the affected ITGCs were ineffective because they could have been adversely impacted. This control deficiency was a result of IT control processes that lacked sufficient documentation and risk-assessment processes inadequate to identify and assess changes in IT environments and personnel that could impact internal control over financial reporting. There were ineffectively designed control activities over the reserve for excess and slow-moving inventory, including the lack of effective review and reconciliation controls over forecasted sales and usage data. There were ineffectively designed control activities over the proper costing of inventory at interim dates to ensure that inventory is presented on a first-in first-out (FIFO) basis and at net realizable value. The material weaknesses referred to above are described in Management's Report on Internal Control Over Financial Reporting. We considered the material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting FS-3 Table of Contents principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. ​ Excess and Slow-Moving Inventory Reserve ​ Critical Audit Matter Description As described in Notes 1 and 5 to the consolidated financial statements, management establishes its reserve for excess and slow-moving inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory. The estimated reserve percentages consider future inventory requirements to support forecasted sales based on historical usage, known trends, market conditions, and the ability to find alternate applications of its raw materials into finished goods to better match customer demand. We identified the reserve for excess and slow-moving inventory as a critical audit matter because of the significant estimates and assumptions management makes to determine the reserve, specifically the future inventory requirements and related forecasted sales and usage. Performing audit procedures to evaluate the reasonableness of these estimates, including the estimated reserve percentages, and assumptions is subjective and requires a high degree of auditor judgment. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included: ● We tested management’s process in developing the estimate for reserve for obsolete inventory. ● We evaluated the appropriateness of management’s approach and estimates and whether the assumptions were consistent with evidence obtained in other audit areas. ● We tested the completeness and accuracy of underlying data used in the approach, including historical sales and usage of the Company’s products and age of the inventory. ● We developed an independent expectation of the excess and slow-moving inventory reserve using historic inventory activity and compared our independent expectation to the amount recorded in the financial statements. ● We evaluated the reasonableness of the estimated reserve percentages used by management to determine the obsolete inventory reserve and tested the clerical accuracy of the model. FS-4 Table of Contents Impact on Financial Statements of Material Weakness in Internal Control Over Financial Reporting – Refer to Management’s Report on Internal Control Over Financial Reporting appearing on page FS-1 and under Item 9A. Critical Audit Matter Description As discussed above and in Management’s Report on Internal Control Over Financial Reporting, the Company identified a material weakness in their internal control over financial reporting associated with user access and program change-management over certain information technology (IT) systems that support the Company’s financial reporting processes, and related material weakness in the components of Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This material weakness impacts the Company’s controls over IT systems and business processes and affects substantially all financial statement account balances and disclosures. Due to the ineffective ITGCs, the information in system generated reports produced by those financial reporting systems could not be relied upon without further testing. We determined it necessary to perform incremental audit procedures over the completeness and accuracy of financial information utilizing the impacted IT systems as a critical audit matter. Significant auditor judgment was required to design and execute the incremental audit procedures and to assess the sufficiency of the procedures performed and evidence obtained due to ineffective controls and the complexity of the Company’s IT environment. How We Addressed the Matter in Our Audit As a result of the material weakness, in performing our audit procedures we lowered the threshold for investigating differences between recorded amounts and independent expectations developed by us that we would have otherwise used, and increased the number of tested transactions we would have otherwise made if the Company’s controls were designed and operating effectively. In addition, we utilized original source documents for audit evidence, rather than system reports or other information generated by the Company’s IT systems. For any reports obtained from the IT system, the engagement team designed specific audit procedures to audit the completeness and accuracy of such reports. We have served as the Company's auditor since 2008. ​ /s/ BAKER TILLY US, LLP ​ Uniondale, New York September 8, 2023 ​ ​ FS-5 Table of Contents NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ June 30, 2022 ​ ​ (in thousands, except share data) CURRENT ASSETS ​ ​ ​ Cash and cash equivalents ​ $ 35,955 ​ $ 41,730 Investments - other ​ ​ 25,660 ​ ​ — Marketable securities ​ ​ 5,136 ​ ​ 5,068 Accounts receivable, net of allowance for credit losses of $ 131 and $ 243 as of June 30, 2023 and June 30, 2022, respectively ​ 26,069 ​ 29,218 Inventories, net ​ 35,062 ​ 40,781 Income tax receivable ​ ​ 75 ​ ​ — Prepaid expenses and other current assets ​ 3,402 ​ 2,838 Total Current Assets ​ 131,359 ​ 119,635 Inventories - non-current, net ​ 13,287 ​ 9,005 Property, plant and equipment, net ​ 9,308 ​ 7,939 Intangible assets, net ​ 3,939 ​ 4,300 Deferred income taxes ​ ​ 2,652 ​ ​ — Operating lease asset ​ ​ 5,797 ​ ​ 7,350 Other assets ​ 312 ​ 347 TOTAL ASSETS ​ $ 166,654 ​ $ 148,576 ​ ​ ​ ​ ​ ​ ​ CURRENT LIABILITIES ​ ​ ​ Accounts payable ​ $ 8,061 ​ $ 11,072 Accrued expenses ​ 8,079 ​ 9,489 Accrued salaries and wages ​ 3,546 ​ 4,064 Accrued income taxes ​ — ​ 1,868 Total Current Liabilities ​ 19,686 ​ 26,493 Deferred income taxes ​ — ​ 166 Accrued income taxes ​ 1,110 ​ 1,058 Long term operating lease liabilities ​ ​ 5,689 ​ ​ 7,068 TOTAL LIABILITIES ​ 26,485 ​ 34,785 COMMITMENTS AND CONTINGENCIES (Note 13) ​ ​ STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ Common Stock, par value $ 0.01 per share; 100,000,000 shares authorized as of June 30, 2023 and June 30, 2022; 39,663,812 and 39,628,197 shares issued; and 36,770,097 and 36,734,482 shares outstanding, respectively ​ ​ 397 ​ ​ 396 Additional paid-in capital ​ 21,553 ​ 20,005 Retained earnings ​ 137,740 ​ 112,911 Less: Treasury Stock, at cost ( 2,893,715 shares) ​ ( 19,521 ) ​ ( 19,521 ) TOTAL STOCKHOLDERS’ EQUITY ​ 140,169 ​ 113,791 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY ​ $ 166,654 ​ $ 148,576 ​ See accompanying notes to consolidated financial statements. ​ FS-6 Table of Contents NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ ​ 2023 2022 ​ 2021 ​ ​ (in thousands, except for share and per share data) Net sales: ​ ​ ​ ​ ​ ​ ​ ​ Equipment revenues ​ $ 110,062 $ 97,612 ​ $ 80,131 Service revenues ​ 59,935 ​ 45,981 ​ ​ 33,904 ​ ​ 169,997 ​ 143,593 ​ ​ 114,035 Cost of sales: ​ ​ ​ ​ Equipment-related expenses ​ 90,197 ​ 78,471 ​ ​ 58,401 Service-related expenses ​ 6,567 ​ 5,966 ​ ​ 4,886 ​ ​ 96,764 ​ 84,437 ​ ​ 63,287 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit ​ 73,233 ​ 59,156 ​ ​ 50,748 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 9,328 ​ 8,024 ​ ​ 7,620 Selling, general, and administrative expenses ​ 33,580 ​ 32,907 ​ ​ 25,196 Total Operating Expenses ​ 42,908 ​ 40,931 ​ ​ 32,816 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Income ​ 30,325 ​ 18,225 ​ ​ 17,932 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ ​ ​ ​ ​ Interest and other income (expense), net ​ 903 ​ ( 283 ) ​ ​ ( 5 ) Gain on extinguishment of debt ​ ​ — ​ ​ 3,904 ​ ​ — Income before Provision for Income Taxes ​ 31,228 ​ 21,846 ​ ​ 17,927 Provision for Income Taxes ​ 4,101 ​ 2,247 ​ ​ 2,514 Net Income ​ $ 27,127 ​ $ 19,599 ​ $ 15,413 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income per share: ​ ​ ​ Basic ​ $ 0.74 ​ $ 0.53 ​ $ 0.42 Diluted ​ $ 0.73 ​ $ 0.53 ​ $ 0.42 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of shares outstanding: ​ ​ ​ Basic ​ 36,741,000 ​ 36,725,000 ​ 36,696,000 Diluted ​ 37,005,000 ​ 36,867,000 ​ 36,808,000 ​ See accompanying notes to consolidated financial statements. ​ FS-7 Table of Contents NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Years ended June 30, 2023, 2022 and 2021 ​ ​ (in thousands except for share data) ​ ​ Common Stock ​ ​ ​ ​ Treasury Stock ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares ​ ​ ​ ​ Paid-in ​ Number of ​ ​ ​ ​ Retained ​ ​ ​ ​ ​ Issued ​ Amount ​ Capital ​ Shares ​ Amount ​ Earnings ​ Total Balance at June 30, 2020 ​ 39,588,417 ​ $ 396 ​ $ 17,766 ​ ( 2,893,715 ) ​ $ ( 19,521 ) ​ $ 77,899 ​ $ 76,540 Stock options exercised ​ 7,466 ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation expense ​ — ​ ​ — ​ ​ 435 ​ — ​ ​ — ​ ​ — ​ ​ 435 Net income ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 15,413 ​ ​ 15,413 Balances at June 30, 2021 ​ 39,595,883 ​ $ 396 ​ $ 18,201 ( 2,893,715 ) ​ $ ( 19,521 ) ​ $ 93,312 ​ $ 92,388 Stock options exercised 32,314 ​ — ​ 155 — ​ — ​ — ​ 155 Stock-based compensation expense — ​ — ​ 1,649 — ​ — ​ — ​ 1,649 Net income — ​ — ​ — — ​ — ​ 19,599 ​ 19,599 Balances at June 30, 2022 39,628,197 ​ $ 396 ​ $ 20,005 ( 2,893,715 ) ​ $ ( 19,521 ) ​ $ 112,911 ​ $ 113,791 Stock options exercised ​ 35,615 ​ ​ 1 ​ ​ 84 ​ — ​ ​ — ​ ​ — ​ ​ 85 Stock-based compensation expense — ​ — ​ 1,464 — ​ — ​ — ​ 1,464 Cash dividend ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 2,298 ) ​ ​ ( 2,298 ) Net income — ​ — ​ — — ​ — ​ 27,127 ​ 27,127 Balances at June 30, 2023 39,663,812 ​ $ 397 ​ $ 21,553 ( 2,893,715 ) ​ $ ( 19,521 ) ​ $ 137,740 ​ $ 140,169 ​ See accompanying notes to consolidated financial statements. ​ FS-8 Table of Contents NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ended June 30, ​ 2023 2022 2021 ​ ​ (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ ​ Net income ​ $ 27,127 ​ $ 19,599 ​ $ 15,413 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ Depreciation and amortization ​ 1,930 ​ 1,771 ​ 1,697 Gain on disposal of fixed asset ​ ​ ( 15 ) ​ ​ — ​ ​ — Interest income on other investments ​ ​ ( 470 ) ​ ​ — ​ ​ — Unrealized loss (gain) on marketable securities ​ ​ 80 ​ ​ 426 ​ ​ 9 (Recovery) reserve of credit losses ​ ( 112 ) ​ 17 ​ ( 100 ) Change to inventory reserve ​ ( 445 ) ​ 1,187 ​ ( 79 ) Deferred income taxes ​ ( 2,818 ) ​ ( 214 ) ​ 337 Stock based compensation expense ​ 1,464 ​ 1,649 ​ 435 Gain on extinguishment of debt ​ ​ — ​ ​ ( 3,904 ) ​ ​ — Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ 3,261 ​ ( 1,154 ) ​ ( 5,049 ) Inventories ​ 1,883 ​ ( 19,274 ) ​ 8,794 Prepaid expenses and other current assets ​ ( 564 ) ​ ( 430 ) ​ ( 359 ) Income tax receivable ​ ​ ( 75 ) ​ ​ — ​ ​ — Other assets ​ 35 ​ ( 103 ) ​ — Accounts payable, accrued expenses, accrued salaries and wages, accrued income taxes ​ ( 6,581 ) ​ 8,762 ​ 1,889 Net Cash Provided by Operating Activities ​ 24,700 ​ 8,332 ​ 22,987 CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ Purchases of property, plant, and equipment ​ ( 2,962 ) ​ ( 1,482 ) ​ ( 1,007 ) Proceeds from disposal of fixed asset ​ ​ 38 ​ ​ — ​ ​ — Purchases of marketable securities ​ ​ ( 148 ) ​ ​ ( 81 ) ​ ​ ( 5,422 ) Purchases of other investments ​ ​ ( 35,281 ) ​ ​ — ​ ​ — Redemption of other investments ​ ​ 10,091 ​ ​ — ​ ​ — Net Cash Used in Investing Activities ​ ( 28,262 ) ​ ( 1,563 ) ​ ( 6,429 ) CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ Proceeds from stock option exercises ​ 85 ​ 155 ​ — Cash paid for dividend ​ ( 2,298 ) ​ — ​ — Net Cash (Used in) Provided by Financing Activities ​ ( 2,213 ) ​ 155 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (decrease) increase in Cash and Cash Equivalents ​ ( 5,775 ) ​ 6,924 ​ 16,558 CASH AND CASH EQUIVALENTS - Beginning ​ 41,730 ​ 34,806 ​ 18,248 CASH AND CASH EQUIVALENTS - Ending ​ $ 35,955 ​ $ 41,730 ​ $ 34,806 SUPPLEMENTAL CASH FLOW INFORMATION ​ ​ ​ Interest paid ​ $ 16 ​ $ 16 ​ $ 18 Income taxes paid ​ $ 8,811 ​ $ 2,168 ​ $ 1,970 ​ See accompanying notes to consolidated financial statements. ​ FS-9 Table of Contents NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - Nature of Business and Summary of Significant Accounting Policies Nature of Business : 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. 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. Significant future deterioration of the current economic conditions may also affect this trend. The monthly recurring 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 consolidated financial statements include the accounts of Napco Security Technologies, Inc. and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation. Accounting Estimates The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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 June 30, 2022 and 2021 due to their short-term maturities. Long-term debt and lease liabilities reflect fair value based on prevailing market rates. Cash and Cash Equivalents Cash and cash equivalents include approximately $ 15,242,000 of short-term time deposits, consisting of several certificates of deposit totaling $ 15,179,000 and $ 63,000 in a money market fund as of June 30, 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. FS-10 Table of Contents Cash and cash equivalents consists of the following as of (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 June 30, 2022 ​ ​ ​ Cash ​ $ 20,713 ​ $ 41,667 Money Market Fund ​ 63 ​ 63 Certificates of Deposit ​ ​ 15,179 ​ ​ — ​ ​ $ 35,955 ​ $ 41,730 ​ Investments-other consists of the following as of (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 June 30, 2022 ​ ​ ​ Certificates of Deposit ​ $ 25,660 ​ $ — ​ ​ $ 25,660 ​ $ — ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance Sheet Classification Interest Rate Maturity Date Cost Carrying Value Cash and Cash Equivalents ​ ​ 4.59 % - 5.00 % ​ ​ 7/30/2023 - 8/29/2023 ​ $ 15,112 ​ $ 15,179 Investments - other ​ ​ 4.80 % - 5.15 % ​ ​ 7/24/2023 - 10/24/2023 ​ ​ 25,359 ​ ​ 25,660 ​ The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of June 30, 2023 and 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 evaluates its investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value had been below cost basis, the financial condition of the issuer and the Company’s ability and intent to hold the investment for a period of time, which may be sufficient for anticipated recovery of market value. The Company records an impairment charge to the extent that 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 years ended June 30, 2023 and 2022, 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 credit losses of $ 131,000 and $ 243,000 as of June 30, 2023 and 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. FS-11 Table of Contents Inventories Inventories are valued at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (FIFO) method. The reported net value of inventory includes finished saleable products, work-in-process and raw materials that will be sold or used in future periods. Inventory costs include raw materials, direct labor and overhead. The Company’s overhead expenses are applied based, in part, upon estimates of the proportion of those expenses that are related to procuring and storing raw materials as compared to the manufacture and assembly of finished products. These proportions, the method of their application, and the resulting overhead included in ending inventory, are based in part on subjective estimates and actual results could differ from those estimates. 