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<SEC-DOCUMENT>0000950123-03-006103.txt : 20030515
<SEC-HEADER>0000950123-03-006103.hdr.sgml : 20030515
<ACCEPTANCE-DATETIME>20030515155201
ACCESSION NUMBER:		0000950123-03-006103
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20030331
FILED AS OF DATE:		20030515

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NAPCO SECURITY SYSTEMS INC
		CENTRAL INDEX KEY:			0000069633
		STANDARD INDUSTRIAL CLASSIFICATION:	COMMUNICATIONS EQUIPMENT, NEC [3669]
		IRS NUMBER:				112277818
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-10004
		FILM NUMBER:		03704904

	BUSINESS ADDRESS:	
		STREET 1:		333 BAYVIEW AVE
		CITY:			AMITYVILLE
		STATE:			NY
		ZIP:			11701
		BUSINESS PHONE:		5168429400

	MAIL ADDRESS:	
		STREET 1:		C/O FORCHELLI CURTO SCHWARTZ ET AL, LLP
		STREET 2:		330 OLD COUNTRY RD. - 3RD FL.
		CITY:			MINEOLA
		STATE:			NY
		ZIP:			11501
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>y86777e10vq.txt
<DESCRIPTION>NAPCO SECURITY SYSTEMS, INC.
<TEXT>
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

X        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2003

         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
         __________.


Commission File number:         0-10004


                           NAPCO SECURITY SYSTEMS, INC
             (Exact name of Registrant as specified in its charter)

                Delaware                                  11-2277818
     (State or other jurisdiction of              (IRS Employer Identification
      incorporation of organization)                        Number)

          333 Bayview Avenue
         Amityville, New York                               11701
               (Address)                                 (Zip Code)

                                 (631) 842-9400
               (Registrant's telephone number including area code)

                                      None
             (Former name, former address and former fiscal year if
                            changed from last report)


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:

                        Yes  X    No

Number of shares outstanding of each of the issuer's classes of common stock, as
of: MARCH 31, 2003


                COMMON STOCK, $.01 PAR VALUE PER SHARE 3,198,296

<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
                                      INDEX
                                 MARCH 31, 2003


<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>                                                                                      <C>
PART I:  FINANCIAL INFORMATION (unaudited)

         Condensed Consolidated Balance Sheets, March 31, 2003 and
         June 30, 2002                                                                    3

         Condensed Consolidated Statements of Operations for the Three
         Months ended March 31, 2003 and 2002                                             4

         Condensed Consolidated Statements of Operations for the Nine
         Months ended March 31, 2003 and 2002                                             5

         Condensed Consolidated Statements of Cash Flows for the Nine
         Months ended March 31, 2003 and 2002                                             6

         Notes to Condensed Consolidated Financial Statements                             7

         Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                                           11

PART II:  OTHER INFORMATION                                                              17

SIGNATURE PAGE                                                                           18

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002                                                               19

INDEX TO EXHIBITS                                                                        22
</TABLE>


                                       2
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

<TABLE>
<CAPTION>
                                                                                           March 31,        June 30,
                                    ASSETS                                                    2003            2002
                                    ------                                                 --------         --------
                                                                                       (in thousands, except share data)
<S>                                                                                     <C>                 <C>
Current Assets:
       Cash                                                                                $  1,764         $  1,500
       Accounts receivable, less reserve for doubtful accounts:
                March 31, 2003              $    408
                June 30, 2002               $    393                                         13,408           18,313
       Inventories, net (Note 2)                                                             19,220           17,931
       Prepaid expenses and other current assets                                                595            1,213
                                                                                           --------         --------
                Total current assets                                                         34,987           38,957

       Property, Plant and Equipment, net of accumulated depreciation and
          amortization (Note 3):
                March 31, 2003              $ 17,640
                June 30, 2002               $ 16,696                                          9,626            9,964
       Goodwill                                                                               9,686            9,686
       Deferred income taxes                                                                  1,032            1,032
       Other assets                                                                             217              229
                                                                                           --------         --------
                                                                                           $ 55,548         $ 59,868
                                                                                           ========         ========

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
       Current portion of long-term debt                                                   $  2,025         $  2,664
       Accounts payable                                                                       2,698            2,994
       Accrued and other current liabilities                                                  2,155            2,693
       Accrued income taxes                                                                     193               96
                                                                                           --------         --------
                Total current liabilities                                                     7,071            8,447
Long-term debt                                                                               16,100           16,588
Deferred income taxes                                                                           539              539
                                                                                           --------         --------
                Total liabilities                                                            23,710           25,574
                                                                                           --------         --------

Shareholders' Equity:
       Common stock, par value $.01 per share; 21,000,000 shares authorized,
          6,069,352 and 6,004,252 shares issued, respectively;
          3,198,296 and 3,383,196 shares outstanding, respectively                               61               60
       Additional paid-in capital                                                             1,341            1,082
       Retained earnings                                                                     38,295           38,569
       Less: Treasury stock, at cost (2,871,056 and 2,621,056 shares, respectively)          (7,859)          (5,417)
                                                                                           --------         --------
                Total stockholders' equity                                                   31,838           34,294
                                                                                           --------         --------
                                                                                           $ 55,548         $ 59,868
                                                                                           ========         ========
</TABLE>


See accompanying notes to condensed consolidated financial statement


                                       3
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                                                    March 31,
                                                                          ---------------------------
                                                                              2003             2002
                                                                           ---------         --------
                                                                          (in thousands, except share
                                                                               and per share data)

