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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: March 31, 2025

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OR

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

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Commission File number: 0-10004 | ​

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NAPCO SECURITY TECHNOLOGIES, INC. ​ ​
(Exact name of Registrant as specified in its charter)

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Delaware | ​ | 11-2277818
(State or other jurisdiction of | ​ | (IRS Employer Identification
incorporation of organization) | ​ | Number)
| ​ |
333 Bayview Avenue | ​ |
Amityville, New York | ​ | 11701
(Address of principal executive offices) | ​ | (Zip Code)

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(631) 842-9400
(Registrant’s telephone number including area code)
(Former name, former address and former fiscal year if
changed from last report)

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Securities registered pursuant to Section 12(b) of the Act:

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Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, par value $0.01 per share | ​ | NSSC | ​ | Nasdaq Stock Market

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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 ⌧ No ☐

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐

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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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Large accelerated filer ⌧ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧

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Number of shares outstanding of each of the issuer’s classes of common stock, as of: May 2, 2025

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COMMON STOCK, $.01 PAR VALUE PER SHARE 35,656,421

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Table of Contents

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

|  | Page
PART I: FINANCIAL INFORMATION |
ITEM 1. | Financial Statements | 3
| NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX – March 31, 2025 |
| Condensed Consolidated Balance Sheets as of March 31, 2025 and June 30, 2024 (unaudited) | 3
| Condensed Consolidated Statements of Income for the Three Months ended March 31, 2025 and 2024 (unaudited) | 4
​ | Condensed Consolidated Statements of Income for the Nine Months ended March 31, 2025 and 2024 (unaudited) | 5
​ | Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months ended March 31, 2025 and 2024 (unaudited) | 6
| Condensed Consolidated Statements of Stockholders Equity for the Nine Months Ended March 31, 2025 and 2024 (unaudited) | 7
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2025 and 2024 (unaudited) | 8
| Notes to Condensed Consolidated Financial Statements (unaudited) | 9
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 36
ITEM 4. | Controls and Procedures | 37
PART II: OTHER INFORMATION |
ITEM 1. | Legal Proceedings | 37
ITEM 1A. | Risk Factors | 38
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 38
ITEM 3. | Defaults Upon Senior Securities | 38
ITEM 4. | Mine Safety Disclosures | 38
ITEM 5. | Other Information | 38
ITEM 6. | Exhibits | 38
SIGNATURE PAGE | 40

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2

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, 2025 |  | June 30, 2024 |
​ | ​ | (in thousands, except share data) | ​
CURRENT ASSETS | ​ | ​ |  |  | ​ |  | ​
Cash and cash equivalents | ​ | $ | 73,413 | ​ | $ | 65,341 | ​
Investments - other | ​ | ​ | — | ​ | ​ | 26,980 | ​
Marketable securities | ​ | ​ | 15,884 | ​ | ​ | 5,398 | ​
Accounts receivable, net of allowance for credit losses of $20 and $32 as of March 31, 2025 and June 30, 2024, respectively | ​ |  | 24,250 | ​ |  | 31,898 | ​
Inventories | ​ |  | 34,450 | ​ |  | 34,804 | ​
Income tax receivable | ​ | ​ | 958 | ​ | ​ | 73 | ​
Prepaid expenses and other current assets | ​ |  | 3,428 | ​ |  | 4,269 | ​
Total Current Assets | ​ |  | 152,383 | ​ |  | 168,763 | ​
Inventories - non-current | ​ |  | 12,410 | ​ |  | 15,109 | ​
Property, plant and equipment, net | ​ |  | 9,487 | ​ |  | 9,077 | ​
Intangible assets, net | ​ |  | 3,366 | ​ |  | 3,602 | ​
Deferred income taxes | ​ | ​ | 7,752 | ​ | ​ | 5,428 | ​
Operating lease - Right-of-use asset | ​ | ​ | 5,261 | ​ | ​ | 5,487 | ​
Other assets | ​ |  | 204 | ​ |  | 286 | ​
TOTAL ASSETS | ​ | $ | 190,863 | ​ | $ | 207,752 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
CURRENT LIABILITIES | ​ | ​ |  |  | ​ |  | ​
Accounts payable | ​ | $ | 5,401 | ​ | $ | 7,977 | ​
Accrued expenses | ​ |  | 8,776 | ​ |  | 10,345 | ​
Accrued salaries and wages | ​ |  | 3,967 | ​ |  | 3,907 | ​
Dividend payable | ​ | ​ | 4,468 | ​ | ​ | — | ​
Total Current Liabilities | ​ |  | 22,612 | ​ |  | 22,229 | ​
Accrued income taxes | ​ |  | 1,327 | ​ |  | 1,122 | ​
Operating lease liability | ​ | ​ | 5,376 | ​ | ​ | 5,512 | ​
TOTAL LIABILITIES | ​ |  | 29,315 | ​ |  | 28,863 | ​
COMMITMENTS AND CONTINGENCIES (Note 13) | ​ |  |  | ​ |  |  | ​
STOCKHOLDERS’ EQUITY | ​ | ​ | ​ | ​ | ​ | ​ | ​
Common Stock, par value $0.01 per share; 100,000,000 shares authorized as of March 31, 2025 and June 30, 2024; 39,771,035 and 39,768,186 shares issued; and 35,656,421 and 36,874,471 shares outstanding, respectively. | ​ | ​ | 398 | ​ | ​ | 398 | ​
Additional paid-in capital | ​ |  | 24,909 | ​ |  | 23,712 | ​
Retained earnings | ​ |  | 192,443 | ​ |  | 174,300 | ​
Less: Treasury Stock, at cost (4,114,614 and 2,893,715 shares as of March 31, 2025 and June 30, 2024, respectively) | ​ |  | (56,315) | ​ |  | (19,521) | ​
Accumulated other comprehensive income | ​ | ​ | 113 | ​ | ​ | — | ​
TOTAL STOCKHOLDERS’ EQUITY | ​ |  | 161,548 | ​ |  | 178,889 | ​
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | ​ | $ | 190,863 | ​ | $ | 207,752 | ​

​

See accompanying notes to condensed consolidated financial statements.

​

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months ended March 31,
​ |  | 2025 |  | 2024
​ | ​ | (in thousands, except for share and per share data)
Net sales: |  | ​ | ​ | ​ | ​ | ​
Equipment revenues | ​ | $ | 22,351 | ​ | $ | 29,735
Service revenues | ​ |  | 21,610 | ​ |  | 19,532
​ | ​ |  | 43,961 | ​ |  | 49,267
Cost of sales: | ​ |  |  | ​ |  |
Equipment related expenses | ​ |  | 16,852 | ​ |  | 21,179
Service-related expenses | ​ |  | 1,982 | ​ |  | 1,604
​ | ​ |  | 18,834 | ​ |  | 22,783
​ | ​ | ​ | ​ | ​ | ​ | ​
Gross Profit | ​ |  | 25,127 | ​ |  | 26,484
​ | ​ | ​ | ​ | ​ | ​ | ​
Operating expenses: | ​ | ​ | ​ | ​ | ​ | ​
Research and development | ​ |  | 3,185 | ​ |  | 2,757
Selling, general, and administrative expenses | ​ |  | 10,796 | ​ |  | 9,233
Total Operating Expenses | ​ | ​ | 13,981 | ​ | ​ | 11,990
​ | ​ | ​ | ​ | ​ | ​ | ​
Operating Income | ​ |  | 11,146 | ​ |  | 14,494
​ | ​ | ​ | ​ | ​ | ​ | ​
Other income: | ​ |  | ​ | ​ |  |
Interest and other income, net | ​ |  | 862 | ​ |  | 637
Income before Provision for Income Taxes | ​ |  | 12,008 | ​ |  | 15,131
Provision for Income Taxes | ​ |  | 1,886 | ​ |  | 1,935
Net Income | ​ | $ | 10,122 | ​ | $ | 13,196
​ | ​ | ​ | ​ | ​ | ​ | ​
Income per share: | ​ |  |  | ​ |  |
Basic | ​ | $ | 0.28 | ​ | $ | 0.36
Diluted | ​ | $ | 0.28 | ​ | $ | 0.36
​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average number of shares outstanding: | ​ |  |  | ​ |  |
Basic | ​ |  | 36,111,000 | ​ |  | 36,835,000
Diluted | ​ |  | 36,253,000 | ​ |  | 37,118,000

​

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended March 31, | ​
​ | ​ | 2025 |  | 2024 | ​
​ | ​ | (in thousands, except for share and per share data) | ​
Net sales: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Equipment revenues | ​ | $ | 66,993 | ​ | $ | 83,133 | ​
Service revenues | ​ |  | 63,904 | ​ |  | 55,357 | ​
​ | ​ |  | 130,897 | ​ |  | 138,490 | ​
Cost of sales: | ​ |  |  |  |  |  | ​
Equipment-related expenses | ​ |  | 50,968 | ​ |  | 59,332 | ​
Service-related expenses | ​ |  | 5,697 | ​ |  | 5,249 | ​
​ | ​ |  | 56,665 | ​ |  | 64,581 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gross Profit | ​ |  | 74,232 | ​ |  | 73,909 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating expenses: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Research and development | ​ |  | 9,349 | ​ |  | 7,736 | ​
Selling, general, and administrative expenses | ​ |  | 30,710 | ​ |  | 26,319 | ​
Total Operating Expenses | ​ |  | 40,059 |  | ​ | 34,055 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating Income | ​ |  | 34,173 |  |  | 39,854 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other income: | ​ |  | ​ |  |  |  | ​
Interest and other income, net | ​ |  | 2,927 | ​ |  | 1,806 | ​
Income before Provision for Income Taxes | ​ |  | 37,100 | ​ |  | 41,660 | ​
Provision for Income Taxes | ​ |  | 5,326 | ​ |  | 5,376 | ​
Net Income | ​ | $ | 31,774 | ​ | $ | 36,284 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income per share: | ​ |  |  | ​ |  |  | ​
Basic | ​ | $ | 0.87 | ​ | $ | 0.99 | ​
Diluted | ​ | $ | 0.86 | ​ | $ | 0.98 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average number of shares outstanding: | ​ |  |  | ​ |  |  | ​
Basic | ​ |  | 36,511,000 | ​ |  | 36,792,000 | ​
Diluted | ​ |  | 36,743,000 | ​ |  | 37,032,000 | ​

​

​

See accompanying notes to condensed consolidated financial statements.

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Three Months ended March 31, | ​ | Nine Months Ended March 31,
​ | 2025 |  | 2024 | ​ | 2025 |  | 2024
Net Income | $ | 10,122 | ​ | $ | 13,196 | ​ | $ | 31,774 | ​ | $ | 36,284
Other comprehensive income, net of tax |  | ​ | ​ |  | — | ​ |  | ​ | ​ |  | —
Net change in unrealized gains on available-for-sale debt securities, net of taxes of $13 and $20, respectively |  | 66 | ​ |  | — | ​ |  | 113 | ​ |  | —
Other comprehensive income, net of tax | ​ | 66 | ​ |  | — | ​ | ​ | 113 | ​ |  | —
Comprehensive income | $ | 10,188 | ​ | $ | 13,196 | ​ | $ | 31,887 | ​ | $ | 36,284