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. Expenditures for maintenance and repairs are charged to expense as incurred; costs of major renewals and improvements are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts and the profit or loss on such disposition is reflected in income. Depreciation is recorded over the estimated service lives of the related assets using primarily the straight-line method. Amortization of leasehold improvements is calculated by using the straight-line method over the estimated useful life of the asset or lease term, whichever is shorter. Long-Lived and Intangible Assets 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. Changes in intangible assets are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ June 30, 2022 ​ June 30, 2021 ​ Carrying Accumulated Net book Carrying Accumulated Net book Carrying Accumulated Net book ​ ​ value ​ amortization ​ value ​ value ​ amortization ​ value ​ value ​ amortization ​ value Customer relationships ​ $ 9,800 ​ ​ ( 9,302 ) ​ $ 498 ​ $ 9,800 ​ ​ ( 9,143 ) ​ $ 657 ​ $ 9,800 ​ $ ( 8,955 ) ​ $ 845 Trade name ​ ​ 4,048 ​ ( 607 ) ​ 3,441 ​ 4,048 ​ ( 405 ) ​ 3,643 ​ 4,048 ​ ( 202 ) ​ 3,846 ​ ​ $ 13,848 ​ $ ( 9,909 ) ​ $ 3,939 ​ $ 13,848 ​ $ ( 9,548 ) ​ $ 4,300 ​ $ 13,848 ​ $ ( 9,157 ) ​ $ 4,691 ​ Amortization expense for intangible assets subject to amortization was approximately $ 361,000 , $ 391,000 and $ 425,000 for the fiscal years ended June 30, 2023, 2022 and 2021, respectively. Amortization expense for each of the next five fiscal years is estimated to be as follows: 2024 - $ 336,000 ; 2025 - $ 315,000 ; 2026 - $ 297,000 ; 2027 - $ 283,000 ; and 2028 - $ 269,000 . The weighted average remaining amortization period for intangible assets was 15.5 years and 16.2 years at June 30, 2023 and 2022, respectively. FS-12 Table of Contents Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. For product sales, the Company typically transfers control at a point in time upon shipment or delivery of the product. For monthly communication services the Company satisfies its performance obligation as the services are rendered over the course of the month 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 product 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" expenses in the consolidated statements of income and are expensed as incurred. Advertising expense for fiscal years ended June 30, 2023, 2022 and 2021 was $ 2,931,000 , $ 2,889,000 and $ 1,306,000 , 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 income. Company-sponsored research and development expense for the fiscal years ended June 30, 2023, 2022 and 2021 was $ 9,328,000 , $ 8,024,000 and $ 7,620,000 , respectively. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The 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. FS-13 Table of Contents 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 fiscal years ended June 30 (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ Net Income per ​ ​ Net Income ​ Shares ​ Share ​ ​ 2023 2022 2021 2023 2022 2021 2023 2022 2021 Basic EPS ​ $ 27,127 ​ $ 19,599 ​ $ 15,413 ​ 36,741 ​ 36,725 ​ 36,696 ​ $ 0.74 ​ $ 0.53 ​ $ 0.42 Effect of Dilutive Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock Options ​ ​ — ​ — ​ — 264 142 112 ​ ( 0.01 ) ​ — ​ — Diluted EPS ​ $ 27,127 ​ $ 19,599 ​ $ 15,413 37,005 36,867 36,808 ​ $ 0.73 ​ $ 0.53 ​ $ 0.42 ​ Options to purchase 7,534 , 214,109 and 40,000 shares of common stock for the fiscal years ended June 30, 2023, 2022 and 2021, respectively, were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive. These options were still outstanding at the end of the respective periods. Stock-Based Compensation The Company has established five 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 $ 1,464,000 , $ 1,649,000 and $ 435,000 were recognized for the fiscal years ended June 30, 2023, 2022 and 2021, 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 operations. 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 are recorded for the fiscal years ended June 30, 2023, 2022 or 2021. Comprehensive Income For the fiscal years ended June 30, 2023, 2022 and 2021, 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 has presented required geographical data in Note 14. FS-14 Table of Contents Shipping and Handling Sales and Costs The Company records the amount billed to customers for shipping and handling in net sales ($ 450,000 , $ 428,000 and $ 395,000 in the fiscal years ended June 30, 2023, 2022 and 2021, respectively) and classifies the costs associated with these sales in cost of sales ($ 1,697,000 , $ 1,425,000 and $ 1,058,000 in the fiscal years ended June 30, 2023, 2022 and 2021, respectively). Leases The Company records lease assets and corresponding lease liabilities for the operating lease on our Consolidated Balance Sheets, excluding short-term leases (leases with terms of 12 months or less) as described under ASU No. 2016-02, Leases (Topic 842) . Lease payments are discounted using a third-party secured incremental borrowing rate based on information available at lease commencement. The Company analyzes whether or not amendments to existing leases classify as a Lease Modification or a full or partial termination of the existing lease. See Note 13 – Commitments and Contingencies; Leases for additional accounting policies and disclosures. Recently 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 was expected to be phased out 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 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. The Company 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 States. As of June 30, 2023 and 2022, the Company included refund liabilities of approximately $ 5,521,000 and $ 5,863,000 , respectively, in current liabilities. As of June 30, 2023 and 2022, the Company included return-related assets of approximately $ 1,338,000 and $ 974,000 , respectively, in other current assets. As a percentage of gross sales, sales returns, rebates and allowances were 7 %, 10 % and 10 % for the fiscal years ended June 30, 2023, 2022 and 2021, 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 FS-15 Table of Contents 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended June 30, ​ ​ 2023 2022 2021 Major Product Lines: ​ ​ ​ ​ Intrusion and access alarm products ​ $ 47,344 ​ $ 49,606 ​ $ 36,794 Door locking devices ​ 62,718 ​ 48,006 ​ 43,337 Services ​ 59,935 ​ 45,981 ​ 33,904 Total Revenues ​ $ 169,997 ​ $ 143,593 ​ $ 114,035 ​ The following table represents the allowance for credit losses accounts as of the respective years ending June 30 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at beginning of period Charged to costs and expenses Deductions/ (recoveries) Balance at end of period For the Year Ended June 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses ​ $ 326 ​ $ 30 ​ $ ( 130 ) ​ $ 226 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses ​ $ 226 ​ $ 17 ​ $ — ​ $ 243 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses ​ $ 243 ​ $ 6 ​ $ ( 118 ) ​ $ 131 ​ ​ FS-16 Table of Contents 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. The Company had one customer with an accounts receivable balance that comprised 19 % , 22 % and 19 % of the Company’s overall accounts receivable at June 30, 2023, 2022 and 2021, respectively. Sales to this customer did not exceed 10% of the Company’s net sales during fiscal years ended June 30, 2023, 2022 and 2021. The Company had another customer with an accounts receivable balance that comprised 14 % and 11 % of the Company’s overall accounts receivable at June 30, 2023 and 2021, respectively. This customers’ accounts receivable balance did not exceed 10% of the Company’s overall accounts receivable at June 30, 2022. Sales to this customer did not exceed 10% of the Company’s net sales in any of the fiscal years ended June 30, 2023, 2022 and 2021. The Company had a third customer with an accounts receivable balance that comprised 16 % and 12 % of the Company’s overall accounts receivable at June 30, 2022 and 2021, respectively. This customers’ accounts receivable balance did not exceed 10% of the Company’s overall accounts receivable at June 30, 2023. Sales to this customer did not exceed 10% of the Company’s net sales in any of the fiscal years ended June 30, 2023, 2022 and 2021. NOTE 4 – Marketable Securities Marketable securities include investments in fixed income mutual funds, which are reported at their fair values. The disaggregated net gains and losses on the marketable securities recognize in the income statement for the years ended June 30, 2023, 2022 and 2021 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended June 30, ​ 2023 2022 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net gains recognized during the period on marketable securities ​ $ 147 ​ $ 81 ​ $ — Less: Net gains recognized during the period on marketable securities sold during the period ​ — ​ — ​ — Unrealized gains (losses) recognized during the reporting period on marketable securities still held at the reporting date ​ ( 79 ) ​ ( 426 ) ​ ( 9 ) ​ ​ $ 68 ​ $ ( 345 ) ​ $ ( 9 ) ​ 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 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ June 30, 2022 ​ ​ ​ ​ ​ ​ ​ Unrealized ​ ​ ​ ​ ​ ​ ​ Unrealized ​ Cost Fair Value Gain (Loss) Cost Fair Value Gain (Loss) Mutual Funds - Level 1 $ 5,651 ​ ​ 5,136 ​ $ ( 515 ) ​ $ 5,504 ​ $ 5,068 ​ $ ( 436 ) ​ Investment income is recognized when earned and consists principally of interest income from fixed income mutual funds. Realized gains and losses on sales of investments are determined on a specific identification basis. FS-17 Table of Contents ​ For the years ended June 30, 2023 and 2022, there were no transfers between Levels 1 and 2 investments and no transfers in or out of Level 3. ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, June 30, ​ ​ 2023 ​ 2022 Component parts ​ $ 29,939 ​ $ 32,656 Work-in-process ​ 7,726 ​ 10,085 Finished product ​ 10,684 ​ 7,045 ​ ​ $ 48,349 ​ $ 49,786 ​ ​ ​ ​ ​ ​ ​ Classification of inventories, net of reserves: ​ ​ Current ​ $ 35,062 ​ $ 40,781 Non-current ​ 13,287 ​ 9,005 ​ ​ $ 48,349 ​ $ 49,786 ​ The following table represents the inventory obsolescence and net realizable value inventory reserves as of the respective years ending June 30 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at beginning of period Charged to costs and expenses Deductions/ (recoveries) Balance at end of period For the Year Ended June 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inventory obsolescence and net realizable value reserve ​ $ 2,913 ​ $ — ​ $ ( 79 ) ​ $ 2,834 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended June 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inventory obsolescence and net realizable value reserve ​ $ 2,834 ​ $ 1,187 ​ $ — ​ $ 4,021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inventory obsolescence and net realizable value reserve ​ $ 4,021 ​ $ 460 ​ $ ( 905 ) ​ $ 3,576 ​ ​ ​ NOTE 6 - Property, Plant, and Equipment Property, plant and equipment consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 June 30, 2022 Useful Life in Years ​ ​ ​ ​ ​ ​ ​ ​ ​ Land ​ $ 904 ​ $ 904 ​ N/A Buildings ​ 8,911 ​ 8,911 ​ 30 to 40 Molds and dies ​ 7,517 ​ 7,480 ​ 3 to 5 Furniture and fixtures ​ 3,387 ​ 3,030 ​ 5 to 10 Machinery and equipment ​ 28,574 ​ 26,696 ​ 3 to 10 Building improvements ​ 3,078 ​ 2,464 ​ Shorter of the lease term or life of asset ​ ​ 52,371 ​ 49,485 ​ Less: accumulated depreciation and amortization ​ ( 43,063 ) ​ ( 41,546 ) ​ ​ ​ $ 9,308 ​ $ 7,939 ​ ​ FS-18 Table of Contents Depreciation and amortization expense on property, plant, and equipment was approximately $ 1,569,000 , $ 1,380,000 and $ 1,260,000 in fiscal 2023, 2022 and 2021, respectively. NOTE 7 - Income Taxes The provision for income taxes is comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year ended June 30, ​ 2023 2022 2021 Current income taxes: ​ ​ ​ Federal ​ $ 5,899 ​ $ 2,161 ​ $ 1,912 State ​ 1,020 ​ 300 ​ 265 ​ ​ 6,919 ​ 2,461 ​ 2,177 Deferred income taxes: ​ ​ ​ ​ ​ ​ ​ Federal ​ ​ ( 2,334 ) ​ ​ ( 214 ) ​ 337 State ​ ​ ( 484 ) ​ ​ — ​ ​ — ​ ​ ​ ( 2,818 ) ​ ( 214 ) ​ 337 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for income taxes ​ $ 4,101 ​ $ 2,247 ​ $ 2,514 ​ A reconciliation of the U.S. Federal statutory income tax rate to our actual effective tax rate on earnings before income taxes is as follows for the years ended June 30, (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ ​ Pre-tax ​ ​ ​ ​ ​ Pre-tax ​ ​ ​ ​ ​ Pre-tax ​ ​ Amount Income ​ Amount Income ​ Amount Income Tax at Federal statutory rate ​ $ 6,558 ​ 21.0 % ​ $ 4,588 ​ 21.0 % ​ $ 3,765 ​ 21.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increases (decreases) in taxes resulting from: ​ ​ ​ ​ ​ ​ ​ Meals and entertainment ​ 48 0.2 % ​ ​ 29 0.1 % ​ ​ 29 0.2 % State income taxes, net of Federal income tax benefit ​ 436 1.4 % ​ ​ 238 1.1 % ​ ​ 135 0.8 % Global intangible low-taxed income ​ ​ 2,739 ​ 8.8 % ​ ​ 1,697 ​ 7.8 % ​ ​ 1,706 ​ 9.5 % R&D Credit ​ ( 661 ) ( 2.1 ) % ​ ​ ( 554 ) ( 2.5 ) % ​ ​ ( 523 ) ( 2.9 ) % Foreign withholding tax ​ — — % ​ ​ — — % ​ ​ 205 1 % Foreign Source income not subject to Tax ​ ​ ( 5,524 ) ​ ( 17.7 ) % ​ ​ ( 3,231 ) ​ ( 14.8 ) % ​ ​ ( 3,353 ) ​ ( 19 ) % Non-taxable debt extinguishment ​ — — % ​ ​ ( 820 ) ( 3.8 ) % ​ ​ — — % Uncertain Tax Positions ​ 63 0.2 % ​ ​ 20 0.1 % ​ ​ 312 1.7 % IRS examination settlements ​ — — % ​ ​ — — % ​ ​ — — % Other, net ​ 442 1.4 % ​ ​ 280 1.3 % ​ ​ 238 1.3 % Effective tax rate ​ $ 4,101 13.1 % ​ $ 2,247 10.3 % ​ $ 2,514 14.0 % ​ FS-19 Table of Contents Deferred tax assets and deferred tax liabilities at June 30, 2023 and 2022 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred Tax Assets (Liabilities) ​ 2023 2022 Accounts receivable ​ $ 22 ​ $ 42 Inventories ​ 397 ​ 413 Accrued liabilities ​ 857 ​ 454 Stock based compensation expense ​ 250 ​ 179 Revenue reserves ​ ​ 333 ​ ​ 466 Unrealized loss (gain) on marketable securities ​ ​ 124 ​ ​ 90 Capitalized research and development cost ​ ​ 2,923 ​ ​ — Other ​ ​ 4 ​ ​ — Total Deferred Tax Assets ​ $ 4,910 ​ $ 1,644 Valuation allowance ​ — ​ — Deferred income tax assets, net of valuation allowance ​ $ 4,910 ​ $ 1,644 ​ ​ ​ ​ ​ ​ ​ Intangibles ​ ( 916 ) ​ ( 615 ) Property, plant and equipment ​ ( 729 ) ​ ( 582 ) Other deferred tax liabilities ​ ( 613 ) ​ ( 613 ) Total Deferred Tax Liability ​ $ ( 2,258 ) ​ $ ( 1,810 ) ​ ​ ​ ​ ​ ​ ​ Net Deferred Tax Asset/(Liability) ​ $ 2,652 ​ $ ( 166 ) ​ The Company has identified the United States and New York State as its major tax jurisdictions. Fiscal year 2018 and forward years are still open for examination. In addition, the Company has a wholly-owned subsidiary which operates in a Free Zone in the Dominican Republic (“DR”) and is exempt from DR income tax. The Company was audited by the IRS for the fiscal year 2017. The Company received Form 4549-A, Income Tax Examination Changes from the IRS proposing an adjustment to income for the fiscal 2017 tax year regarding deemed dividends based on its interpretation under IRC Section 956 arising from the intercompany balances on the books of the Company. During the third quarter of fiscal 2021, the Company settled the issue and paid the IRS $ 399,000 . The Company reported the results of the IRS exam to all the jurisdictions in which it files and paid taxes and interest totaling $ 97,000 . Subsequent to the quarter end, the Company paid the IRS $ 68,000 for interest. None of the payments were recorded to expense in 2021, since liabilities had previously been established. 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 have been no changes proposed in relation to this examination. 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 tax rates in foreign jurisdictions, state and local income taxes, tax benefit of R&D credits, certain nondeductible expenses, uncertain tax positions and global intangible low-taxed income ("GILTI"). During the year ending June 30, 2023, the Company increased its reserve for uncertain income tax positions by $ 22,000 . 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 June 30, 2023, the Company had accrued interest totaling $ 139,000 , penalties totaling $ 5,000 , and $ 700,000 of unrecognized net tax benefits that, if recognized, would favorably affect the Company’s effective income tax rate in any future period. The Company does not expect that its unrecognized tax benefits will significantly change within the next twelve months. The Company claims R&D tax credits on eligible research and development expenditures. The R&D tax credits are recognized as a reduction to income tax expense. FS-20 Table of Contents A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Balance of gross unrecognized tax benefits as of Beginning of Year ​ $ 678 ​ $ 678 ​ $ 866 Increase (Decrease) to unrecognized tax benefits from deemed dividends for investments in US property ​ ​ — ​ — ​ ( 3 ) Increase (Decrease) to unrecognized tax benefits resulting from the release of R&D credits due to the settled IRS audit ​ — ​ — ​ ( 185 ) Increase (Decrease) to unrecognized tax benefits resulting from a state filing tax position ​ 22 ​ — ​ — Balance of gross unrecognized tax benefits as of End of Year ​ $ 700 ​ $ 678 ​ $ 678 ​ ​ NOTE 8 - Debt As of June 30, 2023 and 2022, debt consisted of a revolving line of credit of $ 11,000,000 (“Revolver Agreement”), with no amounts outstanding, which expires in June 2024. 