<S>                                                                        <C>              <C>
Net Sales                                                                  $  13,406        $  13,321
Cost of Sales                                                                  9,910            9,861
                                                                           ---------        ---------
         Gross profit                                                          3,496            3,460
Selling, General and Administrative Expenses                                   3,487            2,913
                                                                           ---------        ---------
         Operating income (loss)                                                   9              547
                                                                           ---------        ---------
Interest Expense, net                                                            141              328
Other Expense, net                                                                69               12
                                                                           ---------        ---------
                                                                                 210              340
                                                                           ---------        ---------
         Income (loss) before provision for income taxes                        (201)             207
Provision for income taxes                                                         5             --
                                                                           ---------        ---------
         Net income (loss)                                                 $    (206)       $     207
                                                                           =========        =========
Net income (loss) per share (Note 4):                   Basic              $   (0.06)       $    0.06
                                                                           =========        =========
                                                        Diluted            $   (0.06)       $    0.06
                                                                           =========        =========

Weighted average number of shares outstanding (Note 4): Basic              3,303,696        3,342,796
                                                                           =========        =========
                                                        Diluted            3,303,696        3,507,289
                                                                           =========        =========
</TABLE>


See accompanying notes to condensed consolidated financial statements


                                       4
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                                March 31,
                                                                     ----------------------------
                                                                        2003               2002
                                                                     ----------         ---------
                                                                      (in thousands, except share
                                                                            and per share data)
<S>                                                                  <C>               <C>
Net Sales                                                            $   38,990         $  36,712
Cost of Sales                                                            28,877            27,175
                                                                     ----------        ----------
         Gross profit                                                    10,113             9,537
Selling, General and Administrative Expenses                              9,913             8,628
                                                                     ----------        ----------
         Operating income                                                   200               909
                                                                     ----------        ----------
Interest Expense, net                                                       577             1,137
Other (Income) Expense, net                                                (118)               37
                                                                     ----------        ----------
                                                                            459             1,174
                                                                     ----------        ----------
         Loss before provision for income taxes                            (259)             (265)
Provision for income taxes                                                   15                --
                                                                     ----------        ----------
         Net loss                                                    $     (274)       $     (265)
                                                                     ==========        ==========
Net loss per share (Note 4):                              Basic      $    (0.08)       $    (0.08)
                                                                     ==========        ==========
                                                          Diluted    $    (0.08)       $    (0.08)
                                                                     ==========        ==========
Weighted average number of shares outstanding (Note 4):   Basic       3,348,746         3,375,697
                                                                     ==========        ==========
                                                          Diluted     3,348,746         3,375,697
                                                                     ==========        ==========
</TABLE>


See accompanying notes to condensed consolidated financial statements


                                       5
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                                Nine Months Ended
                                                                                                     March 31,
                                                                                           -----------------------
                                                                                             2003            2002
                                                                                           -------         -------
                                                                                                 (in thousands)
<S>                                                                                        <C>             <C>
Net Cash Provided by Operating Activities                                                  $ 4,180         $ 4,719
                                                                                           -------         -------
Cash Flows from Investing Activities:
         Net purchases of property, plant and equipment                                       (606)           (557)
                                                                                           -------         -------
                  Net cash used in investing activities                                       (606)           (557)
                                                                                           -------         -------
Cash Flows from Financing Activities:
         Proceeds from long-term debt                                                        4,250             200
         Proceeds from exercise of employee stock options                                      259             105
         Principal payments on long-term debt                                               (5,377)         (3,308)
         Payments for purchase of treasury stock                                            (2,442)           (243)
                                                                                           -------         -------
                  Net cash used in financing activities                                     (3,310)         (3,246)
                                                                                           -------         -------
Net Increase in Cash                                                                           264             916
Cash, Beginning of Period                                                                    1,500           1,037
                                                                                           -------         -------
Cash, End of Period                                                                        $ 1,764         $ 1,953
                                                                                           =======         =======

Cash Paid During the Period for:
         Interest                                                                          $   586         $ 1,130
                                                                                           =======         =======
         Income taxes                                                                      $    14         $    11
                                                                                           =======         =======
</TABLE>


See accompanying notes to condensed consolidated financial statement.


                                       6
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
                   NOTES TO CONDENSED CONSOLIDATED STATEMENTS

1.)  Summary of Significant Accounting Policies and Other Disclosures

     The accompanying Condensed Consolidated Financial Statements are unaudited.
     In management's opinion, all adjustments (consisting of only normal
     recurring accruals) necessary for a fair presentation have been made.

     The Unaudited Condensed Consolidated Financial Statements include the
     accounts of the Company after elimination of all material inter-company
     balances and transactions. The Company has made a number of estimates and
     assumptions relating to the assets and liabilities, the disclosure of
     contingent assets and liabilities and the reporting of revenues and
     expenses to prepare these financial statements in conformity with
     accounting principles generally accepted in the United States. Actual
     results could differ from those estimates. The Unaudited Condensed
     Consolidated Financial Statements should be read in conjunction with the
     consolidated financial statements and related notes contained in the
     Company's Annual Report on Form 10-K for the year ended June 30, 2002.