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (unaudited)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine months ended March 31, 2025 (in thousands, except for share data)
​ | ​ | Common Stock | ​ | ​ | ​ | ​ | Treasury Stock | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Number of |  | ​ | ​ |  | Additional |  | ​ |  | ​ | ​ |  | ​ | ​ |  | Accumulated |  | ​ | ​
​ |  | Shares | ​ | ​ | ​ |  | Paid-in |  | Number of | ​ | ​ | ​ |  | Retained |  | Other Comprehensive | ​ | ​ | ​
​ |  | Issued | ​ | Amount |  | Capital | ​ | Shares | ​ | Amount | ​ | Earnings | ​ | Income | ​ | Total
Balances at June 30, 2024 |  | 39,768,186 | ​ | $ | 398 | ​ | $ | 23,712 |  | (2,893,715) | ​ | $ | (19,521) | ​ | $ | 174,300 | ​ | $ | — | ​ | $ | 178,889
Net income |  | — | ​ |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | 11,185 | ​ |  | — | ​ | ​ | 11,185
Stock-based compensation expense |  | — | ​ |  | — | ​ | ​ | 371 |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ | ​ | 371
Stock options exercised | ​ | 2,849 | ​ |  | — | ​ | ​ | 54 |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ | ​ | 54
Purchase of treasury shares | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | (193,252) | ​ | ​ | (7,280) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (7,280)
Cash dividend ($.125 per share) | ​ | — | ​ |  | — | ​ | ​ | — |  | — | ​ |  | — | ​ |  | (4,610) | ​ |  | — | ​ | ​ | (4,610)
Balances at September 30, 2024 |  | 39,771,035 | ​ | $ | 398 | ​ | $ | 24,137 |  | (3,086,967) | ​ | $ | (26,801) | ​ | $ | 180,875 | ​ | $ | — | ​ | $ | 178,609
Net income | ​ | — | ​ |  | — | ​ |  | — |  | — | ​ |  | — | ​ | ​ | 10,467 | ​ | ​ | — | ​ | ​ | 10,467
Other comprehensive income, net of tax | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 47 | ​ | ​ | 47
Stock-based compensation expense | ​ | — | ​ |  | — | ​ | ​ | 386 |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ | ​ | 386
Purchase of treasury shares | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | (282,647) | ​ | ​ | (10,728) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (10,728)
Cash dividend ($.125 per share) | ​ | — | ​ |  | — | ​ | ​ | — |  | — | ​ |  | — | ​ |  | (4,554) | ​ |  | — | ​ | ​ | (4,554)
Balances at December 31, 2024 |  | 39,771,035 | ​ | $ | 398 | ​ | $ | 24,523 |  | (3,369,614) | ​ | $ | (37,529) | ​ | $ | 186,788 | ​ | $ | 47 | ​ | $ | 174,227
Net income | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | ​ | 10,122 | ​ | ​ | — | ​ | ​ | 10,122
Other comprehensive income, net of tax | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 66 | ​ | ​ | 66
Stock-based compensation expense | ​ | — | ​ | ​ | — | ​ | ​ | 386 | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 386
Purchase of treasury shares | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | (745,000) | ​ | ​ | (18,786) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (18,786)
Cash dividend ($.125 per share) | ​ | — | ​ |  | — | ​ | ​ | — |  | — | ​ |  | — | ​ |  | (4,467) | ​ |  | — | ​ | ​ | (4,467)
Balances at March 31, 2025 | ​ | 39,771,035 | ​ | $ | 398 | ​ | $ | 24,909 |  | (4,114,614) | ​ | $ | (56,315) | ​ | $ | 192,443 | ​ | $ | 113 | ​ | $ | 161,548

​

​ ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Nine months ended March 31, 2024 (in thousands, except share data)
​ |  | Common Stock | ​ |  | ​ | ​ | Treasury Stock | ​ |  | ​ | ​ |  | ​ | ​ |  | ​
​ |  | Number of |  | ​ | ​ |  | Additional |  | ​ |  | ​ | ​ |  | ​ | ​ |  | Accumulated |  | ​ | ​
​ |  | Shares | ​ | ​ | ​ |  | Paid-in |  | Number of | ​ | ​ | ​ |  | Retained |  | Other Comprehensive | ​ | ​ | ​
​ |  | Issued | ​ | Amount |  | Capital | ​ | Shares | ​ | Amount | ​ | Earnings | ​ | Income | ​ | Total
Balances at June 30, 2023 |  | 39,663,812 | ​ | $ | 397 | ​ | $ | 21,553 |  | (2,893,715) | ​ | $ | (19,521) | ​ | $ | 137,740 | ​ | $ | — | ​ | $ | 140,169
Net income |  | — | ​ |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | 10,478 | ​ |  | — | ​ | ​ | 10,478
Stock-based compensation expense |  | — | ​ |  | — | ​ | ​ | 307 |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ | ​ | 307
Cash dividend ($.08 per share) | ​ | — | ​ |  | — | ​ | ​ | — |  | — | ​ |  | — | ​ |  | (2,942) | ​ |  | — | ​ | ​ | (2,942)
Balances at September 30, 2023 |  | 39,663,812 | ​ | $ | 397 | ​ | $ | 21,860 |  | (2,893,715) | ​ | $ | (19,521) | ​ | $ | 145,276 | ​ | $ | — | ​ | $ | 148,012
Net income | ​ | — | ​ |  | — | ​ |  | — |  | — | ​ |  | — | ​ | ​ | 12,610 | ​ | ​ | — | ​ | ​ | 12,610
Stock-based compensation expense | ​ | — | ​ |  | — | ​ | ​ | 303 |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ | ​ | 303
Stock options exercised | ​ | 11,892 | ​ |  | — | ​ | ​ | — |  | — | ​ |  | — | ​ |  | — | ​ |  | — | ​ | ​ | —
Cash dividend ($.08 per share) | ​ | — | ​ |  | — | ​ | ​ | — |  | — | ​ |  | — | ​ |  | (2,941) | ​ |  | — | ​ | ​ | (2,941)
Balances at December 31, 2023 |  | 39,675,704 | ​ | $ | 397 | ​ | $ | 22,163 |  | (2,893,715) | ​ | $ | (19,521) | ​ | $ | 154,945 | ​ | $ | — | ​ | $ | 157,984
Net income | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | ​ | 13,196 | ​ | ​ | — | ​ | ​ | 13,196
Stock-based compensation expense | ​ | — | ​ | ​ | — | ​ | ​ | 266 | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 266
Stock options exercised | ​ | 90,650 | ​ | ​ | 1 | ​ | ​ | 426 | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 427
Cash dividend ($.10 per share) | ​ | — | ​ |  | — | ​ | ​ | — |  | — | ​ |  | — | ​ |  | (3,687) | ​ |  | — | ​ | ​ | (3,687)
Balances at March 31, 2024 | ​ | 39,766,354 | ​ | $ | 398 | ​ | $ | 22,855 |  | (2,893,715) | ​ | $ | (19,521) | ​ | $ | 164,454 | ​ | $ | — | ​ | $ | 168,186

​

See accompanying notes to condensed consolidated financial statements

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months ended March 31, | ​
​ |  | 2025 |  | 2024 |
​ | ​ | (in thousands) | ​
CASH FLOWS FROM OPERATING ACTIVITIES | ​ | ​ |  |  | ​ |  | ​
Net income | ​ | $ | 31,774 | ​ | $ | 36,284 | ​
Adjustments to reconcile net income to net cash provided by operating activities: | ​ |  |  | ​ |  | ​ | ​
Depreciation and amortization | ​ |  | 1,705 | ​ |  | 1,627 | ​
Interest (income) expense on other investments | ​ | ​ | (194) | ​ | ​ | 112 | ​
Unrealized (gain) loss on marketable securities | ​ | ​ | (131) | ​ | ​ | (52) | ​
(Recovery of) credit losses | ​ |  | (12) | ​ |  | (26) | ​
Change to inventory reserve | ​ |  | 78 | ​ |  | 634 | ​
Deferred income taxes | ​ |  | (2,324) | ​ |  | (2,331) | ​
Stock based compensation expense | ​ |  | 1,143 | ​ |  | 876 | ​
Changes in operating assets and liabilities: | ​ |  |  | ​ |  |  | ​
Accounts receivable | ​ |  | 7,660 | ​ |  | (4,178) | ​
Inventories | ​ |  | 2,973 | ​ |  | (2,388) | ​
Prepaid expenses and other current assets | ​ |  | 841 | ​ |  | 23 | ​
Income tax receivable | ​ | ​ | (905) | ​ | ​ | 75 | ​
Other assets | ​ |  | 84 | ​ |  | 22 | ​
Accounts payable, accrued expenses, accrued salaries and wages, accrued income taxes | ​ |  | (3,789) | ​ |  | 354 | ​
Net Cash Provided by Operating Activities | ​ |  | 38,903 | ​ |  | 31,032 | ​
CASH FLOWS FROM INVESTING ACTIVITIES | ​ |  |  | ​ |  |  | ​
Purchases of property, plant, and equipment | ​ |  | (1,879) | ​ |  | (1,043) | ​
Purchases of marketable securities | ​ | ​ | (10,222) | ​ | ​ | (160) | ​
Purchases of other investments | ​ | ​ | (78) | ​ | ​ | (1,123) | ​
Redemption of other investments | ​ | ​ | 27,252 | ​ | ​ | — | ​
Net Cash Provided by (Used in) Investing Activities | ​ |  | 15,073 | ​ |  | (2,326) | ​
CASH FLOWS FROM FINANCING ACTIVITIES | ​ |  |  | ​ |  |  | ​
Proceeds from stock option exercises | ​ |  | 54 | ​ |  | 427 | ​
Cash paid for dividend | ​ |  | (9,164) | ​ |  | (9,570) | ​
Cash paid for purchase of treasury shares | ​ | ​ | (36,794) | ​ | ​ | — | ​
Net Cash Used in Financing Activities | ​ |  | (45,904) | ​ |  | (9,143) | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net increase in Cash and Cash Equivalents | ​ |  | 8,072 | ​ |  | 19,563 | ​
CASH AND CASH EQUIVALENTS - Beginning | ​ |  | 65,341 | ​ |  | 35,955 | ​
CASH AND CASH EQUIVALENTS - Ending | ​ | $ | 73,413 | ​ | $ | 55,518 | ​
SUPPLEMENTAL CASH FLOW INFORMATION | ​ |  |  | ​ |  |  | ​
Interest paid | ​ | $ | — | ​ | $ | 8 | ​
Income taxes paid | ​ | $ | 8,350 | ​ | $ | 7,437 | ​
Non-Cash Investing and Financing Transactions | ​ | ​ |  |  | ​ |  | ​
Cash dividends declared and not paid | ​ | $ | 4,467 | ​ | $ | — | ​

​

See accompanying notes to condensed consolidated financial statements.

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NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

March 31, 2025

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

Nature of Business:

Napco Security Technologies, Inc (“NAPCO”, “the Company”, “we”, “our”) is one of the leading manufacturers and designers of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions. We offer a diversified array of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance products. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment.

Basis of Presentation:

The accompanying unaudited Condensed Consolidated Financial Statements of Napco Security Technologies, Inc. (Napco) have been prepared in accordance with U.S. GAAP as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, the interim condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended June 30, 2024. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature.

Significant Accounting Policies:

Principles of Consolidation

The consolidated financial statements include the accounts of Napco Security Technologies, Inc. and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continuously evaluate our estimates and judgments based on historical experience, as well as other factors that we believe to be reasonable under the circumstances. The results of our evaluation form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical estimates include management’s judgments associated with reserves for sales returns and allowances, allowance for credit losses, overhead expenses applied to inventory, inventory reserves, valuation of intangible assets, share based compensation and income taxes. These estimates may change in the future if underlying assumptions or factors change, and actual results may differ from these estimates.

Fair Value of Financial Instruments

The methods and assumptions used to estimate the fair value of the following classes of financial instruments were: Current Assets and Current Liabilities - The carrying amount of cash and cash equivalents, certificates of deposits, marketable securities, current receivables and payables and certain other short-term financial instruments approximate their fair value as of March 31, 2025 and June 30, 2024 due to their short-term maturities.

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Cash and Cash Equivalents and Investments – other

All financial instruments purchased with an original maturity of three months or less at the time of purchase are considered cash equivalents. Such items may include liquid money market funds, certificate of deposit, U.S. treasury securities and time deposit accounts. Investments that are classified as cash equivalents are carried at cost, which approximates fair value. Certificate of deposits with an original maturity greater than three months are classified as Investments – other.

Cash and cash equivalents include approximately $59,685,000 of short-term time deposits money market funds as of March 31, 2025. Cash and cash equivalents include approximately $46,518,000 of short-term time deposits, consisting of certificates of deposit totaling $5,402,000 and $41,116,000 in a money market fund as of June 30, 2024. 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 consist of the following as of (in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2025 |  | June 30, 2024
​ |  | ​ |  |  | ​ |
Cash | ​ | $ | 13,728 | ​ | $ | 18,823
Money Market Fund | ​ |  | 59,685 | ​ |  | 41,116
Certificate of Deposits | ​ | ​ | — | ​ | ​ | 5,402
​ | ​ | $ | 73,413 | ​ | $ | 65,341

​

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

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2025 |  | June 30, 2024
​ |  | ​ |  |  | ​ |
Certificate of Deposits | ​ | $ | — | ​ | $ | 26,980
​ | ​ | $ | — | ​ | $ | 26,980

​

Certificates of deposit are recorded at the original cost plus accrued interest. There were no certificate of deposits outstanding at March 31, 2025. The Company’s certificates of deposits as of June 30, 2024 consist of the following (in thousands):

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
June 30, 2024
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Balance Sheet Classification |  | Interest Rate |  | Maturity Date |  | Cost |  | Carrying Value
Cash and Cash Equivalents | ​ | ​ | 4.70% | ​ | ​ | 8/22/2024 | ​ | $ | 5,374 | ​ | $ | 5,402
Investments - other | ​ | ​ | 4.55% - 4.75% | ​ | ​ | 7/25/2024 - 10/24/2024 | ​ | ​ | 26,709 | ​ | ​ | 26,980

​

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, 2025 and June 30, 2024. The Company has not historically experienced any credit losses with balances in excess of FDIC limits.

