What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-05-08 · 190 added, 270 removed, 504 unchanged (48% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2023

September 30, 2023

June 30, 2023

4 unchanged sentences

Marketable securities

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

Accounts receivable, net of allowance for credit losses of $ 107 and $ 131 as of September 30, 2023 and June 30, 2023, respectively

Inventories, net

Income tax receivable

Prepaid expenses and other current assets

9 unchanged sentences

Accrued salaries and wages

Accrued income taxes

Total Current Liabilities

Deferred income taxes

Accrued income taxes

4 unchanged sentences

Common Stock, par value $ 0.01 per share;

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

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

and 36,767,780 and 36,734,482 shares outstanding, respectively

100,000,000 shares authorized as of September 30, 2023 and June 30, 2023;

39,663,812 shares issued ;

and 36,770,097 shares outstanding as of each date.

Additional paid-in capital

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Three Months ended March 31,

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

Equipment revenues

Service revenues

Cost of sales:

Equipment related expenses

Service-related expenses

Operating expenses:

Research and development

Selling, general, and administrative expenses

Total Operating Expenses

Operating Income

Other income (expense):

Interest and other income (expense), net

Income before Provision for Income Taxes

Provision for Income Taxes

Income per share:

Weighted average number of shares outstanding:

See accompanying notes to condensed consolidated financial statements.

NAPCO SECURITY TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Nine Months Ended March 31,

Three Months ended September 30,

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

11 unchanged sentences

Interest and other income (expense), net

Gain on extinguishment of debt

Income before Provision for Income Taxes

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (unaudited)

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

Three months ended September 30, 2023 (in thousands, except for share data)

Treasury Stock

2 unchanged sentences

Stock-based compensation expense

Stock options exercised

Cash dividend

Balances at September 30, 2023

( 2,893,715 )

Stock-based compensation expense

Stock options exercised

Balances at December 31, 2022

( 2,893,715 )

Stock-based compensation expense

Stock options exercised

Balances at March 31, 2023

( 2,893,715 )

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

Three months ended September 30, 2022 (in thousands, except share data)

Treasury Stock

5 unchanged sentences

( 2,893,715 )

Stock-based compensation expense

Stock options exercised

Balances at December 31, 2021

( 2,893,715 )

Stock-based compensation expense

Stock options exercised

Balances at March 31, 2022

( 2,893,715 )

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months ended March 31,

Three Months ended September 30,

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

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

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

Depreciation and amortization

1 unchanged sentence

Interest income on other investments

Unrealized loss (gain) on marketable securities

Unrealized loss on marketable securities

(Recovery) of credit losses

2 unchanged sentences

Stock based compensation expense

Gain on extinguishment of debt

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses and other current assets

Income tax receivable

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

5 unchanged sentences

Purchases of other investments

Redemption of other investments

Net Cash Used in Investing Activities

1 unchanged sentence

Proceeds from stock option exercises

Net Cash Provided by Financing Activities

Net (decrease) increase in Cash and Cash Equivalents

Cash paid for dividend

Net Cash (Used in) Provided by Financing Activities

Net increase (decrease) in Cash and Cash Equivalents

CASH AND CASH EQUIVALENTS - Beginning

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

March 31, 2023

September 30, 2023

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

4 unchanged sentences

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

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

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

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

3 unchanged sentences

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

The monthly recurring service revenue, which is less susceptable 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.

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

Significant Accounting Policies :

3 unchanged sentences

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

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

The additional shares were distributed on January 4, 2022.

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

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

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

Accounting Estimates

4 unchanged sentences

The methods and assumptions used to estimate the fair value of the following classes of financial instruments were:

Current Assets and Current Liabilities - The carrying amount of cash and cash equivalents, certificates of deposits, current receivables and payables and

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

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 September 30, 2023 and June 30, 2023 due to their short-term maturities.