2.)  Inventories

     Inventories consist of:

<TABLE>
<CAPTION>
                                                            March 31,     June 30,
                                                              2003          2002
                                                            -------        -------
                                                                (in thousands)
<S>                                                         <C>            <C>
                            Component parts                 $10,184        $ 9,551
                            Work-in-process                   3,527          3,308
                            Finished products                 5,509          5,072
                                                            -------        -------
                                                            $19,220        $17,931
                                                            =======        =======
</TABLE>

3.)  Property, Plant and Equipment

     Property, Plant and Equipment consists of:

<TABLE>
<CAPTION>
                                                                               March 31,      June 30,
                                                                                 2003           2002
                                                                               -------        -------
                                                                                     (in thousands)
<S>                                                                            <C>            <C>
                        Land                                                   $   904        $   904
                        Building                                                 8,911          8,911
                        Molds and dies                                           4,302          4,197
                        Furniture and fixtures                                   1,217          1,141
                        Machinery and equipment                                 11,746         11,316
                        Building improvements                                      186            191
                                                                               -------        -------
                                                                                27,266         26,660
                        Less: Accumulated depreciation
                                 and amortization                               17,640         16,696
                                                                               -------        -------
                                                                               $ 9,626        $ 9,964
                                                                               =======        =======
</TABLE>


                                       7
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
                   NOTES TO CONDENSED CONSOLIDATED STATEMENTS


4.)  Net Income Per Common Share

     The Company follows the provisions of Statement of Financial Accounting
     Standards ("SFAS") No. 128, "Earnings Per Share". In accordance with SFAS
     No. 128, net income per common share amounts ("Basic EPS") were computed by
     dividing net income by the weighted average number of common shares
     outstanding for the period. Net income per common share amounts, assuming
     dilution ("Diluted EPS"), were computed by reflecting the potential
     dilution from the exercise of stock options. SFAS No. 128 requires the
     presentation of both Basic EPS and Diluted EPS on the face of the
     consolidated statements of operations.

     A reconciliation between the numerators and denominators of the Basic and
Diluted EPS computations for net income is as follows:

<TABLE>
<CAPTION>
                                            Three months ended March 31, 2003
                                          (in thousands, except per share data)
                                          -------------------------------------
                                          Net Income      Shares      Per Share
                                          (numerator)  (denominator)   Amounts
                                          -----------  -------------   -------
<S>                                       <C>          <C>             <C>
Net loss                                     $(206)         --           --
                                             -----         -----        -----
BASIC EPS
Net loss attributable to common stock        $(206)        3,304        ($0.06)

EFFECT OF DILUTIVE SECURITIES
Options                                      $--            --           --
                                             -----         -----        -----
DILUTED EPS
Net loss attributable to common stock
    and assumed option exercises             $(206)        3,304        ($0.06)
                                             =====         =====        =====
</TABLE>

     Options to purchase 421,860 shares of common stock in the three months
     ended March 31, 2003 were not included in the computation of Diluted EPS
     because the Company incurred a loss for the three months, therefore the
     impact would have been anti-dilutive. These options were still outstanding
     at the end of the period.

<TABLE>
<CAPTION>
                                                Three months ended March 31, 2002
                                              (in thousands, except per share data)
                                            ----------------------------------------
                                             Net Income      Shares        Per Share
                                            (numerator)   (denominator)     Amounts
                                            -----------   -------------     -------
<S>                                         <C>           <C>              <C>
Net income                                     $ 207         --               --
                                               -----        -----            -----
BASIC EPS
Net income attributable to common stock        $ 207        3,343            $0.06
EFFECT OF DILUTIVE SECURITIES
Options                                        $--            164             --
                                               -----        -----            -----
DILUTED EPS
Net income attributable to common stock
    and assumed option exercises               $ 207        3,507            $0.06
                                               =====        =====            =====
</TABLE>

     Options to purchase 3,500 shares of common stock in the three months ended
     March 31, 2002 were not included in the computation of Diluted EPS because
     the exercise prices exceeded the average market price of the common shares
     for this period. These options were still outstanding at the end of the
     period.


                                       8
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
                   NOTES TO CONDENSED CONSOLIDATED STATEMENTS

<TABLE>
<CAPTION>
                                                 Nine months ended March 31, 2003
                                               (in thousands, except per share data)
                                             ----------------------------------------
                                              Net Income      Shares        Per Share
                                             (numerator)   (denominator)     Amounts
                                             -----------   -------------     -------
<S>                                          <C>           <C>              <C>
Net loss                                       $(274)           --             --
                                               -----           -----          -----
BASIC EPS
Net loss attributable to common stock          $(274)          3,349          ($0.08)

EFFECT OF DILUTIVE SECURITIES
Options                                        $--              --             --
                                               -----           -----          -----
DILUTED EPS
Net loss attributable to common stock
    and assumed option exercises               $(274)          3,349          ($0.08)
                                               =====           =====          =====
</TABLE>

     Options to purchase 421,860 shares of common stock in the nine months ended
     March 31, 2003 were not included in the computation of Diluted EPS because
     the Company incurred a loss for the nine months, therefore the impact would
     have been anti-dilutive. These options were still outstanding at the end of
     the period.

<TABLE>
<CAPTION>
                                                Nine months ended March 31, 2002
                                              (in thousands, except per share data)
                                            ----------------------------------------
                                            Net Income        Shares       Per Share
                                            (numerator)    (denominator)    Amounts
                                            -----------    ------------     -------
<S>                                         <C>            <C>             <C>
Net loss                                       $(265)           --             --
                                               -----           -----          -----
BASIC EPS
Net loss attributable to common stock          $(265)          3,376          ($0.08)

EFFECT OF DILUTIVE SECURITIES
Options                                        $--              --             --
                                               -----           -----          -----
DILUTED EPS
Net loss attributable to common stock
    and assumed option exercises               $(265)          3,376          ($0.08)
                                               =====           =====          =====
</TABLE>

     Options to purchase 418,080 shares of common stock in the nine months ended
     March 31, 2002 were not included in the computation of Diluted EPS because
     the Company incurred a loss for the nine months, therefore the impact would
     have been anti-dilutive. These options were still outstanding at the end of
     the period.