Marketable Securities

Investments in debt securities are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in fair value, excluding credit losses and impairments, are recorded in other comprehensive income. Fair value is calculated based on publicly available market information or other estimates determined by management. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost. To determine credit losses, a systematic methodology is employed that considers available quantitative and qualitative evidence. In addition, specific adverse conditions are considered related to the financial health of, and business outlook for, the investee. If the Company plans to sell the security or it is more likely than not that the Company will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment

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charge in other income (expense), net and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, we may incur future impairments.

Investments in equity securities with readily determinable fair values are measured at fair value. Equity investments without readily determinable fair values are measured using the equity method or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). The Company performs a qualitative assessment on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. Changes in value are recorded in other income (expense), net.

Accounts Receivable

Accounts receivable is stated net of the reserves for credit losses of $20,000 and $32,000 as of March 31, 2025 and June 30, 2024, respectively. In accordance with ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), the Company recognizes an allowance for credit losses for trade receivables to present the net amount expected to be collected as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset which includes consideration of past events and historical loss experience, current events and also future events based on our expectation as of the balance sheet date. Receivables are written off when the Company determined that such receivables are deemed uncollectible. The Company pools its receivables based on similar risk characteristics in estimating its expected credit losses. In situations where a receivable does not share the same risk characteristics with other receivables, the Company measures those receivables individually. The Company also continuously evaluates such pooling decisions and adjusts as needed from period to period as risk characteristics change.

The Company utilizes the loss rate method in determining its lifetime expected credit losses on its receivables. This method is used for calculating an estimate of losses based primarily on the Company’s historical loss experience. In determining its loss rates, the Company evaluates information related to its historical losses, adjusted for current conditions and further adjusted for the period of time that can be reasonably forecasted. Qualitative and quantitative adjustments related to current conditions and the reasonable and supportable forecast period consider all the following: past due receivables, the customer creditworthiness, changes in the terms of receivables, effect of other external forces such as competition, and legal and regulatory requirements on the level of estimated credit losses in the existing receivables.

Inventories

Inventories are valued at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (FIFO) method. The reported net value of inventory includes finished saleable products, work-in-process and raw materials that will be sold or used in future periods. Inventory costs include raw materials, direct labor and overhead. The Company’s overhead expenses are applied based, in part, upon estimates of the proportion of those expenses that are related to procuring and storing raw materials as compared to the manufacture and assembly of finished products. These proportions, the method of their application, and the resulting overhead included in ending inventory, are based in part on subjective estimates and actual results could differ from those estimates.

The Company records a reserve for excess and slow-moving inventory, which represents any excess of the cost of the inventory over its estimated realizable value. This reserve is calculated using an estimated excess and slow-moving percentage applied to the inventory based on age, historical trends, product life cycle, requirements to support forecasted sales, and the ability to find alternate applications of its raw materials and to convert finished product into alternate versions of the same product to better match customer demand. In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events. There is inherent professional judgment and subjectivity made by both production and engineering members of management in determining the estimated excess and slow-moving percentage (See Note 6).

The Company also regularly reviews the period over which its inventories will be converted to sales. Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current.

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred; costs of major renewals and improvements are capitalized. At the time property and equipment are retired or

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

Depreciation is recorded over the estimated service lives of the related assets using primarily the straight-line method. Amortization of leasehold improvements is calculated by using the straight-line method over the estimated useful life of the asset or lease term, whichever is shorter.

Long-Lived and Intangible Assets

Long-lived assets are amortized over their useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets in question may not be recoverable. Impairment would be recorded in circumstances where undiscounted cash flows expected to be generated by an asset are less than the carrying value of that asset.

Intangible assets consisted of the follows (in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2025 | ​ | June 30, 2024
​ |  | Carrying |  | Accumulated |  | Net book |  | Carrying |  | Accumulated |  | Net book
​ | ​ | value | ​ | amortization | ​ | value | ​ | value | ​ | amortization | ​ | value
Customer relationships | ​ | $ | 9,800 | ​ | $ | (9,521) | ​ | $ | 279 | ​ | $ | 9,800 | ​ | $ | (9,436) | ​ | $ | 364
Trade name | ​ | ​ | 4,048 |  | ​ | (961) |  | ​ | 3,087 |  | ​ | 4,048 |  | ​ | (810) |  | ​ | 3,238
​ | ​ | $ | 13,848 | ​ | $ | (10,482) | ​ | $ | 3,366 | ​ | $ | 13,848 | ​ | $ | (10,246) | ​ | $ | 3,602

​

Amortization expense for intangible assets subject to amortization was approximately $79,000 and $84,000 for the three months ended March 31, 2025 and 2024, respectively. Amortization expense for intangible assets subject to amortization was approximately $236,000 and $253,000 for the nine months ended March 31, 2025 and 2024, respectively. Amortization expense for each of the next five fiscal years is estimated to be as follows: 2026 - $297,000; 2027 - $283,000; 2028 - $269,000; 2029 - $210,000; and 2030 - $202,000. The weighted average remaining amortization period for intangible assets was 14.3 years and 14.8 years at March 31, 2025 and June 30, 2024, respectively.

Revenue Recognition

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

Equipment Revenue

Equipment revenue, which includes shipping and handling costs, is primarily generated from the sale of finished products to customers. Those sales predominantly contain a single performance obligation and revenue is recognized at a single point in time when ownership, risks and rewards transfer, which is typically the date of shipment of the related equipment when the product is picked up by the carrier or customer. A provision for product returns, credits and rebates is recorded as a reduction of equipment revenue in the same period the revenue is recognized.

The Company provides limited standard warranty for defective products, usually for a period of 24 to 36 months, and accepts returns for such defective products as well as for other limited circumstances. The Company also provides rebates to customers for meeting specified purchasing targets and other coupons or credits in limited circumstances. Reserves are established for the estimated returns, rebates and credits and such variable consideration is measured based on the most likely amount method.

The Company analyzes product sales returns and is able to make reasonable and reliable estimates of product returns based on several factors including actual returns and expected return data communicated to the Company by its customers.

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Service Revenue

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

The services are billed monthly, and customers have the right to cancel the cellular communication services at any time, however the contract with the customer does not provide for a refund.

Cost of Sales

Equipment Cost of Sales

Equipment cost of sales is primarily comprised of direct materials and supplies consumed in the manufacturing of products, as well as manufacturing labor, depreciation expense and direct and indirect overhead expenses necessary to acquire and convert the purchased materials and supplies into finished products.

Service Cost of Sales

Service cost of sales includes the cost of operating our network operations center to manage and deliver telecommunication services.

Shipping and Handling Sales and Costs

The Company records the amount billed to customers for shipping and handling in net sales ($91,000 and $93,000 in the three months ended March 31, 2025 and 2024, respectively, and $261,000 and $279,000 in the nine months ended March 31, 2025 and 2024, respectively); and classifies the costs associated with these sales in cost of sales ($330,000 and $421,000 in the three months ended March 31, 2025 and 2024, respectively and $1,073,000 and $1,181,000 in the nine months ended March 31, 2025 and 2024, respectively).

Advertising and Promotional Costs

Advertising and promotional costs are included in "Selling, General and Administrative" (“SG&A”) expenses in the consolidated statements of income and are expensed as incurred. Advertising expense for the three months ended March 31, 2025 and 2024 was $526,000 and $395,000, respectively. Advertising expense for the nine months ended March 31, 2025 and 2024 was $2,332,000 and $1,852,000, 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.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company measures and recognizes the tax implications of positions taken or expected to be taken in its tax returns on an ongoing basis. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the

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more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Treasury Stock

Treasury stock is accounted for using the cost method and recorded as a reduction to Stockholders’ equity on the Consolidated Balance Sheets. Incremental direct costs to purchase treasury stock are included in the cost of the shares acquired.

To determine the cost of treasury stock that is either sold or re-issued, we use the first in, first out method. When treasury stock is re-issued at a price higher than its cost, the increase is recorded in additional paid-in capital on the Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the decrease is recorded in additional paid-in capital to the extent that there are previously recorded increases to offset the decrease. Any decreases in excess of that amount are recorded in retained earnings on the Consolidated Balance Sheets.

Net Income per Share

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

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Net Income | ​ | Weighted Average Shares | ​ | Net Income per Share
​ |  | 2025 |  | 2024 |  | 2025 | ​ | 2024 | ​ | 2025 |  | 2024
Basic EPS | ​ | $ | 10,122 | ​ | $ | 13,196 | ​ | 36,111 | ​ | 36,835 | ​ | $ | 0.28 | ​ | $ | 0.36
Effect of Dilutive Securities: | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​
Stock Options | ​ |  | — | ​ | ​ | — | ​ | 142 |  | 283 | ​ |  | — | ​ |  | —
Diluted EPS | ​ | $ | 10,122 | ​ | $ | 13,196 | ​ | 36,253 |  | 37,118 | ​ | $ | 0.28 | ​ | $ | 0.36

​

Options to purchase 125,000 and 0 shares of common stock were excluded for the three months ended March 31, 2025 and 2024, respectively, and were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive. These options were still outstanding at the end of the period.

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Net Income per
​ | ​ | Net Income | ​ | Weighted Average Shares | ​ | Share
​ | ​ | 2025 |  | 2024 |  | 2025 |  | 2024 |  | 2025 |  | 2024
Basic EPS | ​ | $ | 31,774 | ​ | $ | 36,284 | ​ | 36,511 | ​ | 36,792 | ​ | $ | 0.87 | ​ | $ | 0.99
Effect of Dilutive Securities: | ​ | ​ |  |  | ​ |  |  | ​ |  | ​ |  | ​ |  |  | ​ |
Stock Options | ​ | ​ | — |  | ​ | — |  | 232 |  | 240 |  | ​ | (0.01) |  | ​ | (0.01)
Diluted EPS | ​ | $ | 31,774 | ​ | $ | 36,284 |  | 36,743 |  | 37,032 | ​ | $ | 0.86 | ​ | $ | 0.98

​

Options to purchase 88,333 and 24,167 shares of common stock were excluded for the nine months ended March 31, 2025 and 2024, respectively, and were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive. These options were still outstanding at the end of the period.

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Stock-Based Compensation

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

Stock-based awards exchanged for services are accounted for under the fair value method. Accordingly, stock-based compensation cost is measured at the grant date based on the estimated fair value of the award. The expense for awards is recognized over the requisite service period (generally the vesting period of the award). The Company has elected to treat awards with only service conditions and with graded vesting as one award. Consequently, the total compensation expense is recognized straight-line over the entire vesting period, so long as the compensation cost recognized at any date at least equals the portion of the grant date fair value of the award that is vested at that date.

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

Stock-based compensation costs of $386,000 and $266,000 were recognized for the three months ended March 31, 2025 and 2024, respectively. Stock-based compensation costs of $1,143,000 and $876,000 were recognized for the nine months ended March 31, 2025 and 2024, respectively.

Foreign Currency

The Company has determined the functional currency of all foreign subsidiaries is the U.S. Dollar. All foreign operations are considered a direct and integral part or extension of the Company’s operations. The day-to-day operations of all foreign subsidiaries are dependent on the economic environment of the U.S. Dollar. Therefore, no realized and unrealized gains and losses associated with foreign currency translation are recorded for the three and nine months ended March 31, 2025 or 2024.

Segment Reporting

The Company operates and measures its results in one operating segment and therefore has one reportable segment: the development, manufacture and sales of high-tech security devices and related cellular communication services for the devices. The Company’s Chief Operating Decision Maker, (the President, Chief Operating Officer, and Chief Financial Officer) evaluates performance of the Company and makes decisions regarding the allocation of resources based on total Company results. The Company has presented required geographical data in Note 14.