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 fiscal year ended June 30, 2022 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 Options The Company follows ASC 718 (“Share-Based Payment”), which requires that all share-based payments to employees, including stock options, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period. For the fiscal years ended June 30, 2023, 2022 and 2021, the Company recorded non-cash compensation expense of $ 1,464,000 ($ .04 per basic and diluted share), $ 1,649,000 ($ .04 per basic and diluted share) and $ 435,000 ($ .01 per basic and diluted share), respectively, relating to stock-based compensation. FS-21 Table of Contents 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), 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. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At June 30, 2023, 521,580 stock options were outstanding, 247,628 stock options were exercisable and no further stock options were available for grant under this plan. 37,500 options were granted under this plan during the year ended June 30, 2023. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ 2021 Risk-free interest rates ​ 3.03 % 1.64 % n/a ​ Expected lives ​ 7.27 Years ​ 6.18 Years ​ n/a ​ Expected volatility ​ 43 % 43 % n/a ​ Expected dividend yields ​ 0 % 0 % n/a ​ ​ The Company uses a weighted-average expected stock-price volatility assumption that is a combination of both current and historical implied volatilities of the underlying stock. The implied volatilities were obtained from publicly available data sources. For the weighted-average expected option life assumption, the Company considers the exercise behavior of past grants. The average risk-free interest rate is based on the U.S. Treasury Bond rate for the expected term of the options and the average dividend yield is based on historical experience. The following table reflects activity under the 2012 Plan for the fiscal years ended June 30,: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ Weighted average ​ ​ ​ ​ Weighted average ​ ​ ​ ​ Weighted average ​ Options exercise price Options exercise price Options exercise price Outstanding, beginning of year ​ ​ 523,080 ​ $ 18.59 ​ ​ 214,080 ​ $ 9.59 ​ ​ 235,680 ​ $ 9.42 Granted ​ ​ 37,500 ​ $ 26.94 ​ ​ 338,000 ​ $ 23.17 ​ ​ — ​ ​ — Forfeited/Lapsed ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 13,000 ) ​ ​ 6.91 Exercised ​ ​ ( 39,000 ) $ 10.44 ​ ( 29,000 ) $ 5.45 ​ ( 8,600 ) ​ 9.04 Outstanding, end of period ​ ​ 521,580 ​ $ 19.37 ​ 523,080 ​ $ 18.59 ​ 214,080 ​ $ 9.59 Exercisable, end of period ​ ​ 247,628 ​ $ 17.16 ​ 176,752 ​ $ 14.68 ​ 98,176 ​ $ 8.07 Weighted average fair value at grant date of options granted ​ $ 13.36 ​ ​ ​ $ 12.16 ​ ​ ​ $ n/a ​ ​ Total intrinsic value of options exercised ​ $ 822,000 ​ ​ ​ ​ $ 502,000 ​ ​ ​ $ 65,000 ​ ​ Total intrinsic value of options outstanding ​ $ 7,968,000 ​ ​ ​ ​ $ 1,916,000 ​ ​ ​ $ 1,840,000 ​ ​ Total intrinsic value of options exercisable ​ $ 4,330,000 ​ ​ ​ ​ $ 1,218,000 ​ ​ ​ $ 993,000 ​ ​ ​ 37,500 , 338,000 and 0 options were granted during the fiscal years ended June 30, 2023, 2022 and 2021, respectively. 39,000 , 29,000 and 8,600 options were exercised during the fiscal years ended June 30, 2023, 2022 and 2021, respectively. 29,600 of the 39,000 stock options exercised during the fiscal year ended June 30, 2023, were settled by exchanging 10,150 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. 1,000 of the 29,000 stock options exercised during the fiscal year ended June 30, 2022, were settled by exchanging 153 shares of the Company’s common stock which were retired and returned to FS-22 Table of Contents unissued status upon receipt. 8,600 stock options exercised during the fiscal year ended June 30, 2021 were settled by exchanging 4,604 shares of the Company's common stock which were retired and returned to unissued status upon receipt. $ 84,000 , $ 155,000 and $ 0 was received from the remaining option exercises for the fiscal years ended June 30, 2023, 2022 and 2021, respectively, 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 2012 Employee Plan at June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options outstanding ​ Options exercisable ​ ​ Weighted average ​ ​ ​ ​ ​ ​ ​ Number ​ remaining ​ Weighted average ​ Number ​ Weighted average Range of exercise prices ​ outstanding ​ contractual life ​ exercise price ​ exercisable ​ exercise price $ 3.15 ‑ $ 26.94 ​ 521,580 ​ 7.67 ​ $ 19.37 ​ 247,628 ​ $ 17.16 ​ ​ 521,580 ​ 7.67 ​ $ 19.37 ​ 247,628 ​ $ 17.16 ​ As of June 30, 2023 and 2022, there was $ 1,971,000 and $ 2,489,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan, respectively. 109,876 , 107,576 and 44,776 options vested during the years June 30, 2023, 2022 and 2021, respectively. The total grant date fair value of the options vesting during the fiscal years ended June 30, 2022, 2021 and 2020 under this plan was $ 981,000 , $ 1,040,000 and $ 244,000 , 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 100,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries. Under the 2012 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20 % per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At June 30, 2023, 20,400 stock options were outstanding, 13,920 stock options were exercisable and 0 stock options were available for grant under this plan. No stock options were granted under this plan during the year ended June 30, 2023. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ 2021 Risk-free interest rates n/a ​ 1.68 % n/a ​ Expected lives n/a ​ 6.18 Years ​ n/a ​ Expected volatility n/a ​ 43 % n/a ​ Expected dividend yields n/a ​ 0 % n/a ​ ​ FS-23 Table of Contents The following table reflects activity under the 2012 Non-Employee Plan for the fiscal years ended June 30,: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ Weighted average ​ ​ Weighted average ​ ​ Weighted average ​ ​ Options ​ exercise price ​ Options ​ exercise price ​ Options ​ exercise price Outstanding, beginning of year ​ ​ 20,400 ​ $ 14.39 ​ ​ 12,000 ​ $ 6.55 ​ ​ 24,000 ​ $ 5.15 Granted ​ ​ — ​ ​ — ​ ​ 9,600 ​ $ 22.93 ​ ​ — ​ ​ — Forfeited/Lapsed ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 9,600 ) ​ $ 3.59 Exercised ​ ​ — ​ ​ — ​ ( 1,200 ) $ 4.35 ​ ( 2,400 ) $ 4.35 Outstanding, end of period ​ ​ 20,400 ​ $ 14.39 ​ 20,400 ​ $ 14.39 ​ 12,000 ​ $ 6.55 Exercisable, end of period ​ ​ 13,920 ​ $ 10.99 ​ 11,280 ​ $ 8.92 ​ 6,240 ​ $ 6.04 Weighted average fair value at grant date of options granted ​ ​ n/a ​ ​ ​ ​ $ 12.58 ​ ​ ​ n/a ​ Total intrinsic value of options exercised ​ ​ n/a ​ ​ ​ ​ $ 19,000 ​ ​ $ 31,000 ​ Total intrinsic value of options outstanding ​ $ 413,000 ​ ​ ​ ​ $ 149,000 ​ ​ $ 140,000 ​ Total intrinsic value of options exercisable ​ $ 329,000 ​ ​ ​ ​ $ 136,000 ​ ​ $ 76,000 ​ ​ 0 , 9,600 and 0 options were granted during the fiscal years ended June 30, 2023, 2022 and 2021, respectively. 0 , 1,200 and 2,400 options were exercised during the fiscal years ended June 30, 2023, 2022 and 2021, respectively. 1,200 stock options exercised during the fiscal year ended June 30, 2022 were settled by exchanging 258 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. 2,400 options exercised during the fiscal year ended June 30, 2021 were settled by exchanging 612 shares of the Company common stock which were retired and returned to unissued status upon receipt. $ 0 was received from the remaining option exercises for each of the fiscal years ended June 30, 2023, 2022 and 2021, and the actual tax benefit realized for the tax deductions from option exercises was $ 0 , $ 4,000 and $ 6,000 in fiscal 2023, 2022 and 2021 respectively. The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options outstanding ​ Options exercisable ​ ​ ​ ​ Weighted average ​ Weighted ​ ​ ​ Weighted ​ ​ Number ​ remaining ​ average exercise ​ Number ​ average exercise Range of exercise prices ​ outstanding contractual life ​ price exercisable ​ price $ 4.35 - $ 22.93 ​ 20,400 ​ 6.65 ​ $ 14.39 ​ 13,920 ​ $ 10.99 ​ ​ 20,400 ​ 6.65 ​ $ 14.39 ​ 13,920 ​ $ 10.99 ​ As of June 30, 2023 and 2022, there was $ 46,000 and $ 70,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan, respectively. 