                                       9
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
                   NOTES TO CONDENSED CONSOLIDATED STATEMENTS

5)   Long Term Debt

     In January 2003, the Company repurchased 250,000 shares of its common stock
     from two shareholders, unaffiliated with the Company, at $9.75 per share, a
     discount from its then current trading price of $10.01. The transaction was
     approved by the board of directors and the purchase price of $2,437,500 was
     financed through the Company's revolving line of credit and a new five (5)
     year term loan from its primary bank for approximately 50% of the purchase
     price. This term loan is for $1,250,000 and is being repaid in 60 equal
     monthly installments commencing on April 30, 2003.

6)   Accrued Warranty Obligations

     In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
     Accounting and Disclosure Requirements for Guarantees, Including Indirect
     Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that the
     guarantor recognize, at the inception of certain guarantees, a liability
     for the fair value of the obligation undertaken in issuing such guarantee.
     FIN 45 also requires additional disclosure requirements about the
     guarantor's obligations under certain guarantees it has issued. the initial
     recognition and measurement provisions of this interpretation are
     applicable on a prospective basis to guarantees issued or modified after
     December 31, 2002. The disclosure requirements of this interpretation are
     effective for financial statement periods ending after December 15, 2002.
     The Company adopted the disclosure requirements of this interpretation in
     the current quarter. the adoption of this interpretation did not have a
     material impact on its consolidated financial position, results of
     operations or cash flows. The Company recognizes the estimated cost
     associated with its standard warranty on products at the time of sale. The
     estimate is based on historic as well as current return rates and
     experience. The changes in the Company's accrued warranty obligation for
     the period was immaterial.

7)   Employee Stock-based Compensation

     As of March 31, 2003, the Company had established a number of share
     incentive programs as discussed in more detail in our annual report on Form
     10-K for the year ended June 30, 2002. The Company applies the intrinsic
     value method as outlined in Accounting Principles Board Opinion No. 25,
     "Accounting for Stock Issued to Employees", and related interpretations in
     accounting for stock options and share units granted under these programs.
     Under the intrinsic value method, no compensation expense is recognized if
     the exercise price of the Company's employee stock options equals the
     market price of the underlying stock on the date of grant. Accordingly, no
     compensation cost has been recognized. Statement of Financial Accounting
     Standard ("SFAS") No. 123, "Accounting for Stock-Based Compensation -
     Transition and Disclosure" requiring quarterly SFAS No. 123 pro forma
     disclosure. The following table illustrates the effect on net income and
     earnings per share as if the fair value method had been applied to all
     outstanding and unvested awards in each period presented.

<TABLE>
<CAPTION>
                                                                         Three Months                    Nine Months
                                                                        Ended March 31,                 Ended March 31,
                                                                    ------------------------       ------------------------
                                                                      2003            2002           2003            2002
                                                                    --------        --------       --------        --------
                                                                                          (Unaudited)
                                                                             (In thousands, except per share data)
<S>                                                                 <C>             <C>            <C>             <C>
Net earnings attributable to common stock, as reported              $   (206)       $    207       $   (274)       $   (265)
Deduct:  Total stock-based employee compensation
         expense determined under fair value method
         for all awards, net of related tax effects                      (74)           (100)          (248)           (306)
                                                                    --------        --------       --------        --------
Pro forma net earnings, attributable to common stock                $   (280)       $    107       $   (522)       $   (571)
                                                                    ========        ========       ========        ========

EARNINGS PER COMMON SHARE:
         Basic - as reported                                        $  (0.06)       $   0.06       $  (0.08)       $  (0.08)
                                                                    ========        ========       ========        ========
         Basic - pro forma                                          $  (0.08)       $   0.03       $  (0.16)       $  (0.17)
                                                                    ========        ========       ========        ========

         Diluted - as reported                                      $  (0.06)       $   0.06       $  (0.08)       $  (0.08)
                                                                    ========        ========       ========        ========
         Diluted - pro forma                                        $  (0.08)       $   0.03       $  (0.16)       $  (0.17)
                                                                    ========        ========       ========        ========
</TABLE>


                                       10
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Results of Operations

Sales for the three months ended March 31, 2003 increased by 0.6% to $13,406,000
as compared to $13,321,000 for the same period a year ago. Sales for the nine
months ended March 31, 2003 increased by 6.2% to $38,990,000 as compared to
$36,712,000 for the same period a year ago. The increases in net sales for the
three and nine months were primarily due to increases in sales volume to several
of the Company's larger, domestic alarm customers as well as one of the
Company's major customers that had streamlined its on-hand inventory during the
first half of fiscal 2002.

The Company's gross profit for the three months ended March 31, 2003 increased
by $36,000 to $3,496,000 or 26.1% of sales as compared to $3,460,000 or 26.0% of
sales for the same period a year ago. The Company's gross profit for the nine
months ended March 31, 2003 increased by $576,000 to $10,113,000 or 25.9% of
sales as compared to $9,537,000 or 26.0% of sales for the same period a year
ago. These increases in dollars are due primarily to the increase in sales as
discussed above. In addition, gross profit, both in dollars and as a percentage
of net sales, was impacted slightly by a shift in product mix to lower margin
products.

Selling, general and administrative expenses for the three months ended March
31, 2003 increased by $574,000 to $3,487,000, or 26.0% of sales, as compared to
$2,913,000, or 21.9% of sales a year ago. Selling, general and administrative
expenses for the nine months ended March 31, 2003 increased by $1,285,000 to
$9,913,000, or 25.4% of sales, as compared to $8,628,000, or 23.5% of sales, a
year ago. These increases for the three and nine months are due primarily to
additions to the Company's sales force and investor relations expenses, as well
as increases in the Company's property and liability insurance rates.