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Leases

The Company determines at contract inception if an arrangement is a lease, or contains a lease, of an identified asset for which the Company has the right to obtain substantially all of the economic benefits from its use and the right to direct its use. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, while lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. The implicit discount rate in the Company’s leases generally cannot readily be determined, and therefore the Company uses its incremental borrowing rate based on information available at lease commencement date in determining the present value of future payments. If the Company has options to renew or terminate certain leases, those options are included in the determination of lease term when it is reasonably certain that the Company will exercise such options. The Company does not separate lease and non-lease components in determining ROU assets or lease liabilities for real estate leases. Additionally, the Company does not recognize ROU assets or lease liabilities for leases with original terms or renewals of one year or less. See Note 13 – Commitments and Contingencies; Leases for additional accounting policies and disclosures.

Legal and Other Contingencies

The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. An estimated loss from a loss contingency such as a legal proceeding or claim is accrued by a charge to income if it is probable that an asset has been impaired, or a liability has been incurred and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The update expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. It further requires disclosure of the amount and description of its composition for other segment items, and interim disclosures of both a reportable segment’s profit or loss and assets. The guidance requires disclosure of the title and position of the chief operating decision maker and how reported measures of segment profit or loss are used to assess performance and allocate resources. This pronouncement is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

The Company is evaluating other pronouncements recently issued but not yet adopted. The adoption of these pronouncements is not expected to have a material impact on our consolidated financial statements.

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NOTE 2 – Revenue Recognition and Contracts with Customers

The Company is engaged in the development, manufacture, and distribution of security products, encompassing access control systems, door security products, intrusion and fire alarm systems, alarm communication services, and video surveillance products for commercial and residential use. The Company also provides wireless communication service for intrusion and fire alarm systems on a monthly basis. These products and services are used for commercial, residential, institutional, industrial and governmental applications, and are sold primarily to independent distributors, dealers and installers of security equipment. Sales to unaffiliated customers are primarily shipped from the United States.

As of March 31, 2025 and June 30, 2024, the Company included refund liabilities of approximately $4,973,000 and $6,295,000, respectively, in current liabilities. As of March 31, 2025 and June 30, 2024, the Company included return-related assets of approximately $1,215,000 and $1,586,000, respectively, in other current assets.

As a percentage of gross sales, returns, rebates and allowances were 6% for both the three months ended March 31, 2025 and 2024, respectively. As a percentage of gross sales, returns, rebates and allowances were 7% and 6% for the nine months ended March 31, 2025 and 2024, respectively.

The Company disaggregates revenue from contracts with customers into major product lines. The Company determines that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. As noted in the accounting policy footnote, the Company’s business consists of one operating segment. Following is the disaggregation of revenues based on major product lines (in thousands):

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended March 31, | ​ | Nine months ended March 31, | ​
​ |  | 2025 |  | 2024 |  | 2025 |  | 2024 | ​
Major Product Lines: | ​ | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ |  | ​
Intrusion and access alarm products | ​ | $ | 8,049 | ​ | $ | 10,139 | ​ | $ | 24,668 | ​ | $ | 30,693 | ​
Door locking devices | ​ |  | 14,302 | ​ |  | 19,596 | ​ |  | 42,325 | ​ |  | 52,440 | ​
Services | ​ |  | 21,610 | ​ |  | 19,532 | ​ |  | 63,904 | ​ |  | 55,357 | ​
Total Revenues | ​ | $ | 43,961 | ​ | $ | 49,267 | ​ | $ | 130,897 | ​ | $ | 138,490 | ​

​

​

NOTE 3 – Business and Credit Concentrations

An entity is more vulnerable to concentrations of credit risk if it is exposed to risk of loss greater than it would have had if it mitigated its risk through diversification of customers. Such risks of loss manifest themselves differently, depending on the nature of the concentration, and vary in significance. The Company had two customers that comprised of 16% and 13% of the accounts receivable balance as of March 31, 2025. The Company had two customers that comprised of 17% and 12% of the accounts receivable balance as of June 30, 2024. Sales to any customers did not exceed 10% of net sales during the three or nine months ended March 31, 2025 and 2024, respectively.

​

NOTE 4 – Fair Value Measurement

Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. The Company is required to classify certain assets and liabilities based on the following fair value hierarchy:

| ● | Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

| ● | Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and

| ● | Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company has evaluated the estimated fair value of financial instruments using available market information and

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valuations as provided by third-party sources. The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts.

The following table presents the Company’s assets that were measured at fair value on a recurring basis at March 31, 2025 and June 30, 2024, respectively:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Level 1 | ​ | Level 2 | ​ | Level 3 | ​ | Total
March 31, 2025 | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash equivalents | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Treasury Securities | - | ​ | - | ​ | - | ​ | -
Money market funds | 59,685,000 | ​ | - | ​ | - | ​ | 59,685,000
Total | 59,685,000 | ​ | - | ​ | - | ​ | 59,685,000
Marketable securities | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Treasury Securities | 10,136,000 | ​ | - | ​ | - | ​ | 10,136,000
Mutual funds | 5,748,000 | ​ | - | ​ | - | ​ | 5,748,000
Total | 15,884,000 | ​ | - | ​ | - | ​ | 15,884,000
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
June 30, 2024 | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash equivalents | ​ | ​ | ​ | ​ | ​ | ​ | ​
Certificate of deposits | 5,402,000 | ​ | - | ​ | - | ​ | 5,402,000
Money market funds | 41,116,000 | ​ | - | ​ | - | ​ | 41,116,000
Total | 46,518,000 | ​ | - | ​ | - | ​ | 46,518,000
Short-term investments | ​ | ​ | ​ | ​ | ​ | ​ | ​
Certificate of deposits | 26,980,000 | ​ | - | ​ | - | ​ | 26,980,000
Total | 26,980,000 | ​ | - | ​ | - | ​ | 26,980,000
Marketable securities | ​ | ​ | ​ | ​ | ​ | ​ | ​
Mutual funds | 5,398,000 | ​ | - | ​ | - | ​ | 5,398,000
Total | 5,398,000 | ​ | - | ​ | - | ​ | 5,398,000

​

The Company’s investments classified as Level 1 are based on quoted prices that are available in active markets, as well as certificates of deposits and time deposits that are classified as Level 1 due to their short-term nature.

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For the three and nine months ending March 31, 2025 and 2024, there were no transfers between Levels 1 and 2 investments and no transfers in or out of Level 3.

NOTE 5 – Marketable Securities

A summary of the fair value of the Company’s investment in marketable securities as of March 31, 2025 and June 30, 2024 is as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2025 |  | June 30, 2024
​ |  | ​ |  |  | ​ |
Equity Securities | ​ | $ | 5,748 | ​ | $ | 5,398
Debt Securities (available-for-sale) | ​ |  | 10,136 | ​ |  | —
​ | ​ | $ | 15,884 | ​ | $ | 5,398

​

Investments in Equity Securities

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended March 31, | ​ | Nine months ended March 31,
​ | ​ | 2025 |  | 2024 |  | 2025 |  | 2024
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net gains recognized during the period on equity securities | ​ | $ | 51 | ​ | $ | 42 | ​ | $ | 219 | ​ | $ | 160
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date | ​ |  | 49 | ​ |  | (18) | ​ |  | 131 | ​ |  | 52
​ | ​ | $ | 100 | ​ | $ | 24 | ​ | $ | 350 | ​ | $ | 212

​

The following tables summarize the Company’s investments in equity securities at March 31, 2025 and June 30, 2024, respectively (in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | March 31, 2025 | ​ | June 30, 2024
​ | ​ | ​ | ​ | ​ | ​ | ​ | Unrealized | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Unrealized
​ | Cost |  | Fair Value |  | Gain (Loss) |  | Cost |  | Fair Value |  | Gain (Loss)
Mutual Funds | $ | 5,951 | ​ | ​ | 5,748 | ​ | $ | (203) | ​ | $ | 5,857 | ​ | $ | 5,398 | ​ | $ | (459)

​

Investment income is recognized when earned and consists principally of dividend income from fixed income mutual funds. Realized gains and losses on sales of investments are determined on a specific identification basis.

Investments in Debt Securities

The Company had no investment in debt securities at June 30, 2024. The following tables summarize the Company’s investments in debt securities at March 31, 2025 (in thousands):

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Amortized Cost | ​ | Unrealized Gains | ​ | Unrealized Losses | ​ | Aggregate Fair Value
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Treasury Securities | $ | 10,003 | ​ | $ | 133 | ​ | $ | — | ​ | $ | 10,136

​

The debt investments all mature within one year or less, and the Company did not recognize any credit or non-credit related losses related to its debt securities during the three and nine months ended March 31, 2025.

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NOTE 6 - Inventories

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

​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, |  | June 30,
​ | ​ | 2025 | ​ | 2024
Component parts | ​ | $ | 30,528 | ​ | $ | 32,283
Work-in-process | ​ |  | 7,496 | ​ |  | 7,509
Finished product | ​ |  | 8,836 | ​ |  | 10,121
​ | ​ | $ | 46,860 | ​ | $ | 49,913
​ | ​ | ​ | ​ | ​ | ​ | ​
Classification of inventories: | ​ |  |  | ​ |  |
Current | ​ | $ | 34,450 | ​ | $ | 34,804
Non-current | ​ |  | 12,410 | ​ |  | 15,109
​ | ​ | $ | 46,860 | ​ | $ | 49,913

​

The reserve for excess and slow-moving inventory, which reduces inventory in our consolidated balance sheets were $5,139,000 and $5,026,000 as of March 31, 2025 and June 30, 2024, respectively.

​

NOTE 7 – Property, Plant, and Equipment

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, 2025 |  | June 30, 2024 |  | Useful Life in Years
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Land | ​ | $ | 904 | ​ | $ | 904 | ​ | N/A
Buildings | ​ |  | 8,911 | ​ |  | 8,911 | ​ | 30 to 40
Molds and dies | ​ |  | 7,548 | ​ |  | 7,539 | ​ | 3 to 5
Furniture and fixtures | ​ |  | 3,715 | ​ |  | 3,613 | ​ | 5 to 10
Machinery and equipment | ​ |  | 30,906 | ​ |  | 29,761 | ​ | 3 to 10
Building improvements | ​ |  | 3,657 | ​ |  | 3,129 | ​ | Shorter of the lease term or life of asset
​ | ​ |  | 55,641 | ​ |  | 53,857 | ​ |
Less: accumulated depreciation and amortization | ​ |  | (46,154) | ​ |  | (44,780) | ​ |
​ | ​ | $ | 9,487 | ​ | $ | 9,077 | ​ |

​

Depreciation and amortization expense on property, plant, and equipment was approximately $493,000 and $454,000 for the three months ended March 31, 2025 and 2024, respectively. Depreciation and amortization expense on property, plant, and equipment was approximately $1,469,000 and $1,374,000 for the nine months ended March 31, 2025 and 2024, respectively.

​

NOTE 8 - Income Taxes

The provision for income taxes represents Federal, foreign, and state and local income taxes. The effective rate differs from statutory rates due to the effect of state and local income taxes, tax rates in foreign jurisdictions, global intangible low-taxed income (“GILTI”), tax benefit of R&D credits, and certain nondeductible expenses. Our effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, and state and local income taxes. In addition, changes in judgment from the evaluation of new information resulting in the recognition de-recognition or re-measurement of a tax position taken in a prior annual period is recognized separately in the quarter of the change.

For the nine months ended March 31, 2025 the Company recognized total pre-tax book income of $37,100,000, comprised of $5,325,000 and $31,775,000 of domestic and foreign pre-tax book income, respectively.

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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, 2025, the Company had accrued interest totaling $268,000, as well as $754,000 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, 2025, additional tax liability and interest expense were accrued for in the amount of $54,000 and $50,000, respectively.

The company has FIN 48 liabilities accrued due to historic Section 956 positions. These positions would not be reversed until the earlier of when the statute of limitation lapses noting that Section 956 adjustments are subject to a 6-year period under the constructive dividend rules, or the position is effectively settled via an IRS audit. Based on the tax returns filed in April of 2019, the six year statute of limitations would expire during Q4 of June 30, 2025.

We file a consolidated U.S. income tax return and tax returns in certain state and local and foreign jurisdictions. As of March 31, 2025, fiscal years 2021 and forward are still open for examination, in addition to fiscal year 2018, which is subject to a six year statute of limitations. In addition, the Company has a wholly-owned subsidiary which operates in a Free Zone in the Dominican Republic (“DR”) and is exempt from DR income tax.