2,640 , 6,240 and 5,520 options vested during the years June 30, 2023, 2022 and 2021, respectively. The total grant date fair value of the options vesting during each of the fiscal years ended June 30, 2022, 2021 and 2020 under this plan was $ 24,000 , $ 39,000 and $ 18,000 , 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 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 June 30, 2023, 75,000 stock options were outstanding, 50,720 stock options were exercisable and 0 stock options were available for grant under this plan. No stock options were granted under this plan during the year ended June 30, 2023. FS-24 Table of Contents The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ 2021 Risk-free interest rates ​ n/a ​ 1.68 % n/a ​ Expected lives ​ n/a ​ 6.18 Years ​ n/a ​ Expected volatility ​ n/a ​ 43 % n/a ​ Expected dividend yields ​ n/a ​ 0 % n/a ​ ​ The following table reflects activity under the 2018 Non-Employee plan for the fiscal year ended June 30,: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ Weighted average ​ ​ Weighted average ​ ​ Weighted average ​ ​ Options exercise price ​ Options exercise price ​ Options exercise price Outstanding, beginning of year ​ ​ 89,000 ​ $ 14.91 ​ ​ 70,100 ​ $ 11.93 ​ ​ 96,800 ​ $ 11.74 Granted ​ ​ — ​ — ​ 23,500 $ 22.93 ​ — ​ — Forfeited/Lapsed ​ ​ — ​ — ​ — ​ — ​ ( 23,500 ) ​ 11.68 Exercised ​ ​ ( 14,000 ) $ 15.32 ​ ( 4,600 ) $ 10.43 ​ ( 3,200 ) ​ 8.10 Outstanding, end of period ​ ​ 75,000 ​ $ 14.83 ​ 89,000 ​ $ 14.91 ​ 70,100 ​ $ 11.93 Exercisable, end of period ​ ​ 50,720 ​ $ 12.87 ​ 45,040 ​ $ 12.98 ​ 29,960 ​ $ 11.68 Weighted average fair value at grant date of options granted ​ ​ n/a ​ ​ ​ ​ $ 12.58 ​ ​ ​ ​ ​ n/a ​ ​ ​ Total intrinsic value of options exercised ​ $ 209,000 ​ ​ ​ ​ $ 58,000 ​ ​ ​ ​ $ 29,000 ​ ​ ​ Total intrinsic value of options outstanding ​ $ 1,486,000 ​ ​ ​ ​ $ 561,000 ​ ​ ​ ​ $ 439,000 ​ ​ ​ Total intrinsic value of options exercisable ​ $ 1,104,000 ​ ​ ​ ​ $ 354,000 ​ ​ ​ ​ $ 195,000 ​ ​ ​ ​ 0 , 23,500 and 0 options were granted during the fiscal years ended June 30, 2023, 2022 and 2021, respectively. 14,000 , 4,600 and 3,200 options were exercised during the fiscal years ended June 30, 2023, 2022 and 2021, respectively. 14,000 stock options exercised during the fiscal year ended June 30, 2023 were settled by exchanging 7,235 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. 4,600 stock options exercised during the fiscal year ended June 30, 2022 were settled by exchanging 2,075 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. 3,200 stock options exercised during the fiscal year ended June 30, 2021 were settled by exchanging 1,518 shares of the Company’s common stock which were retired and returned to unissued status upon receipt. $ 0 was received from the remaining option exercises for each of the fiscal years ended June 30, 2023, 2022 and 2021, and the actual tax benefit realized for the tax deductions from option exercises was $ 44,000 , $ 12,000 and $ 6,000 in fiscal 2023, 2022 and 2021, respectively. The following table summarizes information about stock options outstanding under the 2018 Non- Employee Plan at June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options outstanding ​ Options exercisable ​ ​ Weighted average Weighted ​ Weighted ​ ​ Number ​ remaining ​ average exercise ​ Number ​ average exercise Range of exercise prices ​ outstanding ​ contractual life ​ price ​ exercisable ​ price $ 8.10 - $ 22.93 ​ 75,000 6.76 ​ $ 14.83 50,720 ​ $ 12.87 ​ ​ 75,000 6.76 ​ $ 14.83 50,720 ​ $ 12.87 ​ As of June 30, 2023 and 2022, there was $ 135,000 and $ 265,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee Plan, respectively. 19,680 options vested during each of the years June 30, 2023, 2022 and 2021, respectively. The total grant date fair value of the options vesting during the fiscal year ended June 30, 2023, 2022 and 2021 under this plan was $ 149,000 , $ 160,000 and $ 133,000 , respectively. FS-25 Table of Contents 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 June 30, 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. 30,000 options were granted under this plan during the year ended June 30, 2023. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Risk-free interest rates 3.03 - 3.40 % 1.68 % 0.62 % Expected lives 7.23 - 7.27 Years ​ 6.18 Years ​ 10 Years ​ Expected volatility 43 % 43 % 45 % Expected dividend yields 0 % 0 % 0 % ​ The following table reflects activity under the 2020 Non-Employee plan for the fiscal year ended June 30,: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ Weighted average ​ ​ ​ ​ Weighted average ​ ​ ​ ​ Weighted average ​ Options exercise price Options exercise price Options exercise price Outstanding, beginning of year ​ 26,900 $ 18.64 ​ ​ 10,000 $ 11.40 ​ ​ — ​ — Granted ​ 30,000 ​ $ 27.57 ​ ​ 16,900 ​ $ 22.93 ​ ​ 10,000 ​ $ 11.40 Forfeited/Lapsed ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Exercised ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — Outstanding, end of period ​ 56,900 ​ $ 23.35 ​ ​ 26,900 ​ $ 18.64 ​ ​ 10,000 ​ $ 11.40 Exercisable, end of period ​ 18,760 ​ $ 20.73 ​ ​ 7,380 ​ $ 16.68 ​ ​ 2,000 ​ $ 11.40 Weighted average fair value at grant date of options granted ​ $ 13.74 ​ ​ $ 12.58 ​ ​ ​ $ 6.10 ​ ​ Total intrinsic value of options exercised ​ n/a ​ ​ n/a ​ ​ ​ n/a ​ ​ Total intrinsic value of options outstanding ​ $ 643,000 ​ ​ $ 92,000 ​ ​ ​ $ 68,000 ​ ​ Total intrinsic value of options exercisable ​ $ 261,000 ​ ​ $ 37,000 ​ ​ ​ $ 14,000 ​ ​ ​ 30,000 , 16,900 and 10,000 options were granted during the fiscal years ended June 30, 2023, 2022 and 2021, respectively. No options were exercised during the fiscal years ended June 30, 2023, 2022 and 2021. The following table summarizes information about stock options outstanding under the 2020 Non- Employee Plan at June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options outstanding ​ Options exercisable ​ ​ ​ ​ Weighted average ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number ​ remaining ​ Weighted average ​ Number ​ Weighted average Range of exercise prices outstanding contractual life exercise price exercisable exercise price $ 11.40 - $ 30.71 56,900 8.59 ​ $ 23.35 18,760 ​ $ 20.73 ​ 56,900 8.59 ​ $ 23.35 18,760 ​ $ 20.73 ​ As of June 30, 2023 and 2022, there was $ 344,000 and $ 135,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan, respectively. 11,380 , 5,380 and 2,000 options vested during FS-26 Table of Contents the years June 30, 2023, 2022 and 2021, respectively. The total grant date fair value of the options vesting during the fiscal year ended June 30, 2023, 2022 and 2021 under this plan was $ 129,000 , $ 55,000 and $ 12,000 , respectively. 2022 Employee Stock Option Plan In December 2022, the stockholders approved the 2022 Employee Stock Option Plan (the “2022 Employee Plan”). The plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 950,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (“ISOs”) or non-incentive stock options, to valued employees. 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 June 30, 2023, 5,000 stock options were outstanding, 1,000 stock options were exercisable and 945,000 stock options were available for grant under this plan. 5,000 options were granted under this plan during the year ended June 30, 2023. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: ​ ​ ​ ​ ​ ​ 2023 Risk-free interest rates 3.84 % Expected lives 7.28 Years ​ Expected volatility 45 % Expected dividend yields 0.62 % ​ The following table reflects activity under the 2022 Employee plan for the fiscal year ended June 30,: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ ​ ​ ​ ​ Weighted average ​ Options exercise price Outstanding, beginning of year ​ — ​ — Granted ​ 5,000 ​ $ 40.01 Forfeited/Lapsed ​ ​ — ​ ​ — Exercised ​ — ​ — Outstanding, end of period ​ 5,000 ​ $ 40.01 Exercisable, end of period ​ 1,000 ​ $ 40.01 Weighted average fair value at grant date of options granted ​ $ 19.77 ​ Total intrinsic value of options exercised ​ n/a ​ Total intrinsic value of options outstanding ​ $ — ​ Total intrinsic value of options exercisable ​ $ — ​ ​ 5,000 options were granted during the fiscal year ended June 30, 2023. No options were exercised during the fiscal year ended June 30, 2023. The following table summarizes information about stock options outstanding under the 2022 Employee Plan at June 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options outstanding ​ Options exercisable ​ ​ ​ ​ Weighted average ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number ​ remaining ​ Weighted average ​ Number ​ Weighted average Range of exercise prices outstanding contractual life exercise price exercisable exercise price $ 40.01 5,000 9.95 ​ $ 40.01 1,000 ​ $ 40.01 ​ 5,000 9.95 ​ $ 40.01 1,000 ​ $ 40.01 ​ FS-27 Table of Contents As of June 30, 2023, there was $ 74,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan. 1,000 options vested during the year ended June 30, 2023. The total grant date fair value of the options vesting during the fiscal year ended June 30, 2023 under this plan was $ 20,000 . 