Interest and other expense for the three months ended March 31, 2003 decreased
by $130,000 to $210,000 from $340,000 for the same period a year ago. Interest
and other expense for the nine months ended March 31, 2003 decreased by $715,000
to $459,000 from $1,174,000 for the same period a year ago. These decreases for
the three and nine months resulted from a decrease in interest expense during
the nine months ended March 31, 2003 resulting from the continued reduction of
the Company's outstanding debt as well as a decline in the interest rates
available to the Company. In addition, during the quarter ended September 30,
2002, the Company settled litigation which it had initiated as the plaintiff and
realized a gain of approximately $210,000. This gain was recorded as Other
Income during the quarter ended September 30, 2002.

The Company had a provision for income taxes for the three months ended March
31, 2003 of $5,000 as compared to no provision for the same period a year ago.
The Company had a provision for income taxes for the nine months ended March 31,
2003 of $15,000 as compared to no provision for the same period a year ago.
These provisions relate to income taxes on the Company's United Kingdom
subsidiary.

Net income decreased by $413,000 to a loss of ($206,000) or ($0.06) per share
for the three months ended March 31, 2003 as compared to net income of $207,000
or $0.06 per share for the same period a year ago. Net income decreased by
$9,000 to a net loss of $(274,000) or $(0.08) per share for the nine months
ended March 31, 2003 as compared to a net loss of $(265,000) or $(0.08) per
share for the same period a year ago. These changes were primarily due to the
items discussed above.

Liquidity and Capital Resources

During the nine months ended March 31, 2003 the Company utilized a portion of
its cash generated from operations to reduce certain of its outstanding
borrowings, purchase property, plant and equipment and invest in additional
inventory as discussed below. During the first quarter of fiscal 2001, the
Company entered into an $8,250,000 term loan agreement, payable over 60 equal
monthly installments, in order to purchase the assets of Continental
Instruments, LLC. The Company's management believes that current working
capital, cash flows from operations and its revolving credit agreement will be
sufficient to fund the Company's operations through at least the first quarter
of fiscal 2005.

Accounts Receivable at March 31, 2003 decreased $4,905,000 to $13,408,000 as
compared to $18,313,000 at June 30, 2002. This decrease is primarily the result
of the higher sales volume during the quarter ended June 30, 2002 as compared to
the quarter ended March 31, 2003.

Inventory at March 31, 2003 increased by $1,289,000 to $19,220,000 as compared
to $17,931,000 at June 30, 2002. This increase was primarily the result of the
Company's level-loading its production schedule in anticipation of its
historical sales cycle where a larger portion of the Company's sales occur in
the latter fiscal quarters as compared to the earlier quarters.


                                       11
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

In May of 1998 the Company repurchased 889,576 shares of Napco common stock for
$5.00 per share from one of its co-founders. $2.5 million was paid at closing
and the balance of the purchase price was paid over a four (4) year period. The
portion of the purchase price paid at closing was financed by the Company's
primary bank and is being repaid over a five (5) year period.

In November 2000 the Company adopted a stock repurchase program. Under this
program, the Company is authorized to repurchase from time to time, 205,000
shares of its common stock. As of March 31, 2003 the Company had repurchased
202,605 shares under this program for a total cash amount of $968,000.

In January 2003, the Company repurchased 250,000 shares of its common stock from
two shareholders, unaffiliated with the Company, at $9.75 per share, a discount
from its then current trading price of $10.01. The transaction was approved by
the board of directors and the purchase price of $2,437,500 was financed through
the Company's revolving line of credit and a new five (5) year term loan from
its primary bank for approximately 50% of the purchase price. This term loan is
for $1,250,000 and is being repaid in 60 equal monthly installments commencing
on April 30, 2003.

Other than the $8,250,000 loan described above, the Company's bank debt
consisted of an $18,000,000 secured revolving credit agreement and a $3,000,000
line of credit to be used in connection with commercial and standby letters of
credit. The revolving credit agreement has an expiration date of July 2004 and
the Company expects to renew it on or before that time. As of March 31, 2003,
the Company was in compliance with all covenants related to the agreements
described above.

As of March 31, 2003 the Company had no material commitments for capital
expenditures or inventory purchases other than purchase orders used in the
normal course of business.

Recently Issued Accounting Standards

The Financial Accounting Standards Board recently issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets", which
addresses the financial accounting and reporting for the impairment or disposal
of long-lived assets. SFAS No. 144 supercedes SFAS No. 121 but retains
fundamental provisions of SFAS No. 121 for (a) recognition/measurement of
impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale. SFAS No. 144 also supercedes the
accounting/reporting provisions of Accounting Principles Board Opinion No. 30
for segments of a business to be disposed of but retains APB 30's requirement to
report discontinued operations separately from continuing operations and extends
that reports to a component of an entity that either has been disposed of or is
classified as held for sale. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The effect of the adoption of SFAS No.
144 effective July 1, 2002 was not material.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". This statement nullifies EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)". SFAS
No. 146 requires that a liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. The provisions of SFAS
No. 146 are effective for exit or disposal activities initiated after March 31,
2003 and thus will become effective for the Company on January 1, 2003. The
Company will continue to apply the provisions of EITF Issue 94-3 to any exit
activities that have been initiated under an exit plan that met the criteria of
EITF Issue No. 94-3 before the adoption of SFAS No. 146. The adoption of SFAS
No. 146 did not have a material effect on the financial position, results of
operations or cash flows of the Company upon adoption.

In December 2001, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 01-6, "Accounting by Certain Entities (Including
Entities with Trade Receivables) That Lend to or Finance the Activities of
Others." The SOP applies to any entity that lends to or finances the activities
of others, and specifies accounting and disclosure requirements for entities
that extend trade credit to customers and also provides specific guidance for
other types of transactions specific to certain financial institutions. The SOP
is effective for the Company beginning July 1, 2003 and the Company does not
believe the recognition and measurement provisions within this SOP will result
in a change in practice for its trade receivables or any other activities of the
Company. The SOP also provides certain presentation and disclosure changes for
entities with trade receivables as part of the objective of requiring consistent
accounting and reporting for like transactions, which the Company intends to
include in its disclosures upon adoption.