NOTE 9 - Long-Term Debt

On February 9, 2024, the Company and its primary bank, HSBC Bank USA National Association (“HSBC”), agreed to amend and restate the existing Third Amended and Restated Credit Agreement (“Agreement”) dated June 29, 2012, as amended, between the Registrant and HSBC with the Fourth Amended and Restated Credit Agreement (“Amended Agreement”). The Amended Agreement extends the term of the Agreement from June 28, 2024, to February 9, 2029. The Amended Agreement also increases the available revolving credit line from $11,000,000 to $20,000,000 and replaces the LIBOR benchmark rate with the Secured Overnight Financing Rate (SOFR) benchmark rate. As of March 31, 2025 and June 30, 2024, the Company has no outstanding debt.

The Amended Agreement provides for a SOFR-based interest rate option of SOFR plus 1.2645% to 1.3645%, depending on the Fixed Charge Coverage Ratio, which is to be measured and adjusted quarterly, a prime rate-based interest rate option of the prime rate, as defined in the Amended Agreement, and other terms and conditions as more fully described in the Amended Agreement. The Company’s obligations under the Amended Agreement continue to be secured by substantially all its domestic assets, including but not limited to, deposit accounts, accounts receivable, inventory, equipment and fixtures and intangible assets. In addition, the Company’s wholly owned subsidiaries, except for the Company’s foreign subsidiaries, have issued guarantees and pledges of all their assets to secure the Company’s obligations under the Amended Agreement. All the outstanding common stock of the Company’s domestic subsidiaries and 65% of the common stock of the Company’s foreign subsidiaries have been pledged to secure the Company’s obligations under the Amended Agreement. The Amended Agreement contains various restrictions and covenants including, but not limited to, compliance with certain financial rations, restrictions on payment of dividends and restrictions on borrowings.

NOTE 10 - Stock Options

The Company follows ASC 718 (“Share-Based Payment”), which requires that all share-based payments to employees, including stock options, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period. For the three months ended March 31, 2025 and 2024, the Company recorded non-cash compensation expense of $386,000 ($0.01 per basic and diluted share) and $266,000 ($0.01 per basic and diluted share), respectively, relating to stock-based compensation which are included in SG&A in the consolidated statements of income. For the nine months ended March 31, 2025 and 2024, the Company recorded non-cash compensation expense of $1,143,000 ($0.03 per basic and diluted share) and $876,000 ($0.02 per basic and diluted share), respectively, relating to stock-based compensation which are included in SG&A in the consolidated statements of income.

2012 Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (the 2012 Employee Plan). The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 1,900,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (“ISOs”) or non-incentive stock options, to employees. Any plan participant who is granted ISOs and possesses more than 10% of the voting rights of the Company’s outstanding common stock must be granted an option with a price of at least 110% of the fair market value on the date of grant and a term of 10 years.

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Under the 2012 Employee Plan, stock options may be granted to employees with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable, in whole or in part, at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At March 31, 2025, 361,036 stock options were outstanding, 265,660 stock options were exercisable and no further stock options were available for grant under this plan after December 2022.

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2025 | ​ | 2024 | ​
​ | ​ | ​ | ​ | ​ | Weighted average | ​ | ​ | ​ | ​ | Weighted average | ​
​ |  | Options |  | exercise price |  | Options |  | exercise price |
Outstanding, beginning of year | ​ | ​ | 363,036 | ​ | $ | 21.47 | ​ | ​ | 521,580 | ​ | $ | 19.37 | ​
Forfeited/Lapsed | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (11,000) | ​ | $ | 3.15 | ​
Exercised | ​ | ​ | (2,000) |  | $ | 26.94 | ​ |  | (147,544) |  | $ | 15.43 | ​
Outstanding, end of period | ​ | ​ | 361,036 | ​ | $ | 21.44 | ​ |  | 363,036 | ​ | $ | 21.47 | ​
Exercisable, end of period | ​ | ​ | 265,660 | ​ | $ | 21.36 | ​ |  | 178,984 | ​ | $ | 21.59 | ​
Weighted average fair value at grant date of options granted | ​ | ​ | n/a | ​ |  | ​ | ​ | ​ | n/a | ​ |  | ​ | ​
Total intrinsic value of options exercised | ​ | $ | 35,000 | ​ | ​ | ​ | ​ | $ | 3,972,000 | ​ |  | ​ | ​
Total intrinsic value of options outstanding | ​ | $ | 696,000 | ​ | ​ | ​ | ​ | $ | 6,787,000 | ​ |  | ​ | ​
Total intrinsic value of options exercisable | ​ | $ | 505,000 | ​ | ​ | ​ | ​ | $ | 3,323,000 | ​ |  | ​ | ​

​

No stock options were exercised during the three months ended March 31, 2025. A total of 2,000 stock options were exercised during the nine months ended March 31, 2025. $54,000 cash was received from the option exercises during the nine months ended March 31, 2025. The actual tax benefit realized for the tax deductions from option exercises during the nine months ended March 31, 2025 was $0. A total of 115,944 and 147,544 stock options were exercised during the three and nine months ended March 31, 2024. 77,944 of the 115,944 options that were exercised during the three months ended March 31, 2024 were settled by the Company withholding 26,002 from the shares issuable on exercise of the options. 109,544 of the 147,544 options that were exercised during the nine months ended March 31, 2024 were settled by the Company withholding 46,570 from the shares issuable on exercise of the options. The withheld shares of common stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid. For the remaining 38,000 stock options exercised during the three and nine months ended March 31, 2024. $427,000 cash was received from the option exercises. The actual tax benefit realized for the tax deductions from option exercises during both the three and nine months ended March 31, 2024 was $67,000 and $119,000.

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at March 31, 2025:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Options outstanding | ​ | Options exercisable
​ |  | ​ |  | Weighted average |  | ​ | ​ |  | ​ |  | ​ | ​
​ | ​ | Number | ​ | remaining | ​ | Weighted average | ​ | Number | ​ | Weighted average
Range of exercise prices | ​ | outstanding | ​ | contractual life | ​ | exercise price | ​ | exercisable | ​ | exercise price
$10.02 ‑ $26.94 | ​ | 361,036 | ​ | 6.40 | ​ | $ | 21.44 | ​ | 265,660 | ​ | $ | 21.36
​ | ​ | 361,036 | ​ | 6.40 | ​ | $ | 21.44 | ​ | 265,660 | ​ | $ | 21.36

​

As of March 31, 2025, there was $468,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. 0 and 76,700 options vested during the three and nine months ended March 31, 2025. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2025 was $0 and $782,000, respectively. 5,200 and 89,900 options vested during the three and nine months ended March 31, 2024. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 was $33,000 and $881,000, respectively.

2012 Non-Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Non-Employee Stock Option Plan (the 2012 Non-Employee Plan). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 100,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

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Under the 2012 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At March 31, 2025, 20,400 stock options were outstanding, 18,480 stock options were exercisable and no further stock options were available for grant under this plan after December 2022.

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2025 | ​ | 2024 | ​
​ |  | ​ | ​ |  | Weighted average |  | ​ | ​ |  | Weighted average |
​ | ​ | Options | ​ | exercise price | ​ | Options | ​ | exercise price | ​
Outstanding, beginning of year | ​ | ​ | 20,400 | ​ | $ | 14.39 | ​ | ​ | 20,400 | ​ | $ | 14.39 | ​
Forfeited/Lapsed | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​
Exercised | ​ | ​ | — | ​ | ​ | — | ​ |  | — | ​ | ​ | — | ​
Outstanding, end of period | ​ | ​ | 20,400 | ​ | $ | 14.39 | ​ |  | 20,400 | ​ | $ | 14.39 | ​
Exercisable, end of period | ​ | ​ | 18,480 | ​ | $ | 13.50 | ​ |  | 16,560 | ​ | $ | 12.41 | ​
Weighted average fair value at grant date of options granted | ​ | ​ | n/a | ​ | ​ | ​ | ​ | ​ | n/a | ​ |  |  | ​
Total intrinsic value of options exercised | ​ | ​ | n/a | ​ | ​ | ​ | ​ | ​ | n/a | ​ |  |  | ​
Total intrinsic value of options outstanding | ​ | $ | 176,000 | ​ | ​ | ​ | ​ | $ | 526,000 | ​ |  |  | ​
Total intrinsic value of options exercisable | ​ | $ | 176,000 | ​ | ​ | ​ | ​ | $ | 460,000 | ​ |  |  | ​

​

No stock options were exercised during the three and nine months ended March 31, 2025 and 2024, respectively. No cash was received from option exercises during the three and nine months ended March 31, 2025 and 2024, respectively, and the actual tax benefit realized for the tax deductions from option exercises was $0 for both periods.

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at March 31, 2025:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Options outstanding | ​ | Options exercisable
​ | ​ | ​ | ​ | Weighted average | ​ | Weighted | ​ | ​ | ​ | Weighted
​ | ​ | Number | ​ | remaining | ​ | average exercise | ​ | Number | ​ | average exercise
Range of exercise prices | ​ | outstanding |  | contractual life | ​ | price |  | exercisable | ​ | price
$4.35 - $22.93 | ​ | 20,400 | ​ | 4.90 | ​ | $ | 14.39 | ​ | 18,480 | ​ | $ | 13.50
​ | ​ | 20,400 | ​ | 4.90 | ​ | $ | 14.39 | ​ | 18,480 | ​ | $ | 13.50

​

As of March 31, 2025, there was $10,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. 0 and 1,920 options vested during the three and nine months ended March 31, 2025, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2025 was $0 and $19,000, respectively. 720 and 2,640 options vested during the three and nine months ended March 31, 2024, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 under this plan was $5,000 and 24,000, respectively.

2018 Non-Employee Stock Option Plan

In December 2018, the stockholders approved the 2018 Non-Employee Stock Option Plan (the “2018 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 100,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2018 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At March 31, 2025, 64,900 stock options were outstanding, 62,200 stock options were exercisable and 4,000 further stock options were available for grant under this plan.

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There were no options granted during the nine months ended March 31, 2025 and 2024. No options may be granted under this plan after December 2028.

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2025 | ​ | 2024 | ​
​ |  | ​ | ​ |  | Weighted average |  | ​ | ​ |  | Weighted average |
​ | ​ | Options |  | exercise price | ​ | Options |  | exercise price | ​
Outstanding, beginning of year | ​ | ​ | 68,900 | ​ | $ | 14.54 | ​ | ​ | 75,000 | ​ | $ | 14.83 | ​
Granted | ​ | ​ | — |  | ​ | — | ​ |  | — |  | ​ | — | ​
Forfeited/Lapsed | ​ | ​ | (4,000) |  | $ | 22.93 | ​ |  | — |  | ​ | — | ​
Exercised | ​ | ​ | — |  | ​ | ​ | ​ |  | (3,100) |  | $ | 18.98 | ​
Outstanding, end of period | ​ | ​ | 64,900 | ​ | $ | 14.02 | ​ |  | 71,900 | ​ | $ | 14.65 | ​
Exercisable, end of period | ​ | ​ | 62,200 | ​ | $ | 13.63 | ​ |  | 62,500 | ​ | $ | 13.41 | ​
Weighted average fair value at grant date of options granted | ​ | ​ | n/a | ​ | ​ | ​ | ​ | ​ | n/a | ​ | ​ | ​ | ​
Total intrinsic value of options exercised | ​ | ​ | n/a | ​ | ​ | ​ | ​ | $ | 59,000 | ​ | ​ | ​ | ​
Total intrinsic value of options outstanding | ​ | $ | 584,000 | ​ | ​ | ​ | ​ | $ | 1,834,000 | ​ | ​ | ​ | ​
Total intrinsic value of options exercisable | ​ | $ | 584,000 | ​ | ​ | ​ | ​ | $ | 1,672,000 | ​ | ​ | ​ | ​

​

No stock options were exercised during both the three and nine months ended March 31, 2025. No cash was received from option exercises during both the three and nine months ended March 31, 2025, and the actual tax benefit realized for the tax deductions from option exercises was $0. A total of 1,500 and 3,100 stock options were exercised during the three and nine months ended March 31, 2024, respectively. The 1,500 options that were exercised during the three months ended March 31, 2024 were settled by the Company withholding 792 from the shares issuable on exercise of the options. The 3,100 options that were exercised during the nine months ended March 31, 2024 were settled by the Company withholding 1,532 from the shares issuable on exercise of the options. The withheld shares of Common Stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid. No cash was received from the option exercises during the three and nine months ended March 31, 2024. The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2024 was $6,000 and $12,000, respectively.