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

Cash and Cash Equivalents and Investments – other

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

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

Cash and cash equivalents include approximately $ 15,630,000 of short-term time deposits, consisting of several certificates of deposit totaling $ 15,366,000 and $ 264,000 in money market funds as of September 30, 2023.

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.

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

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

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

March 31, 2023

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

September 30, 2023

June 30, 2023

2 unchanged sentences

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

March 31, 2023

September 30, 2023

June 30, 2023

1 unchanged sentence

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

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

March 31, 2023

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

September 30, 2023

Balance Sheet Classification

8 unchanged sentences

10/23/2023 - 3/21/2024

The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of March 31, 2023 and June 30, 2022.

The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of September 30, 2023 and June 30, 2023.

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

4 unchanged sentences

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

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

During the three months ended September 30, 2023, the Company did not record an impairment charge regarding its investment in marketable securities because

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

Accounts Receivable

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

Accounts receivable is stated net of the reserves for credit losses of $ 107,000 and $ 131,000 as of September 30, 2023 and June 30, 2023, respectively.

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

24 unchanged sentences

Intangible assets consisted of the follows (in thousands):

March 31, 2023

September 30, 2023

June 30, 2023

Customer relationships

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

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

Amortization expense for intangible assets subject to amortization was approximately $ 84,000 and $ 90,000 for the three months ended September 30, 2023 and 2022, respectively.

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

4 unchanged sentences

and 2028 - $ 269,000 .

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

The weighted average remaining amortization period for intangible assets was 15.3 years and 15.5 years at September 30, 2023 and June 30, 2023, respectively.

Revenue Recognition

19 unchanged sentences

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

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

$ 655,000 , respectively.

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

Advertising expense for the three months ended September 30, 2023 and 2022 was $ 761,000 and $ 754,000 , respectively.

Research and Development Costs

Research and development (“R&D”) costs incurred by the Company are charged to expense as incurred and are included in operating expenses in the consolidated statements of income.

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

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

Company-sponsored R&D expense for the three months ended September 30, 2023 and 2022 was $ 2,437,000 and $ 2,428,000 , respectively.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

8 unchanged sentences

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

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

The following provides a reconciliation of information used in calculating the per share amounts for the three months ended September 30, 2023 and 2022 (in thousands, except share and per share data):

Weighted Average Shares

2 unchanged sentences

Stock Options

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

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

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

Weighted Average

Net Income per

Effect of Dilutive Securities:

Stock Options

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

Options to purchase 5,000 and 62,500 shares of common stock were excluded for the three months ended September 30, 2023 and 2022, respectively, and were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive.

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

Stock-Based Compensation

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

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 $ 322,000 and $ 35,000 were recognized for the three months ended March 31, 2023 and 2022, respectively.

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

Stock-based compensation costs of $ 307,000 and $ 477,000 were recognized for the three months ended September 30, 2023 and 2022, respectively.

Foreign Currency

2 unchanged sentences

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

Therefore, no realized and unrealized gains and losses associated with foreign currency translation are recorded for the three or nine months ended March 31, 2023 or 2022.

Therefore, no realized and unrealized gains and losses associated with foreign currency translation are recorded for the three months ended September 30, 2023 or 2022.

Comprehensive Income

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

For the three months ended September 30, 2023 and 2022, the Company’s operations did not give rise to material items includable in comprehensive income, which were not already included in net income.

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

5 unchanged sentences

Shipping and Handling Sales and Costs

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

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

The Company records the amount billed to customers for shipping and handling in net sales ($ 83,000 and $ 112,000 in the three months ended September 30, 2023 and 2022, respectively);

and classifies the costs associated with these sales in cost of sales ($ 371,000 and $ 394,000 in the three months ended September 30, 2023 and 2022, respectively).

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

2016-02, Leases (Topic 842) .

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

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.

3 unchanged sentences

Reference Rate Reform (ASC Topic 848)

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

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

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, which was available to it through June 30, 2023, has shifted to the Benchmark Replacement as defined in the agreement with the bank.