                                       12
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" ("SFAS 148"). SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation as originally
provided by SFAS No. 123 "Accounting for Stock-Based Compensation".
Additionally, SFAS 148 amends the disclosure requirements of SFAS 123 to require
prominent disclosure in both the annual and interim financial statements about
the method of accounting for stock-based compensation and the effect of the
method used on reported results. The transitional requirements of SFAS 148 are
effective for all financial statements for fiscal years ending after December
15, 2002. We adopted the disclosure portion of this statement for the current
fiscal quarter ended March 31, 2003. The application of the disclosure portion
of this standard will have no impact on our consolidated financial position or
results of operations.

On April 22, 2003, the FASB determined that stock-based compensation should be
recognized as a cost in the financial statements and that such cost be measured
according to the fair value of the stock options. The FASB has not as yet
determined the methodology for calculating fair value and plans to issue an
exposure draft letter this year that could become effective in 2004. We will
continue to monitor communications on this subject from the FASB in order to
determine the impact on the Company's consolidated financial statements.

Forward-looking Statements

This quarterly report, other than historical financial information, contains
forward-looking statements, as defined in the Private Securities Litigation
Reform Act of 1995, that involve a number of risks and uncertainties. Important
factors that could cause actual results to differ materially from those
indicated by such forward-looking statements are set forth in Item 1 of the
Company's annual report on Form 10-K for the year ended June 30, 2002. These
include risks and uncertainties relating to competition and technological
change, intellectual property rights, capital spending international operations,
and the Company's acquisition strategies.

Quantitative and Qualitative Disclosures About Market Risk

The Company's principal financial instrument is long-term debt (consisting of a
revolving credit and term loan facilities) that provides for interest at a
spread above the prime rate. The Company is affected by market risk exposure
primarily through the effect of changes in interest rates on amounts payable by
the Company under this credit facility. A significant rise in the prime rate
could materially adversely affect the Company's business, financial condition
and results of operations. At March 31, 2003 an aggregate amount of
approximately $16,600,000 was outstanding under this facility. If these
borrowings remained at this quarter-end level for an entire year and the prime
rate increased or decreased, respectively, by 1% the Company would pay or save,
respectively, an additional $166,000 in interest that year. In October 2000, the
Company entered into an interest rate swap to maintain the value-at-risk
inherent in its interest rate exposures. This instrument expired on October 30,
2002. This transaction met the requirements for cash flow hedge accounting.
Accordingly, any gain or loss associated with the difference between interest
rates was included as a component of interest expense. The fair value of this
instrument was not material. The Company has not entered into any new interest
rate swaps and does not hold or enter into derivative financial instruments for
trading or speculative purposes.

Where appropriate, the Company requires that letters of credit be provided on
foreign sales. In addition, a significant number of transactions by the Company
are denominated in U.S. dollars. As such, the Company has shifted foreign
currency exposure onto many of its foreign customers. As a result, if exchange
rates move against foreign customers, the Company could experience difficulty
collecting unsecured accounts receivable, the cancellation of existing orders or
the loss of future orders. The foregoing could materially adversely affect the
Company's business, financial condition and results of operations. In addition,
the Company transacts certain sales in Europe in British Pounds Sterling,
therefore exposing itself to a certain amount of foreign currency risk.
Management believes that the amount of this exposure is immaterial.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in conformity with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amount of assets,
liabilities, revenues and expenses reported in those financial statements. These
judgments can be subjective and complex and, consequently, actual results


                                       13
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


could differ from those estimates. Our most critical accounting policies relate
to revenue recognition; concentration of credit risk; inventory; goodwill and
other intangible assets; and income taxes.

Revenue Recognition

Generally, revenues from merchandise sales are recorded at the time the product
is shipped to our customer. We report our sales levels on a net sales basis,
which is computed by deducting from gross sales the amount of actual returns
received and an amount established for anticipated returns.

Our sales return accrual is a subjective critical estimate that has a direct
impact on reported net sales. This accrual is calculated based on a history of
gross sales and actual returns by region and product category. In addition, as
necessary, specific accruals for sales returns may be established for known or
anticipated events.

Concentration of Credit Risk

An entity is more vulnerable to concentrations of credit risk if it is exposed
to risk of loss greater than it would have had it mitigated its risk through
diversification of customers. Such risks of loss are manifest differently,
depending on the nature of the concentration, and vary in significance. We have
two major customers that accounted for approximately $4,354,000, or 32%, of our
consolidated net sales for the three months ended March 31, 2003, $10,068,000,
or 26%, of our consolidated net sales for the nine months ended March 31, 2003
and $7,250,000, or 54%, of our accounts receivable as of March 31, 2003. The
largest of these two customers accounted for $3,560,000, or 27%, and $7,392,000,
or 19% of sales for the three and nine months ended March 31, 2003,
respectively, and $3,681,000, or 27%, of accounts receivable. These customers
sell primarily within North America. Although management believes that these
customers are sound and creditworthy, a severe adverse impact on their business
operations could have a corresponding material adverse effect on our net sales,
cash flows, and/or financial condition. In the ordinary course of business, we
have established an allowance for doubtful accounts and customer deductions in
the amount of $435,000 and $393,000 as of March 31, 2003 and June 30, 2002,
respectively. Our allowance for doubtful accounts is a subjective critical
estimate that has a direct impact on reported net earnings. This reserve is
based upon the evaluation of accounts receivable aging, specific exposures and
historical trends.