The following table summarizes information about stock options outstanding under the 2018 Non-Employee Plan at March 31, 2025:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Options outstanding | ​ | Options exercisable
​ |  | ​ |  | Weighted average |  | Weighted |  | ​ |  | Weighted
​ | ​ | Number | ​ | remaining | ​ | average exercise | ​ | Number | ​ | average exercise
Range of exercise prices | ​ | outstanding | ​ | contractual life | ​ | price | ​ | exercisable | ​ | price
$8.10 - $22.93 | ​ | 64,900 |  | 4.86 | ​ | $ | 14.02 |  | 62,200 | ​ | $ | 13.63
​ | ​ | 64,900 |  | 4.86 | ​ | $ | 14.02 |  | 62,200 | ​ | $ | 13.63

​

As of March 31, 2025, there was $14,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2018 Non-Employee Plan. 0 and 2,700 options vested during both the three and nine months ended March 31, 2025, respectively. The total grant date fair value of the options vesting during both the three and nine months ended March 31, 2025 was $0 and $27,000. 5,380 and 14,880 options vested during the three and nine months ended March 31, 2024, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2024 under this plan was $35,000 and $124,000, respectively.

2020 Non-Employee Stock Option Plan

In May 2020, the stockholders approved the 2020 Non-Employee Stock Option Plan (the “2020 Non-Employee Plan”). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 100,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

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

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option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At March 31, 2025, 51,900 stock options were outstanding, 38,520 stock options were exercisable and 45,100 stock options were available for grant under this plan.

No options were granted during the nine months ended March 31, 2025 and 2024, respectively. No options may be granted under this plan after May 2030.

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

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2025 | ​ | 2024 | ​
​ | ​ | ​ | ​ | ​ | Weighted average | ​ | ​ | ​ | ​ | Weighted average | ​
​ |  | Options |  | exercise price |  | Options |  | exercise price |
Outstanding, beginning of year |  | ​ | 56,900 |  | $ | 23.35 | ​ | ​ | 56,900 |  | $ | 23.35 | ​
Granted |  | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​
Forfeited/Lapsed | ​ | ​ | (2,000) | ​ | $ | 26.94 | ​ | ​ | — | ​ | ​ | — | ​
Exercised |  | ​ | (3,000) | ​ | $ | 26.94 | ​ | ​ | — | ​ |  | — | ​
Outstanding, end of period |  | ​ | 51,900 | ​ | $ | 23.00 | ​ | ​ | 56,900 | ​ | $ | 23.35 | ​
Exercisable, end of period |  | ​ | 38,520 | ​ | $ | 21.79 | ​ | ​ | 30,140 | ​ | $ | 21.72 | ​
Weighted average fair value at grant date of options granted | ​ | ​ | n/a | ​ |  |  | ​ | ​ | n/a | ​ |  | ​ | ​
Total intrinsic value of options exercised | ​ | $ | 32,000 | ​ |  |  | ​ |  | n/a | ​ |  | ​ | ​
Total intrinsic value of options outstanding | ​ | $ | 118,000 | ​ |  |  | ​ | $ | 957,000 | ​ |  | ​ | ​
Total intrinsic value of options exercisable | ​ | $ | 117,000 | ​ |  |  | ​ | $ | 556,000 | ​ |  | ​ | ​

​

A total of 0 and 3,000 stock options were exercised during the three and nine months ended March 31, 2025, respectively. 3,000 stock options exercised during the nine months ended March 31, 2025 were settled by the company withholding 2,151 shares from the shares issuable on exercise of the options. The withheld shares of common stock had an aggregate fair market value on the date of exercise equal to the purchase price being paid. The actual tax benefit realized for the tax deductions from option exercises during the three and nine months ended March 31, 2025 was $0 and $7,000, respectively. No stock options were exercised during both the three and nine months ended March 31, 2024. No cash was received from option exercises during either of the three and nine months ended March 31, 2024 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, 2025:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Options outstanding | ​ | Options exercisable
​ | ​ | ​ | ​ | Weighted average | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Number | ​ | remaining | ​ | Weighted average | ​ | Number | ​ | Weighted average
Range of exercise prices |  | outstanding |  | contractual life |  | exercise price |  | exercisable |  | exercise price
$11.40 - $30.71 |  | 51,900 |  | 6.79 | ​ | $ | 23.00 |  | 38,520 | ​ | $ | 21.79
​ |  | 51,900 |  | 6.79 | ​ | $ | 23.00 |  | 38,520 | ​ | $ | 21.79

​

As of March 31, 2025, there was $111,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2020 Non-Employee Plan. 1,000 and 11,380 options vested during both of the three and nine months ended March 31, 2025 and 2024, respectively. The total grant date fair value of the options vesting during both the three and nine months ended March 31, 2025 and 2024 was $16,000 and $129,000, respectively.

2022 Employee Stock Option Plan

In December 2022, the stockholders approved the 2022 Employee Stock Option Plan (the “2022 Employee Plan”). The plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 950,000 shares of the Company’s common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (“ISOs”) or non-incentive stock options, to valued employees. Any plan participant who is granted ISOs and possesses more than 10% of the voting rights of the Company’s outstanding common stock must be granted an option with a price of at least 110% of the fair market value on the date of grant.

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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 March 31, 2025, 130,000 stock options were outstanding, 28,000 stock options were exercisable and 820,000 stock options were available for grant under this plan.

No stock options were granted during the nine months ended March 31, 2025. No stock options were granted during the three months ended March 31, 2024. There were 10,000 options granted during the nine months ended March 31, 2024. 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:

​

​ | ​ | ​ | ​ | ​ | ​
​ |  | 2025 |  | 2024 |
Risk-free interest rates |  | n/a | ​ | 4.66 | %
Expected lives |  | n/a | ​ | 5.76 Years | ​
Expected volatility |  | n/a | ​ | 48.71 | %
Expected dividend yields |  | n/a | ​ | 1.48 | %

​

The following table reflects activity under the 2022 Employee Plan for the nine months ended March 31:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2025 | ​ | 2024
​ | ​ | ​ | ​ | ​ | Weighted average | ​ | ​ | ​ | ​ | Weighted average
​ |  | Options |  | exercise price | ​ | Options |  | exercise price
Outstanding, beginning of year |  | ​ | 130,000 |  | $ | 41.38 | ​ | ​ | 5,000 |  | $ | 40.01
Granted |  | ​ | — | ​ | ​ | — | ​ | ​ | 10,000 | ​ | $ | 21.60
Forfeited/Lapsed | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (5,000) | ​ | $ | 40.01
Exercised |  | ​ | — | ​ |  | — | ​ | ​ | — | ​ |  | —
Outstanding, end of period |  | ​ | 130,000 | ​ | $ | 41.38 | ​ | ​ | 10,000 | ​ | $ | 21.60
Exercisable, end of period |  | ​ | 28,000 | ​ | $ | 39.96 | ​ | ​ | 2,000 | ​ | $ | 21.60
Weighted average fair value at grant date of options granted | ​ | ​ | n/a | ​ |  |  | ​ | $ | 9.75 | ​ |  | ​
Total intrinsic value of options exercised | ​ |  | n/a | ​ |  |  | ​ |  | n/a | ​ |  | ​
Total intrinsic value of options outstanding | ​ | $ | 14,000 | ​ |  |  | ​ | $ | 186,000 | ​ |  | ​
Total intrinsic value of options exercisable | ​ | $ | 6,000 | ​ |  |  | ​ | $ | 37,000 | ​ |  | ​

​

No options were exercised during both the three and nine months ended March 31, 2025 and 2024, respectively. No cash was received from option exercises during both the three and nine months ended March 31, 2025 and 2024 and the actual tax benefit realized for the tax deductions from option exercises was $0.

The following table summarizes information about stock options outstanding under the 2022 Employee Plan at March 31, 2025:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Options outstanding | ​ | Options exercisable
​ | ​ | ​ | ​ | Weighted average | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Number | ​ | remaining | ​ | Weighted average | ​ | Number | ​ | Weighted average
Range of exercise prices |  | outstanding |  | contractual life |  | exercise price |  | exercisable |  | exercise price
$21.60 - $49.39 |  | 130,000 |  | 9.06 | ​ | $ | 41.38 |  | 28,000 | ​ | $ | 39.96
​ |  | 130,000 |  | 9.06 | ​ | $ | 41.38 |  | 28,000 | ​ | $ | 39.96

​

As of March 31, 2025, there was $1,676,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2022 Employee Plan. 0 and 2,000 options vested during the three and nine months ended March 31, 2025 and 2024, respectively. The total grant date fair value of the options vesting during the three and nine months ended March 31, 2025 and 2024 under this plan was $19,500, respectively.

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NOTE 11 – Stockholders’ Equity Transactions

The following tables summarizes information about dividends declared by the Company for the nine months ended March 31, 2025 and the fiscal year ended June 30, 2024:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
Dividend Declaration Date | ​ | Stockholders of Record Date | ​ | Dividend Payable Date | ​ | Per Share Cash Dividend Amount
​ | ​ | ​ | ​ | ​ | ​ | ​
January 30, 2025 | ​ | March 12, 2025 | ​ | April 3, 2025 | ​ | $0.125
November 1, 2024 | ​ | December 12, 2024 | ​ | January 3, 2025 | ​ | $0.125
August 22, 2024 | ​ | September 12, 2024 | ​ | October 3, 2024 | ​ | $0.125
May 2, 2024 | ​ | June 3, 2024 | ​ | June 24, 2024 | ​ | $ 0.10
February 1, 2024 | ​ | March 1, 2024 | ​ | March 22, 2024 | ​ | $ 0.10
November 2, 2023 | ​ | December 1, 2023 | ​ | December 22, 2023 | ​ | $ 0.08
August 18, 2023 | ​ | September 1, 2023 | ​ | September 22, 2023 | ​ | $ 0.08

​

On September 16, 2014 the Company’s board of directors authorized the repurchase of up to 2 million of the approximately 38.8 million shares of the Company’s common stock then outstanding. Such repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions and the market price of the common stock. In December of Fiscal 2018, the board of directors authorized the repurchase of up to an additional 1 million shares. In November of Fiscal 2025, the board authorized the repurchase of up to an additional 1 million shares. During the first quarter of the fiscal year ended June 30, 2025, the Company repurchased 193,252 shares of its outstanding common stock at a weighted average price of $37.67. During the second quarter of the fiscal year ended June 30, 2025, the Company repurchased 282,647 shares of its outstanding common stock at a weighted average price of $37.95. During the third quarter of the fiscal year ended June 30, 2025, the Company repurchased 745,000 shares of its outstanding common stock at a weighted average price of $25.22. Shares repurchased through the nine months ended March 31, 2025, are included in the Company’s Treasury Stock as of March 31, 2025. The Company currently has available 359,741 shares that can be repurchased under this authorization.

The following tables summarizes information about shares repurchased by the Company for the nine months ended March 31, 2025:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | ​ |  | Total Number of |  | Maximum
​ | ​ | Total | ​ | ​ | ​ | Shares Purchased as | ​ | Number of Shares
​ | ​ | Number of | ​ | Average | ​ | Part of Publicly | ​ | that May Yet Be
​ | ​ | Shares | ​ | Price Paid | ​ | Announced Plans or | ​ | Purchased Under
Period |  | Purchased |  | per Share |  | Programs |  | Plans or Programs
September 10, 2024 - September 19, 2024 |  | 193,252 |  | $ 37.67 |  | 193,252 |  | 1,387,388
November 7, 2024 - December 19, 2024 | ​ | 282,647 | ​ | $ 37.95 | ​ | 282,647 | ​ | 1,104,741
February 6, 2025 - March 20, 2025 | ​ | 745,000 | ​ | $ 25.22 | ​ | 745,000 | ​ | 359,741
Total for the 9 months ended March 31, 2025 |  | 1,220,899 |  | $ 30.14 |  | 1,220,899 |  | 359,741

​

During the nine months ended March 31, 2025, certain employees and directors exercised stock options under the Company's 2012 Employee and 2020 Non-Employee Stock Option Plans totaling 5,000 shares. Of the 5,000 shares exercised, 3,000 of these exercises were completed as cashless exercises as allowed for under the plans, where the exercise shares are issued by the Company in exchange for shares of the Company's common stock that are owned by the optionees. The number of shares withheld by the Company was 2,151 and was based upon the aggregate fair market value on the date of exercise equal to the purchase price being paid. There were no stock option exercises from certain employees and directors during the three months ended March 31, 2025.