The new benchmark rate is the Secured Overnight Financing Rate (SOFR) (see Note 8).

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

5 unchanged sentences

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

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

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

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

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

As of September 30, 2023 and June 30, 2023, the Company included refund liabilities of approximately $ 3,833,000 and $ 5,521,000 , respectively, in current liabilities.

As of September 30, 2023 and June 30, 2023, the Company included return-related assets of approximately $ 1,201,000 and $ 1,338,000 , respectively, in other current assets.

As a percentage of gross sales, returns, rebates and allowances were 4 % and 5 % for the three months ended September 30, 2023 and 2022, respectively.

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

2 unchanged sentences

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

Three months ended March 31,

Nine months ended March 31,

Three months ended September 30,

Major Product Lines:

5 unchanged sentences

Such risks of loss manifest themselves differently, depending on the nature of the concentration, and vary in significance.

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

As of June 30, 2022, the accounts receivable balance with this respective customer did not exceed 10%.

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

The Company had another customer which the accounts receivable balance with this respective customer did not exceed 10% as of March 31, 2023, however the accounts receivable balance comprised of 16 % as of June 30, 2022.

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

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

Sales for the three and nine months ended March 31, 2023 was 12 % and 10 %, respectively.

Sales to this customer did not exceed 10% of net sales during the three or nine months ended March 31, 2022.

The Company had two customers with an accounts receivable balance that comprised of 13 % and 10 % as of September 30, 2023.

As of June 30, 2023, the accounts receivable balance with these respective customers were 19 % and 14 %.

Sales to either of these customers did not exceed 10% of net sales during the three months ended September 30, 2023, however sales to one of these two customers were 12 % for the three months ended September 30, 2022.

There were no other customers who had sales that comprised of 10% or more of net sales for the 3 months ended September 30, 2023 and 2022.

NOTE 4 – Marketable Securities

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

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

Three months ended March 31,

Nine months ended March 31,

The disaggregated net gains and losses

on the marketable securities recognized within the accompanying condensed consolidated statements of income for the three months ended September 30, 2023 and 2022, are as follows (in thousands):

Three months ended September 30,

Net gains recognized during the period on marketable securities

8 unchanged sentences

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

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

March 31, 2023

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

September 30, 2023

June 30, 2023

5 unchanged sentences

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

September 30,

Component parts

4 unchanged sentences

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

March 31, 2023

September 30, 2023

June 30, 2023

6 unchanged sentences

accumulated depreciation and amortization

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

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

Depreciation and amortization expense on property, plant, and equipment was approximately $ 453,000 and $ 367,000 for the three months ended September 30, 2023 and 2022, respectively.

NOTE 7 - Income Taxes

3 unchanged sentences

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

For the nine months ended March 31, 2023 and March 31, 2022, the Company recognized net income tax expense of $ 3,450,000 and $ 1,771,000 , respectively.

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

For the three months ended September 30, 2023 and September 30, 2022, the Company recognized net income tax expense of $ 1,517,000 and $ 461,000 , respectively.

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

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

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

As of September 30, 2023, the Company had accrued interest totaling $ 162,000 , as well as $ 700,000 of unrecognized net tax benefits that, if recognized, would favorably affect the Company’s effective income tax rate in any future period.

For the three months ended September 30, 2023, additional interest expense was accrued for in the amount of $ 23,000 .

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

1 unchanged sentence

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

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

As of September 30, 2023, we remain subject to examination in all tax jurisdictions for all relevant jurisdictional statutes for fiscal years 2018 and thereafter.

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

1 unchanged sentence

NOTE 8 - Long-Term Debt

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

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

March 31, 2023

June 30, 2022

Interest Rate

Revolving line of credit:

Current maturities

Long-term debt

As of September 30, 2023 and June 30, 2023, the Company had a revolving line of credit of $ 11,000,000 (“Revolver Agreement”) 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.