Inventory

We state our inventory at the lower of cost or fair market value, with cost
being determined on the first-in, first-out (FIFO) method. We believe FIFO most
closely matches the flow of our products from manufacture through sale. The
reported net value of our inventory includes finished saleable products,
work-in-process and raw materials that will be sold or used in future periods.
Inventory cost includes raw materials, direct labor and overhead.

We also record an inventory obsolescence reserve, which represents the
difference between the cost of the inventory and its estimated fair market
value, based on various product sales projections. This reserve is calculated
using an estimated obsolescence percentage based on age, historical trends and
requirements to support forecasted sales. In addition, and as necessary, we may
establish specific inventory obsolescence reserves for known or anticipated
events.

Goodwill and Other Intangible Assets

Goodwill is calculated as the excess of the cost of purchased businesses over
the value of their underlying net assets. Goodwill is not amortized. Other
intangible assets are not material.

On an annual basis, we test goodwill and other intangible assets for impairment.
To determine the fair value of these intangible assets, there are many
assumptions and estimates we choose. To mitigate undue influence, we use
industry accepted valuation models and set criteria that are reviewed and
approved by various levels of management. Additionally, we evaluated our
recorded goodwill with the assistance of a third-party valuation firm.

Income taxes

We have accounted for, and currently account for, income taxes in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes". This statement establishes financial accounting and reporting
standards for the


                                       14
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


effects of income taxes that result from an enterprise's activities during the
current and preceding years. It requires an asset and liability approach for
financial accounting and reporting of income taxes.

As of March 31, 2003, we have net long-term deferred tax assets of $493,000.
These net deferred tax assets assume sufficient future taxable earnings for
their realization, as well as the continued application of current tax rates in
the respective jurisdictions. Included in net deferred tax assets is a valuation
allowance of $3,748,000 for deferred tax assets, which relates to tax loss
carry-forwards not utilized to date, where management believes it is more likely
than not that the deferred tax assets will not be realized in the relevant
jurisdiction. Based on our assessments, no additional valuation is required. If
we determine that a deferred tax asset will not be realizable or that a
previously reserved deferred tax asset will become realizable, an adjustment to
the deferred tax asset will result in a reduction of, or an increase to,
earnings at that time.

Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities
and Exchange Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the Securities and Exchange
Commission. The Chief Executive Officer and the Chief Financial Officer have
reviewed the effectiveness of our disclosure controls and procedures within the
last ninety days and have concluded that the disclosure controls and procedures
(as defined in Rules 13(a)-14(c) and 15(d)-14(e) promulgated under the
Securities Exchange Act of 1934) are effective. There were no significant
changes in our internal controls or in other factors that could significantly
affect these controls subsequent to the last day they were evaluated by our
Chief Executive Officer and Chief Financial Officer nor were any corrective
actions required with regard to significant accounting deficiencies or material
weaknesses.

Forward-looking Information

We and our representatives from time to time make written or oral
forward-looking statements, including statements contained in this and other
filings with the Securities and Exchange Commission, in our press releases and
in our reports to stockholders. The words and phrases, "will likely result",
expect", "believe", "planned", "will", "will continue", "is anticipated",
"estimates", "projects" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements include, without limitation, our
expectations regarding sales, earnings or other future financial performance and
liquidity, product introductions, entry into new geographic regions, information
systems initiatives, new methods of sale and future operations or operating
results. Although we believe that our expectations are based on reasonable
assumption within the bounds of our knowledge of our business and operations,
actual results may differ materially from our expectations. Factors that could
cause actual results to differ from expectations include, without limitation:

         i        increased competitive activity from companies in the industry,
                  some of which have greater resources than we do;

         ii       our ability to develop, produce and market new products on
                  which future operating results may depend;

         iii      consolidations, restructurings, bankruptcies and
                  reorganizations in the industry causing a decrease in the
                  number of customers that sell our products, an increase in the
                  ownership concentration within the industry, ownership of
                  customers by our competitors and ownership of competitors by
                  our customers;

         iv       shifts in the preferences of installers as to where and how
                  they order the types of products we sell;

         v        social, political and economic risks to our foreign or
                  domestic manufacturing, distribution and retail operations,
                  including changes in foreign investment and trade policies and
                  regulations of the host countries and of the United States;

         vi       changes in the laws, regulations and policies, including
                  changes in accounting standards, tax and trade rules, and
                  legal or regulatory proceedings, that affect, or will affect,
                  our business;

         vii      foreign currency fluctuations affecting our results of
                  operations and the value of our foreign assets, the assets,
                  the operating and manufacturing costs outside of the United
                  States;


                                       15
<PAGE>

                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


         viii     changes in global or economic conditions that could affect
                  consumer purchasing, the financial strength of our customers,
                  the cost and availability of capital, which we may need for
                  new equipment, facilities or acquisitions, and the assumptions
                  underlying our critical accounting estimates;

         ix       shipment delays, depletion of inventory and increased
                  production costs resulting from disruptions of our operations
                  at our Amityville or Dominican Republic facilities;

         x        changes in product mix to products, which are less profitable;

         xi       our ability to capitalize on opportunities for improved
                  efficiency, such as globalization, and to integrate acquired
                  businesses and realize value therefrom; and

         xii      consequences attributable to the events that took place in New
                  York City and Washington, D.C. on September 11, 2001,
                  including further attacks, retaliation and the threat of
                  further attacks or retaliation.

We assume no responsibility to update forward-looking statements made herein or
otherwise.