NOTE 12 - 401(k) Plan

The Company maintains a 401(k) plan (“the Plan”) that covers all U.S. 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 $73,000 and $72,000 for the three months ended March 31, 2025 and 2024, respectively. Company contributions to this plan are discretionary and totaled $211,000 and $191,000 for the nine months ended March 31, 2025 and 2024, respectively.

​

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NOTE 13 - Commitments and Contingencies

Leases

Our lease obligation consists of a 99-year lease, entered into by one of the Company’s foreign subsidiaries, for approximately four acres of land in the Dominican Republic on which the Company’s principal production facility is located. The lease, which commenced on April 26, 1993 and expires in 2092, initially had an annual base rent of approximately $235,000 plus $53,000 in annual service charges. On September 14, 2022, a lease modification was executed which provides for an annual base rent of $235,000 plus $105,000 in annual service charges. The service charges increase 2% annually over the remaining life of the lease. The modification resulted in a remeasurement of the operating lease asset and liability and the effect was a reduction to the asset and liability of $1.3 million.

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

For the three months ended March 31, 2025 and 2024 cash payments against operating lease liabilities totaled $86,000 and $57,000, respectively. For the nine months ended March 31, 2025 and 2024 cash payments against operating lease liabilities totaled $258,000 and $228,000, respectively.

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

​

​ | ​ | ​ | ​
Weighted-average remaining lease term |  | 67 Years | ​
Weighted-average discount rate | ​ | 6.25 | %

​

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

​

​ | ​ | ​ | ​
Year Ending June 30, |  | Amount
2025 | ​ | $ | 86
2026 | ​ |  | 346
2027 | ​ |  | 349
2028 | ​ |  | 351
2029 | ​ |  | 353
Thereafter | ​ | ​ | 29,665
Total future minimum lease payments | ​ | $ | 31,150
Less: Imputed interest | ​ | ​ | 25,889
Total | ​ | $ | 5,261

​

Operating lease expense totaled approximately $124,000 and $127,000 for the three months ended March 31, 2025 and 2024, respectively. Operating lease expense totaled approximately $363,000 and $380,000 for the nine months ended March 31, 2025 and 2024, respectively.

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Litigation

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. et al., asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with statements made in the Company’s quarterly reports and earnings releases during the period of November 7, 2022 through May 8, 2023. A lead plaintiff was appointed in November 2023 and lead plaintiff filed an Amended Complaint on February 16, 2024. The Amended Complaint added claims under Sections 11, 12, and 15 of the Securities Act of 1933 in connection with the secondary public offering in February 2023. These additional claims are brought against the defendants named in the initial complaint, as well as the directors who allegedly signed the offering materials (prospectuses and registration statement in connection with the offering), and the underwriters for the offering. The Company filed a motion to dismiss the Amended Complaint on April 26, 2024. On April 11, 2025, the Court granted in part and denied in part the motion to dismiss. The Section 11 and Section 12 claims brought against the individual defendants were dismissed; the remaining claims survived the motion to dismiss. The Company intends to vigorously defend against the action.

On November 26, 2024, a putative derivative lawsuit captioned Minzer v. Soloway, et al., Case No. 2024-1218, was filed in the Court of Chancery in the State of Delaware against the Company’s Chairman and Chief Executive Officer, Chief Financial Officer, and certain current and former directors. The Company is a “Nominal Defendant” in the lawsuit. The complaint alleges, among other things, that the defendants breached their fiduciary duties and aided and abetted breach of fiduciary duties by allowing the Company to remain with ineffective internal controls over financial reporting and inventory and by allowing for the dissemination of false and misleading financial information in public filings. The complaint also brings breach of fiduciary duty and unjust enrichment claims in connection with stock sales by the Company’s Chairman and Chief Executive Officer and its Chief Financial Officer and seeks indemnity and contribution. The Company’s status as a “Nominal Defendant” in the action reflects the fact that the lawsuit is maintained by the named plaintiff on behalf of the Company and that the plaintiff seeks damages on the Company’s behalf. Defendants believe that there are substantial defenses to the claims asserted and filed a motion to dismiss and/or stay the case on February 28, 2025. Plaintiff must file an opposition to Defendants’ motion or amend her complaint on or before June 12, 2025.

On March 31, 2025, the Company received a subpoena from the Securities and Exchange Commission (“SEC”). The SEC’s subpoena and inquiry is principally focused on the Company’s previously disclosed restatements and related material weakness determination. The Company has produced, and will continue to produce documents, responsive to the SEC subpoena.

On April 25, 2025, a purported class action, brought on behalf of a putative class who acquired publicly traded NAPCO securities between February 5, 2024 and February 3, 2025, was filed in the United States District Court for the Eastern District of New York against the Company, its Chairman and Chief Executive Officer, and its Chief Financial Officer. The action, captioned Patel v. NAPCO Security Technologies, Inc. et al., asserts securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with statements made in quarterly earnings releases and calls during the period of February 5, 2024 through February 3, 2025. The Company intends to vigorously defend against the action.

With respect to all litigation and related matters, the Company records a liability when the Company believes it is probable that a liability has been incurred and the amount can be reasonably estimated. As of the end of the period covered by this report, the Company has not recorded a liability for the matters disclosed in this note. It is possible that the Company could be required to pay damages, incur other costs or establish accruals in amounts that could not be reasonably estimated as of the end of the period covered by this report.

Employment Agreements

The Company is obligated under three employment agreements and one severance agreement with executive officers of the Company. The employment agreements are with the Company’s CEO, Senior Vice President of Finance and Chief Accounting Officer (“SVP of Finance”) and the Senior Vice President of Engineering and Chief Technology Officer (“the SVP of Engineering”) and the severance agreement is with the Company’s President, Chief Operating Officer and Chief Financial Officer (“CFO”).

The employment agreement with the CEO provides for an annual salary of $980,000, as adjusted for inflation; incentive compensation as may be approved by the Board of Directors from time to time and a termination payment in an amount up to 299% of the average of

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the prior five calendar year’s compensation, subject to certain limitations, as defined in the agreement. The employment agreement renews annually in August unless either party gives the other notice of non-renewal at least six months prior to the end of the applicable term.

The employment agreement with the SVP of Finance expires in June 2025 and provides for an annual salary of $350,000. Upon the anniversary date, if terminated by the Company without cause, the SVP of Finance is entitled to severance of six months’ salary and continued company-sponsored health insurance for six months from the date of termination.

The employment agreement with the EVP of Engineering expires in August 2026 and provides for an annual salary of $458,000, and, if terminated by the Company without cause, severance of nine month’s salary and continued company-sponsored health insurance for six months from the date of termination.

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

NOTE 14 – Geographical Data

The Company is engaged in one major line of business: the development, manufacture, and distribution of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance products for commercial and residential use. The Company also provides wireless communication service for intrusion and fire alarm systems. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment. Sales to unaffiliated customers are primarily shipped from the United States. The Company has customers worldwide with major concentrations in North America.

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended March 31, | ​ | Nine months ended March 31, | ​
​ |  | 2025 |  | 2024 |  | 2025 |  | 2024 | ​
Sales to external customers (1): | ​ | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ |  | ​
Domestic | ​ | $ | 43,482 | ​ | $ | 49,004 | ​ | $ | 129,850 | ​ | $ | 137,666 | ​
Foreign | ​ |  | 479 | ​ |  | 263 | ​ |  | 1,047 | ​ |  | 824 | ​
Total Net Sales | ​ | $ | 43,961 | ​ | $ | 49,267 | ​ | $ | 130,897 | ​ | $ | 138,490 | ​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, 2025 |  | June 30, 2024 |
Identifiable assets: | ​ | ​ |  |  | ​ |  | ​
United States | ​ | $ | 150,110 | ​ | $ | 164,365 | ​
Dominican Republic (2) | ​ |  | 40,753 | ​ |  | 43,387 | ​
Total Identifiable Assets | ​ | $ | 190,863 | ​ | $ | 207,752 | ​

(1) | All of the Company’s sales originate in the United States and are shipped primarily from the Company’s facilities in the United States. There were no sales into any one foreign country in excess of 10% of total Net Sales.

(2) | Consists primarily of inventories (March 31, 2025 = $30,790; June 30, 2024 = $33,584), operating lease right of use (March 31, 2025 = $5,261; June 30, 2024 = $5,487) and fixed assets (March 31, 2025 = $4,112; June 30, 2024 = $3,623) located at the Company’s principal manufacturing facility in the Dominican Republic.

​

​

​

NOTE 15 - Subsequent Events

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

On May 2, 2025, the Company’s Board of Directors declared a cash dividend of $.14 per share payable on July 3, 2025 to stockholders of record on June 12, 2025.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q and the documents we incorporate by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical fact, included or incorporated in this prospectus regarding our strategy, future operations, clinical trials, collaborations, intellectual property, cash resources, financial position, future revenues, projected costs, prospects, plans, and objectives of management are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “plans,” “expects,” “intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,” “continue,” “will,” “schedule,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we will achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause our actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. See “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2024 for more information. These factors and the other cautionary statements made in this prospectus and the documents we incorporate by reference should be read as being applicable to all related forward-looking statements whenever they appear in this prospectus and the documents we incorporate by reference. In addition, any forward-looking statements represent our estimates only as of the date that this prospectus is filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. We do not assume any obligation to update any forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.

Overview

Napco is a leading manufacturer and designer of high-tech electronic security devices, wireless communication services for intrusion and fire alarm systems as well as a provider of school safety solutions. We offer a diversified array of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance products, used for commercial, residential, institutional, industrial and governmental applications. We have experienced significant growth in recent years, primarily driven by our recurring service revenues from wireless communication services for intrusion and fire alarm systems.

NAPCO has established a heritage and proven record in the professional security community for reliably delivering both advanced technology and high-quality security solutions. We are dedicated to developing innovative technology and producing the next generation of reliable security solutions that utilize remote communications and wireless networks.

Highlights from the three and nine months ended March 31, 2025 compared with the comparable periods in fiscal 2024 included:

| ● | Net sales decreased 10.8% to $44.0 million and 5.5% to $130.9 million, for the three and nine months.

| ● | Recurring service revenue (“RSR”) increased 10.6% and 15.4% to $21.6 and $63.9 million for the three and nine months.

| ● | Total gross profit margin increased from 53.8% to 57.2% and 53.4% to 56.7% for the three and nine months.

| ● | Gross margin for RSR decreased to 90.8% as compared to 91.8% for the three months and increased to 91.1% as compared to 90.5% for the nine months.

| ● | Generated $38.9 million in cash flows from operations for the nine months ended March 31, 2025 as compared to $31.0 in fiscal 2024.

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Industry Trends

Our industry is dynamic and highly competitive, with frequent changes in both technologies and business models. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. Napco continually innovates through a broad range of research and development activities that seek to identify and address the changing demands of customers, industry trends, and competitive forces.

Economic Conditions and Other Factors

We are subject to the effects of general macroeconomic and market conditions.

On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, (which includes imports from the Dominican Republic where we manufacture most of our products) plus significant additional country-specific tariffs for select trading partners, on all U.S. imports. The reciprocal country-specific tariffs were subsequently paused for 90 days on most countries. The uncertainty around the long-term tariff rates that could be applied to our importation of products into the U.S. presents significant challenges to our operations and supply chain and could impact future result. We cannot predict what additional actions might be considered or implemented by the U.S. or its trade partners, particularly in the current geopolitical environment. We anticipate that the imposition of the baseline 10% tariff will increase the cost of our products and could impact product margins. The uncertainty could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs. We are closely monitoring the evolving tariff landscape and attempting to mitigate these impacts, including using pricing adjustments, sourcing strategies and other cost-mitigation measures. However, there can be no assurance that we will be able to fully mitigate the impacts of such tariffs or that the imposition of tariffs, and the resulting economic impact on the U.S. market and consumer, will not be material to our financial results.

We primarily source our manufacturing materials from Asia, including Taiwan, India and China, with additional sourcing from other producers throughout the world. There have been significant proposed reciprocal tariffs on certain of these countries. At this time, the overall impact on our business related to tariffs remains uncertain and depends on multiple factors, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, reciprocal measures by impacted trade partners, inflationary effects, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.