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.

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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 extinguishement was accounted for in accordance with ASC 470 “Debt”.

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.

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The Company follows ASC 718 (“Share-Based Payment”), which requires that all share-based payments to employees, including stock options, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period.

For the three months ended March 31, 2023 and 2022, the Company recorded non-cash compensation expense of $ 322,000 ($ 0.01 per basic and diluted share) and $ 35,000 ($ 0.00 per basic and diluted share), respectively, relating to stock-based compensation.

For the nine months ended March 31, 2023 and 2022, the Company recorded non-cash compensation expense of

$ 1,134,000 ($ 0.03 per basic and diluted share) and $ 1,379,000 ($ 0.04 per basic and diluted share), respectively, relating to stock-based compensation.

2022 Employee Stock Option Plan

The Company’s Board of Directors approved a new Employee Stock Option Plan (the 2022 Employee Plan) in August 2022.

The 2022 Employee Plan was approved by the Company’s shareholders at the Company’s annual shareholder’s meeting in December 2022.

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.

The terms of the 2022 Plan are substantially the same as those of the 2012 Employee Stock Option Plan.

The 2022 Plan is intended to replace the 2012 Employee Stock Option Plan, which expired in 2022.

As of March 31, 2023, no options have been granted under the 2022 Employee Plan.

For the three months ended September 30, 2023 and 2022, the Company recorded non-cash compensation expense of $ 307,000 ($ 0.01 per basic and diluted share) and $ 477,000 ($ 0.01 per basic and diluted share), respectively, relating to stock-based compensation.

2012 Employee Stock Option Plan

5 unchanged sentences

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

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

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

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

At September 30, 2023, 521,580 stock options were outstanding, 258,328 stock options were exercisable and no further stock options were available for grant under this plan.

0 and 37,500 options were granted during the three months ended September 30, 2023 and 2022, respectively.

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

4 unchanged sentences

Expected dividend yields

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

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

Weighted average

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Total intrinsic value of options exercisable

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

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

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

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

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

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

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

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

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

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

0 and 5,200 stock options were exercised during the three months ended September 30, 2023 and 2022, respectively.

$ 45,000 cash was received from the option exercises during the three months ended September 30, 2022.

The actual tax benefit realized for the tax deductions from option exercises during the three months ended September 30, 2022 was $ 0 .

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at September 30, 2023:

Options outstanding

8 unchanged sentences

$ 3.15 ‑ $ 26.94

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

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

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

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

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

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

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

As of September 30, 2023, there was $ 1,738,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan.

0 and 37,500 options were granted during the three months ended September 30, 2023 and 2022, respectively.

10,700 and 12,300 options vested during the three months ended September 30, 2023 and 2022, respectively.

The total grant date fair value of the options vesting during the three months ended September 30, 2023 and 2022 under this plan was $ 124,000 and $ 129,000 , respectively.

2012 Non-Employee Stock Option Plan

4 unchanged sentences

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

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

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

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

At September 30, 2023, 20,400 stock options were outstanding, 13,920 stock options were exercisable and no further stock options were available for grant under this plan.

There were no options granted during the three months ended September 30, 2023 or 2022.

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

4 unchanged sentences

Expected dividend yields

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

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

Weighted average

10 unchanged sentences

Total intrinsic value of options exercisable

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

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

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

No stock options were exercised during the three months ended September 30, 2023 or 2022, respectively.

No cash was received from option exercises during the three months ended September 30, 2023 or 2022, respectively, and the actual tax benefit realized for the tax deductions from option exercises was $ 0 for both periods.

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at September 30, 2023:

Options outstanding

6 unchanged sentences

$ 4.35 - $ 22.93

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

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

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

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

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

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

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

As of September 30, 2023, there was $ 40,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan.

No options were granted during the three months ended September 30, 2023 and 2022, respectively.