                                       16
<PAGE>

                           PART II: OTHER INFORMATION


Item 1.           Legal Proceedings

                  In August 2001, the Company became a defendant in a
                  product-related lawsuit, in which the plaintiff seeks damages
                  of approximately seventeen million dollars ($17,000,000). This
                  action is being defended by the Company's insurance company on
                  behalf of the Company. Management believes that the action is
                  without merit and plans to have this action vigorously
                  defended.

                  During the quarter ended September 30, 2002, the Company
                  settled litigation which it had initiated as the plaintiff and
                  realized a gain of approximately $210,000. This gain was
                  recorded as Other Income during the quarter ended September
                  30, 2002

Item 2.           Changes in Securities

                  None

Item 3.           Defaults Upon Senior Securities

                  None

Item 4.           Submission of Matters to a Vote of Security Holders

                  None

Item 5.           Other Information

                  None

Item 6.           Exhibits and Reports on Form 8-K

                  None


                                       17
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

May 14, 2003


                                    NAPCO SECURITY SYSTEMS, INC
                                            (Registrant)

By: /s/  Richard Soloway
    -------------------------------------------------
         Richard Soloway
         Chairman of the Board of Directors, President
                  and Secretary
         (Chief Executive Officer)


By: /s/  Kevin S. Buchel
    -------------------------------------------------
         Kevin S. Buchel
         Senior Vice President of Operations and Finance
                  and Treasurer
         (Principal Financial and Accounting Officer)


                                       18
<PAGE>

                  CERTIFICATIONS PURSUANT TO SECTION 302 OF THE
                           SARBANES-OXLEY ACT OF 2002



I, RICHARD SOLOWAY, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of Napco
                  Security Systems, Inc.;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows for the
                  registrant as of, and for, the periods presented in this
                  quarterly report;

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                           (a)      designed such disclosure controls and
                                    procedures to ensure that material
                                    information relating to the registrant,
                                    including its consolidated subsidiaries, is
                                    made known to us by others within those
                                    entities, particularly during the period in
                                    which this quarterly report is being
                                    prepared;

                           (b)      evaluated the effectiveness of the
                                    registrant's disclosure controls and
                                    procedures as of a date within 90 days prior
                                    to the filing date of this quarterly report
                                    ("Evaluation date"); and

                           (c)      presented in this quarterly report our
                                    conclusions about the effectiveness of the
                                    disclosure controls and procedures based on
                                    our evaluation as of the Evaluation date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of the
                  registrant's board of directors (or persons performing the
                  equivalent function):

                           (a)      all significant deficiencies in the design
                                    or operation of internal controls which
                                    could adversely affect the registrant's
                                    ability to record, process, summarize and
                                    report financial data and have identified
                                    for the registrant's auditors any material
                                    weakness in internal controls; and

                           (b)      any fraud, whether or not material, that
                                    involves management or other employees who
                                    have a significant role in the registrant's
                                    internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.

         Date: 5/14/03

         /s/ RICHARD SOLOWAY
         ----------------------------------------------
         Chairman of the Board, President and Secretary


                                       19
<PAGE>

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
                AND SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, KEVIN S. BUCHEL, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of Napco
                  Security Systems, Inc.;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows for the
                  registrant as of, and for, the periods presented in this
                  quarterly report;

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                           a.       designed such disclosure controls and
                                    procedures to ensure that material
                                    information relating to the registrant,
                                    including its consolidated subsidiaries, is
                                    made known to us by others within those
                                    entities, particularly during the period in
                                    which this quarterly report is being
                                    prepared;

                           b.       evaluated the effectiveness of the
                                    registrant's disclosure controls and
                                    procedures as of a date within 90 days prior
                                    to the filing date of this quarterly report
                                    ("Evaluation date"); and

                           c.       presented in this quarterly report our
                                    conclusions about the effectiveness of the
                                    disclosure controls and procedures based on
                                    our evaluation as of the Evaluation date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of the
                  registrant's board of directors (or persons performing the
                  equivalent function):

                           a.       all significant deficiencies in the design
                                    or operation of internal controls which
                                    could adversely affect the registrant's
                                    ability to record, process, summarize and
                                    report financial data and have identified
                                    for the registrant's auditors any material
                                    weakness in internal controls; and

                           b.       any fraud, whether or not material, that
                                    involves management or other employees who
                                    have a significant role in the registrant's
                                    internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.

         Date: 5/14/03

         /s/ KEVIN S. BUCHEL
         -----------------------------------------------
         Senior Vice President of Operations and Finance


                                       20
<PAGE>

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
                AND SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Report of Napco Security Systems, Inc. (the "Company") on
Form 10-Q for the period ending March 31, 2003 filed herewith (the "Report"), I,
RICHARD SOLOWAY, Chief Executive Officer of the Company, certify, that to the
best of my knowledge:

1.       the Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

2.       the information contained in the Report fairly presents, in all
         material respects, the financial condition and results of the Company.

This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.

Dated:   as of May 14, 2003

/s/ RICHARD SOLOWAY
- --------------------------------------------
    Richard Soloway, Chief Executive Officer

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
                AND SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Report of Napco Security Systems, Inc. (the "Company") on
Form 10-Q for the period ending March 31, 2003 filed herewith (the "Report"), I,
KEVIN S. BUCHEL, Chief Financial Officer of the Company, certify, that to the
best of my knowledge:

1.       the Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

2.       the information contained in the Report fairly presents, in all
         material respects, the financial condition and results of the Company.

This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.

Dated:   as of May 14, 2003

/s/ KEVIN S. BUCHEL
- --------------------------------------------
    Kevin S. Buchel, Chief Financial Officer


                                       21
<PAGE>


                           NAPCO SECURITY SYSTEMS, INC
                                INDEX TO EXHIBITS


Exhibits

         None


                                       22

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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