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 fiscal year ended June 30, 2023, 2022 and 2021, the Company did no t repurchase any shares of its outstanding common stock. Shares repurchased through June 30, 2023 are included in the Company’s Treasury Stock as of June 30, 2023, 2022 and 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 a $ .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 % dividend of the Company’s common stock, payable to stockholder 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. 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. The cash dividend resulted in approximately $ 2,298,000 of cash paid to stockholders. During fiscal 2023, certain employees and directors exercised stock options under the Company's 2012 Employee and 2018 Non-Employee Stock Option Plans totaling 53,000 shares. 43,600 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 17,385 and was based upon the per share price on the effective date of the option exercise. 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. During fiscal 2021, certain employees and directors exercised stock options under the Company's 2012 Employee and Non-Employee and 2018 Non-Employee Stock Option Plans totaling 14,200 shares. All 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 6,734 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 $ 509,000 in offering expenses, which are recorded in selling, general, and administrative expenses in the accompanying condensed consolidated statements of income. FS-28 Table of Contents NOTE 12 - 401(k) Plan The Company maintains a 401(k) plan (“the Plan”) that is available to all U.S. non-union employees and is qualified under Sections 401(a) and 401(k) of the Internal Revenue Code. Company contributions to this plan are discretionary and totaled $ 251,000 , $ 191,000 and $ 138,000 for the years ended June 30, 2023, 2022 and 2021, respectively. NOTE 13 - Commitments and Contingencies Leases 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 fiscal year ended June 30, 2023 and 2022, cash payments against operating lease liabilities totaled $ 335,000 and $ 288,000 , respectively. Supplemental balance sheet information related to operating leases was as follows: ​ ​ ​ ​ ​ Weighted-average remaining lease term 69 Years ​ Weighted-average discount rate ​ 6.25 % ​ The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2023 (in thousands): ​ ​ ​ ​ ​ Year Ending June 30, Amount 2024 ​ $ 316 2025 ​ 299 2026 ​ 282 2027 ​ 267 2028 ​ 253 Thereafter ​ ​ 4,380 Total ​ $ 5,797 ​ Operating lease expense totaled approximately $ 458,000 , $ 319,000 and $ 316,000 , for the fiscal years ended June 30, 2023, 2022 and 2021, respectively. Litigation In the normal course of business, the Company is a party to claims and/or litigation. Management believes that the settlement of such claims and/or litigation, considered in the aggregate, will not have a material adverse effect on the Company’s financial position and results of operations. FS-29 Table of Contents Employment Agreements 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 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-locking products, intrusion and fire alarm systems and video surveillance products for commercial and residential use. The Company also provides wireless communication service for intrusion and fire alarm systems. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment. Sales to unaffiliated customers are primarily shipped from the United States. The Company has customers worldwide with major concentrations in North America. Financial Information Relating to Domestic and Foreign Operations (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ended June 30, ​ ​ 2023 2022 2021 Sales to external customers (1): ​ ​ ​ ​ Domestic ​ $ 168,619 ​ $ 142,059 ​ $ 112,618 Foreign ​ 1,378 ​ 1,534 ​ 1,417 Total Net Sales ​ $ 169,997 ​ $ 143,593 ​ $ 114,035 ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Identifiable assets: ​ ​ ​ United States ​ $ 122,995 ​ $ 98,791 Dominican Republic (2) ​ 43,659 ​ 49,785 Total Identifiable Assets ​ $ 166,654 ​ $ 148,576 ​ (1) All of the Company’s sales originate in the United States and are shipped primarily from the Company’s facilities in the United States. There were no sales into any one foreign country in excess of 10% of total Net Sales. (2) Consists primarily of inventories (2023 = $ 33,477 ; 2022 = $ 38,755 ), operating lease assets (2023 = $ 5,797 ; 2022 = $ 7,350 ) and fixed assets (2023 = $ 3,958 ; 2022 = $ 3,253 ) located at the Company’s principal manufacturing facility in the Dominican Republic. ​ FS-30 Table of Contents NOTE 15 – Subsequent Events The Company has evaluated subsequent events occurring after the date of the consolidated financial statements for events requiring recording or disclosure in the consolidated financial statements. 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. ​ FS-31 Table of Contents ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None ​ ITEM 9A: CONTROL AND PROCEDURES Evaluation of Disclosure Controls and Procedures. At the conclusion of the period ended June 30, 2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2023. Management’s Annual Report on Internal Control over Financial Reporting. Management’s Report on Internal Control over Financial Reporting is set forth on page FS-1. Audit Opinion on Internal Control over Financial Reporting. The effectiveness of the Company’s internal control over financial reporting has been audited by Baker Tilly US , LLP an independent registered public accounting firm, as stated in their report, which is included herein on page FS-2. Limitations on Internal Control . All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Board of Directors of the Company has an Audit Committee comprised of three non-management directors. The Committee meets periodically with financial management and the independent auditors to review accounting, control, audit and financial reporting matters. Baker Tilly US, LLP has full and free access to the Audit Committee, with and without the presence of management. Changes in Internal Control over Financial Reporting . There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected or is likely to materially affect our internal controls over financial reporting. ITEM 9B: OTHER INFORMATION N o n e PART III ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information about our directors appearing in the Company’s Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K (“Proxy Statement”) under the heading “Election of Directors”, is incorporated herein by reference. We have adopted a Code of Ethics which applies to our senior executive and financial officers, among others. The Code is posted on our website, www.napcosecurity.com, under the “Investors – Other” caption. We intend to make all required disclosures regarding any amendment to, or waiver of, a provision of the Code of Ethics for senior executive and financial officers by posting such information on our website. The information appearing in the Proxy Statement relating to the members of the Audit Committee and the Audit Committee financial expert under the headings “Corporate Governance and Board Matters – Board Structure and Committee Composition” and “Corporate Governance and Board Matters – Board Structure and Committee Composition – Audit Committee” and the information appearing in ​ Table of Contents the Proxy Statement under the heading “Delinquent Section 16(c) Beneficial Ownership Reporting Compliance” is incorporated herein by this reference. The information set forth in the Proxy Statement under the heading “Information Concerning Executive Officers” is incorporated herein by reference. ITEM 11: EXECUTIVE COMPENSATION ​ ​ ​ ​ ​ ​ ​ The information appearing in the Proxy Statement under the heading “Executive Compensation” and the information appearing in the Proxy Statement relating to the compensation of directors under the caption “Compensation of Directors” are incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information appearing in the Proxy Statement under the heading “Beneficial Ownership of Common Stock” is incorporated herein by this reference. Information regarding Equity Compensation Plan Information as of June 30, 2023 is included in Item 5. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information appearing in the Proxy Statement under the headings “Corporate Governance and Board Matters – Independence of Directors,” “Corporate Governance and Board Matters – Board Structure and Committee Composition,” “Corporate Governance – Policy with Respect to Related Person Transactions,” and “Executive Compensation – Certain Transactions” is incorporated herein by this reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information appearing in the Proxy Statement under the headings “Principal Accountant Fees” and “Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors” is incorporated herein by this reference. ​ Table of Contents PART IV ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) 1. Financial Statements The following consolidated financial statements of NAPCO Security Technologies, Inc. and its subsidiaries are included in Part II, Item 8: ​ Page Management Report on Internal Control FS-1 Report of Independent Registered Public Accounting Firm (PCAOB ID 23) FS-2 Consolidated Financial Statements: ​ ​ Consolidated Balance Sheets as of June 30, 2023 and 2022 FS-6 Consolidated Statements of Income for the Fiscal Years Ended June 30, 2023, 2022 and 2021 FS-7 Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended June 30, 2023, 2022 and 2021 FS-8 Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 2023, 2022 and 2021 FS-9 Notes to Consolidated Financial Statements FS-10 ​ (a) 2. Financial Statement Schedules The following consolidated financial statement schedules of NAPCO Security Technologies, Inc. and its subsidiaries are included in Part II, Item 8: B. Supplementary Financial Data (a) 3. and (b). Exhibits ​ Management Contracts designated by asterisk. Exhibit No. Title Ex-3.(i) Certificate of Amendment of Certificate of Incorporation Exhibit-3.(i) to Report on Form 10-K (Commission file No. 0-10004) for the fiscal year ended June 30, 2011 Ex-3.(ii) Certificate of Incorporation as amended Exhibit-3.(ii) to Report on Form 10-K (Commission file No. 0-10004) for the fiscal year ended June, 30 2011 Ex-3.(iii) Second Amended and Restated By-Laws Exhibit 10.3 to Report on Form 8-K (Commission file No. 0-10004) filed on September 8, 2020 Ex-3.(iv) Amendment to the Amended and Restated Certificate of Incorporation Exhibit 3.(iv) to Report on Form 8-K (Commission file No. 0-10004) filed on December 7, 2021 ​ ​ Table of Contents Ex 4.01 Third Amended and Restated Credit Agreement dated June 29, 2012. Exhibit 4.01 to Report on Form 8-K (Commission file No. 0-10004) dated June 29, 2012 Ex 4.02 Second Amended and Restated Term A Loan Note Exhibit 4.02 to Report on Form 8-K (Commission file No. 0-10004) dated June 29, 2012 Ex 4.03 Second Amended and Restated Term B Loan Note Exhibit 4.03 to Report on Form 8-K (Commission file No. 0-10004) dated June 29, 2012 Ex 4.04 Second Amended and Restated Revolving Credit Note Exhibit 4.04 to Report on Form 8-K (Commission file No. 0-10004) dated June 29, 2012 Ex 4.05 Second Amended and Restated Swing Line Note Exhibit 4.05 to Report on Form 8-K (Commission file No. 0-10004) dated June 29, 2012 Ex 4.06 Continuing General Security Agreement Exhibit 4.06 to Report on Form 8-K (Commission file No. 0-10004) dated June 29, 2012 Ex 4.07 Reaffirmation of Collateral Documents Exhibit 4.07 to Report on Form 8-K (Commission file No. 0-10004) dated June 29, 2012 Ex 4.08 Reaffirmation of Negative Pledge Exhibit 4.08 to Report on Form 8-K (Commission file No. 0-10004) dated June 29, 2012 Ex 4.09 Amendment No. 3 to Third Amended and Restated Credit Agreement Item 1.01 (e) contained in Report on Form 8-K (Commission file No. 0-10004) dated June 28, 2016 Ex 4.10 Description of the Company’s Securities E-17 *Ex-10.A (ii) 2002 Employee Stock Option Plan Exhibit 10.A(II) to Report on Form 10-K (Commission file No. 0-10004) for the fiscal year ended June 30, 2008 *Ex-10.B 2012 Employee Stock Option Plan Appendix A to Proxy Statement dated October 29, 2012 for Annual Meeting of Stockholders to be held on December 11, 2012 *Ex-10.C 2012 Non-Employee Stock Option Plan Appendix B to Proxy Statement dated October 29, 2012 for Annual Meeting of Stockholders to be held on December 11, 2012 *Ex-10.D 2018 Non-Employee Stock Option Plan Appendix A to Proxy Statement dated October 29, 2018 for Annual Meeting of Stockholders to be held on December 11, 2018 *Ex-10.E 2020 Non-Employee Stock Option Plan Appendix A to Proxy Statement dated April 13, 2020 for Annual Meeting of Stockholders to be held on May 21, 2020 *Ex-10.I Amended and Restated Employment Agreement with Richard Soloway Exhibit 10.I to Report on Form 10-K (Commission file No. 0-10004) for fiscal year ended June 30, 2010 ​ Table of Contents *Ex-10.M Two (2) Year Extension, dated October 21, 2021, of Employment Agreement between the Registrant and Michael Carrieri E-24 *Ex-10.N Form of Indemnification Agreement adopted September 3, 2020 Exhibit 10.N to Report on Form 10-K (Commission file No. 0-10004) for fiscal year ended June 30, 2020 *Ex-10.O Severance Agreement between the Registrant and Kevin S Buchel dated December 30, 2015 Exhibit 10.O to Report on Form 10-Q (Commission file No. 0-10004) dated February 1, 2016 *Ex-10.P Compensation Agreement between the Registrant and Stephen Spinelli dated April 6, 2020 Exhibit 10.P to Report on Form 10-K (Commission file No. 0-10004) dated September 13, 2021 Ex-14.0 Code of Ethics Exhibit 14.0 to Report on Form 10-K (Commission file No. 0-10004) for the fiscal year ended June 30, 2010 Ex-21.0 Subsidiaries of the Registrant E-18 Ex-23.1 Consent of Independent Auditors E-19 Ex-31.1 Section 302 Certification of Chief Executive Officer E-20 Ex-31.2 Section 302 Certification of Chief Financial Officer E-21 Ex-32.1 Certification of Chief Executive Officer Pursuant to 18 USC Section 1350 and Section 906 of Sarbanes - Oxley Act of 2002 E-22 Ex-32.2 Certification of Chief Financial Officer Pursuant to 18 USC Section 1350 and Section 906 of Sarbanes - Oxley Act of 2002 E-23 Ex-101.INS Inline XBRL Instance Document ** Ex-101.SCH Inline XBRL Taxonomy Extension Schema Document** Ex-101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document** Ex-101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document** Ex-101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document** Ex-101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document** Ex-104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) ​ ​ Table of Contents ​ ​ SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. September 8, 2023 NAPCO SECURITY TECHNOLOGIES, INC. (Registrant) ​ By: /s/ RICHARD SOLOWAY Richard Soloway Chairman of the Board of Directors, President and Secretary (Principal Executive Officer) ​ Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and the dates indicated. ​ Signature Title Date /s/ RICHARD SOLOWAY Chairman of the Board of Directors, September 8, 2023 Richard Soloway President and Secretary and Director (Principal Executive Officer) /s/ KEVIN S. BUCHEL Executive Vice President September 8, 2023 Kevin S. Buchel and Chief Financial Officer (Principal Financial and Accounting Officer) /s/ PAUL STEPHEN BEEBER Director September 8, 2023 Paul Stephen Beeber /s/ RICK LAZIO Director September 8, 2023 Rick Lazio /s/ DONNA SOLOWAY Director September 8, 2023 Donna Soloway /s/ ROBERT UNGAR Director September 8, 2023 Robert Ungar /s/ ANDREW J. WILDER Director September 8, 2023 Andrew J. Wilder ​ ​ ​ ​ ​ /s/ DAVID A. PATERSON Director September 8, 2023 David A. Paterson ​ ​ ​ ​ ​ ​ ​ ​