No options vested during the three months ended September 30, 2023 and 2022.

2018 Non-Employee Stock Option Plan

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

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

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

stock to be acquired by the holders of such awards.

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

1 unchanged sentence

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

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

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

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

At September 30, 2023, 75,000 stock options were outstanding, 50,720 stock options were exercisable and no further stock options were available for grant under this plan.

There were no options granted during the three months ended September 30, 2023 and 2022.

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

4 unchanged sentences

Expected dividend yields

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

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

Weighted average

10 unchanged sentences

Total intrinsic value of options exercisable

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

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

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

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

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

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

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

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

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

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

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

0 and 6,300 options were exercised during the three months ended September 30, 2023 and 2022, respectively.

The 6,300 options that were exercised during the three months ended September 30, 2022, were settled by exchanging 3,020 shares of the Company’s common stock which were retired and returned to unissued status upon receipt.

No cash was received from option exercises during the three months ended September 30, 2022, and the actual tax benefit realized for the tax deductions from option exercises was $ 21,000 .

The following table summarizes information about stock options outstanding under the 2018 Non-Employee Plan at September 30, 2023:

Options outstanding

6 unchanged sentences

$ 8.10 - $ 22.93

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

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

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

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

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

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

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

As of September 30, 2023, there was $ 104,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee Plan.

No options were granted during the three months ended September 30, 2023 and 2022, respectively.

No options vested during the three months ended September 30, 2023 and 2022.

2020 Non-Employee Stock Option Plan

4 unchanged sentences

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

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

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

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

At September 30, 2023, 56,900 stock options were outstanding, 25,760 stock options were exercisable and 43,100 stock options were available for grant under this plan.

0 and 25,000 options were granted during the three months ended September 30, 2023 and 2022, respectively.

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

2 unchanged sentences

Expected lives

7.23 - 7.27 Years

Expected volatility

Expected dividend yields

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

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

Weighted average

10 unchanged sentences

Total intrinsic value of options exercisable

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

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

The following table summarizes information about stock options outstanding under the 2020 Non-Employee Plan at March 31, 2023:

No stock options were exercised during the three months ended September 30, 2023 or 2022.

No cash was received from option exercises during either of the three months ended September 30, 2023 or 2022 and the actual tax benefit realized for the tax deductions from option exercises was $ 0 for both periods.

The following table summarizes information about stock options outstanding under the 2020 Non-Employee Plan at September 30, 2023:

Options outstanding

8 unchanged sentences

$ 11.40 - $ 30.71

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

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

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

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

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

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

As of September 30, 2023, there was $ 312,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan.

0 and 25,000 options were granted during the three months ended September

30, 2023 and 2022, respectively.

7,000 options vested during both the three months ended September 30, 2023 and 2022.

The total grant date fair value of the options vesting during the three months ended September 30, 2023 and 2022, under this plan was $ 79,000 each period.

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 September 30, 2023, there were no stock options outstanding or exercisable and 950,000 stock options were available for grant under this plan.

There were no options granted during the three months ended September 30, 2023.

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

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

Risk-free interest rates

Expected lives

Expected volatility

Expected dividend yields

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

Weighted average

exercise price

Outstanding, beginning of year

Forfeited/Lapsed

Outstanding, end of period

Exercisable, end of period

Weighted average fair value at grant date of options granted

Total intrinsic value of options exercised

Total intrinsic value of options outstanding

Total intrinsic value of options exercisable

No options were exercised during the three months ended September 30, 2023.

No cash was received from option exercises during the three months ended September 30, 2023 and the actual tax benefit realized for the tax deductions from option exercises was $ 0 .

The following table summarizes information about stock options outstanding under the 2022 Employee Plan at September 30, 2023:

Options outstanding

Options exercisable

Weighted average

Range of exercise prices

contractual life

exercise price

As of September 30, 2023, there was $ 0 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2022 Employee Plan.

No options were granted during the three months ended September 30, 2023.

No options vested during the three months ended September 30, 2023.

NOTE 10 – Stockholders’ Equity Transactions

1 unchanged sentence

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 loan agreement described in Note 8, the Company’s lender gave its consent to this stock repurchase plan.

During the three and nine months ended March 31, 2023 and the fiscal year ended June 30, 2022, the Company did no t repurchase any shares of its outstanding common stock.

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

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

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

The additional shares were distributed on January 4, 2022.

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

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

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

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

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

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

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

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

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

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

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

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

stock that are owned by the optionees.

During the three months ended September 30, 2023 and the fiscal year ended June 30, 2023, the Company did no t repurchase any shares of its outstanding common stock.

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.

There were no options exercised by certain employees and directors during the three months ended September 30, 2023.

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.

NOTE 11 – Related Party Transaction

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

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

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

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

In February 2023, the Company's President and Chairman and the Company’s Executive Vice President and Chief Financial Officer sold 2,300,000 and 100,000 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.

The Company did not sell any shares in the offering and received no proceeds from the offerings.

NOTE 12 - 401(k) Plan

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

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

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

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

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 $ 62,000 and $ 63,000 for the three months ended September 30, 2023 and 2022, respectively.

NOTE 13 - Commitments and Contingencies

5 unchanged sentences

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

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

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

For the three months ended September 30, 2023 and 2022 cash payments against operating lease liabilities totaled $ 86,000 and $ 72,000 , respectively.

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

1 unchanged sentence

Weighted-average discount rate

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

The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2023 (in thousands):

Year Ending June 30,

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

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

Operating lease expense totaled approximately $ 124,000 and $ 80,000 for the three months ended September 30, 2023 and 2022, respectively.

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

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

On August 18, 2023, the Company announced that it would be restating its financial statements for the quarters ending September 30, 2022, December 31, 2022 and March 31, 2023.

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

The action, captioned Zornberg v.

Napco Security Technologies, Inc.

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

On October 30, 2023, five plaintiffs filed applications to be lead plaintiff in the action.

The Company intends to vigorously defend against the action.

Employment Agreements

As of March 31, 2023, the Company was obligated under two employment agreements and one severance agreement.

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

As of September 30, 2023, the Company was obligated under two employment agreements and one severance agreement.

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

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

2 unchanged sentences

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 month’s 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 month’s salary, continued company-sponsored health insurance for six months from the date of termination and certain non-compete and other restrictive provisions.

The severance agreement is with the CFO and provides for, if terminated by the Company without cause or within three months of a change in corporate control of the Company, severance of nine month’s salary, continued company-sponsored health insurance for six months from the date of termination and certain non-compete and other restrictive provisions.

NOTE 14 – Geographical Data

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 development, manufacture, and distribution of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems, video surveillance products and wireless communication service for intrusion and fire alarm systems.

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

Sales to unaffiliated customers are shipped from the United States.

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

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

Three months ended March 31,

Nine months ended March 31,

Three months ended September 30,

Sales to external customers (1) :

Total Net Sales

March 31, 2023

September 30, 2023

June 30, 2023

5 unchanged sentences

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

(2) Consists primarily of inventories (March 31, 2023 = $ 45,332 ;

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

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

(2) Consists primarily of inventories (September 30, 2023 = $ 37,385 ;

June 30, 2023 = $ 33,477 ), operating lease assets (September 30, 2023 = $ 5,722 ;

June 30, 2023 = $ 5,797 ) and fixed assets (September 30, 2023 = $ 3,851 ;

June 30, 2023 = $ 3,958 ) located at the Company’s principal manufacturing facility in the Dominican Republic.

1 unchanged sentence

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

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

On November 2, 2023, the Company’s Board of Directors declared a cash dividend of $ .08 per share payable on December 22, 2023 to stockholders of record on December 1, 2023.

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

What changed 10-Q

Item 1. Financial Statements