The markets for security devices and services are dynamic and highly competitive. Our competitors are continually developing new products and solutions for consumers and businesses. We must continue to evolve and adapt to respond to customer and user preferences over an extended time in pace with this changing environment.

Critical Accounting Policies and Estimates

The Company’s significant accounting policies are fully described in Note 1 to the Company’s consolidated financial statements included in its 2024 Annual Report on Form 10-K.

Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires a high degree of judgment, either in the application and interpretation of existing accounting literature or in the development of estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. We continuously evaluate our estimates and judgments based on historical experience, as well as other factors that we believe to be reasonable under the circumstances. The results of our evaluation form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical estimates include management’s judgments associated with reserves for sales returns and allowances, allowance for credit losses, overhead expenses applied to inventory, inventory reserves, valuation of intangible assets, share based compensation and income taxes. These estimates may change in the future if underlying assumptions or factors change, and actual results may differ from these estimates.

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Results of Operations

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three months ended March 31, |  | Nine months ended March 31, | ​
​ | ​ | (dollars in thousands) | ​ | (dollars in thousands) |
​ |  | ​ | ​ |  | ​ | ​ |  | % Increase/ |  | ​ | ​ |  | ​ | ​ |  | % Increase/ | ​
​ |  | 2025 |  | 2024 |  | (decrease) |  | 2025 |  | 2024 |  | (decrease) | ​
Net sales: equipment revenues | ​ | $ | 22,351 | ​ | $ | 29,735 |  | (24.8) | % | $ | 66,993 | ​ | $ | 83,133 |  | (19.4) | %
service revenues | ​ | ​ | 21,610 | ​ | ​ | 19,532 | ​ | 10.6 | % | ​ | 63,904 | ​ | ​ | 55,357 | ​ | 15.4 | %
Total net sales | ​ | ​ | 43,961 | ​ | ​ | 49,267 | ​ | (10.8) | % | ​ | 130,897 | ​ | ​ | 138,490 | ​ | (5.5) | %
Gross Profit: equipment | ​ | ​ | 5,499 | ​ | ​ | 8,556 | ​ | (35.7) | % | ​ | 16,025 | ​ | ​ | 23,801 | ​ | (32.7) | %
services | ​ | ​ | 19,628 | ​ | ​ | 17,928 | ​ | 9.5 | % | ​ | 58,207 | ​ | ​ | 50,108 | ​ | 16.2 | %
Total gross profit | ​ |  | 25,127 | ​ |  | 26,484 |  | (5.1) | % |  | 74,232 | ​ |  | 73,909 |  | 0.4 | %
Gross profit as a % of net sales: | ​ |  | 57.2 | % |  | 53.8 | % | 6.3 | % |  | 56.7 | % |  | 53.4 | % | 6.2 | %
equipment | ​ | ​ | 24.6 | % | ​ | 28.8 | % | (14.6) | % | ​ | 23.9 | % | ​ | 28.6 | % | (16.4) | %
services | ​ | ​ | 90.8 | % | ​ | 91.8 | % | (1.1) | % | ​ | 91.1 | % | ​ | 90.5 | % | 0.7 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Research and development | ​ |  | 3,185 | ​ |  | 2,757 |  | 15.5 | % |  | 9,349 | ​ |  | 7,736 |  | 20.9 | %
Selling, general and administrative | ​ |  | 10,796 | ​ |  | 9,233 |  | 16.9 | % |  | 30,710 | ​ |  | 26,319 |  | 16.7 | %
Selling, general and administrative as a percentage of net sales | ​ |  | 24.6 | % |  | 18.7 | % | 31.6 | % |  | 23.5 | % |  | 19.0 | % | 23.7 | %
Operating income | ​ |  | 11,146 | ​ |  | 14,494 |  | (23.1) | % |  | 34,173 | ​ |  | 39,854 |  | (14.3) | %
Interest and other income, net | ​ |  | 862 | ​ |  | 637 |  | 35.3 | % |  | 2,927 | ​ |  | 1,806 |  | 62.1 | %
Provision for income taxes | ​ |  | 1,886 | ​ |  | 1,935 |  | (2.5) | % |  | 5,326 | ​ |  | 5,376 |  | (0.9) | %
Net income | ​ |  | 10,122 | ​ |  | 13,196 |  | (23.3) | % |  | 31,774 | ​ |  | 36,284 |  | (12.4) | %

Net Sales

Three Months Ended March 31, 2025:

Net sales for the three months ended March 31, 2025 decreased $5,306,000 to $43,961,000 as compared to $49,267,000 in the comparable period.

Net equipment revenues for the three months ended March 31, 2025, decreased $7,384,000 to $22,351,000 as compared to $29,735,000 in the comparable period. The decrease in net equipment sales was attributable to decreases in intrusion and access alarm products of $2,090,000 and door locking devices of $5,294,000. The overall decrease in net equipment revenue was primarily due to reduced sales of approximately $5.1 million at three of our larger distributors as follows; (i) a distributor who purchases both our intrusion and locking products, and decided to reduce corporate-wide purchases to stabilize their existing inventory levels; (ii) a locking distributor whose reduced purchases was primarily driven by the timing of project work with their customer; and (iii) a second locking distributor who was looking to reduce their inventory levels.

Net service revenues for the three months ended March 31, 2025, increased $2,078,000 to $21,610,000 as compared to $19,532,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.

Nine Months Ended March 31, 2025:

Net sales for the nine months ended March 31, 2025 decreased $7,593,000 to $130,897,000 as compared to $138,490,000 in the comparable period.

Net equipment revenues for the nine months ended March 31, 2025, decreased $16,140,000 to $66,993,000 as compared to $83,133,000 in the comparable period. The decrease in net equipment sales was attributable to decreases in intrusion and access alarm products of $6,025,000 and door locking devices of $10,115,000. Of the overall decrease in net equipment sales approximately $5.8 million was attributable to one of the Company’s larger distributors, which purchases both our intrusion and locking products, and made a decision to reduce corporate-wide purchases to stabilize their existing inventory levels. In addition, the reduction in door

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locking device sales was primarily attributable to reduced purchases by four of the Company’s locking customers of approximately $8.3 million, which was partially driven by the timing of project work with one of the customers.

Net service revenues for the nine months ended March 31, 2025, increased $8,547,000 to $63,904,000 as compared to $55,357,000 in the comparable period. The increase in net service revenues was due to an increase in the number of our cellular (radio) communication devices put into service and activated.

Gross Profit

Three Months Ended March 31, 2054

Overall gross profit for the three months ended March 31, 2025 decreased $1,357,000 to $25,127,000, or 57.2% of net sales, as compared to $26,484,000, or 53.8% of net sales, for the comparable period.

Gross profit from equipment sales was $5,499,000, or 24.6% of equipment sales, as compared to $8,556,000, or 28.8% of net equipment sales, for the comparable period. The decrease in gross profit percentage from equipment sales is primarily a result of product mix and lower absorption of fixed overhead costs as a result of the decrease in equipment revenue.

Gross profit on service revenues was $19,628,000, or 90.8% of net service revenues, as compared to $17,928,000, or 91.8% of net service revenues, for the comparable period a year ago. The decrease in gross profit percentage was a result of a negotiation of a one-time lower royalty payment in the comparable quarter.

Nine Months Ended March 31, 2025:

Overall gross profit for the nine months ended March 31, 2025 increased $323,000 to $74,232,000, or 56.7% of net sales, as compared to $73,909,000, or 53.4% of net sales, for the comparable period.

Gross profit from equipment sales was $16,025,000, or 23.9% of equipment sales, as compared to $23,801,000, or 28.6% of equipment sales, for the comparable period. The decrease in gross profit percentage from equipment sales is primarily a result of product mix and lower absorption of fixed overhead costs as a result of the decrease in equipment revenue.

Gross profit on service revenues was $58,207,000, or 91.1% of net service revenues, as compared to $50,108,000, or 90.5% of net service revenues, for the comparable period a year ago. The increase in gross profit percentage was a result of renegotiation of royalty arrangements and volume rebates received from carriers.

Research and Development

Research and development expenses for the three months ended March 31, 2025 increased by $428,000 to $3,185,000, or 7.2% of net sales, as compared to $2,757,000, or 5.6% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of annual compensation increases and hiring of additional resources.

Research and development expenses for the nine months ended March 31, 2025 increased by $1,613,000 to $9,349,000, or 7.1% of net sales, as compared to $7,736,000, or 5.6% of net sales, for the comparable period. The increase in research and development expenses was primarily a result of annual compensation increases and hiring of additional resources.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2025 increased by $1,563,000 to $10,796,000 as compared to $9,233,000 for the comparable period. The increase in SG&A expenses was primarily attributable to increased legal fees related to the litigation discussed in Note 13 of $704,000, compensation and benefit increases and hiring of additional staff of $586,000, increases in insurance costs of $162,000 and increases in advertising of $138,000, offset by reductions in investor relations expenses.

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Selling, general and administrative (“SG&A”) expenses for the nine months ended March 31, 2025 increased by $4,391,000 to $30,710,000 as compared to $26,319,000 for the comparable period. The increase in SG&A expenses was primarily attributable to compensation and benefit increases and hiring of additional staff of $2,900,000, increases in professional and consulting fees of $665,000, increases in insurance costs of $456,000, and increases in advertising of $442,000, offset by an insurance recovery of legal fees.

Other Income (Expense)

Interest and other income, net for the three months ended March 31, 2025 increased by $225,000 to income of $862,000 as compared to income of $637,000 for the comparable period. The increase in income was primarily due to an increase in interest income on short-term investments as a result of higher interest rates and larger deposit balances.

Interest and other income, net for the nine months ended March 31, 2025 increased by $1,121,000 to income of $2,927,000 as compared to income of $1,806,000 for the comparable period. The increase in income was primarily due to an increase in interest income on short-term investments as a result of higher interest rates and larger deposit balances.

Income Taxes

The Company’s provision for income taxes for the three months ended March 31, 2025 of $1,886,000 remained consistent as compared to $1,935,000 for the same period a year ago. The Company’s effective rate for income tax was 15.7% and 12.8% for the three months ended March 31, 2025 and 2024 respectively. The Company’s effective tax rate for the three months ended March 31, 2025 increased as a result of lower estimated R&D tax credits for the period.

The Company’s provision for income taxes for the nine months ended March 31, 2025 of $5,326,000 remained consistent as compared to $5,376,000 for the same period a year ago. The Company’s effective rate for income tax was 14.4% and 12.9% for the nine months ended March 31, 2025 and 2024 respectively. The Company’s effective tax rate for the nine months ended March 31, 2025 increased as a result of lower estimated R&D tax credits for the period and higher non-deductible stock based compensation.

Liquidity and Capital Resources

Our cash and cash equivalents increased by $8,072,000 during the nine months ended March 31, 2025, and our cash and cash equivalents and short-term investments as of March 31, 2025 was $89,297,000. We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months.

As of March 31, 2025, the Company’s available revolving credit line was $20,000,000, which expires in February 2029, none of which has been drawn. The Company has no outstanding debt.

A summary of the cash flow activity for the nine months ended March 31, 2025 and 2024 is as follows:

Cash Flows from Operating Activities

Net cash provided by operating activities was $38.9 million for the nine months ended March 31, 2025 and was due to net income of $31.8 million and increase in cash flow from changes in operating assets and liabilities of $6.9 million offset by adjustments for non-cash items of $0.3 million. The changes in operating assets and liabilities were largely attributable to decreases in accounts receivables, inventories and prepaid expenses partially offset by increases in income tax receivable and decreases in accounts payable and accrued expenses.

Net cash provided by operating activities was $31.0 million for the nine months ended March 31, 2024 and was due to net income of $36.3 million and adjustments for non-cash items of $.8 million, partially offset by a decrease in cash flow from operating activities due to changes in operating assets and liabilities of $6.1 million. The changes in operating assets and liabilities was largely attributable to an increase in accounts receivable and inventories partially offset by an increase in and accounts payable and accrued expenses.

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Cash Flows from Investing Activities

The net cash provided by investing activities of $15.1 million during the nine months ended March 31, 2025 was primarily attributable to the redemption of other investments of $27.3 million partially offset by expenditures used for capital expenditures of $1.8 million and purchase of investments of $10.2 million. The cash used in investing activities of $2.3 million during the nine months ended March 31, 2024, was primarily attributable to expenditures used for capital expenditures and purchase of investments. The change in use of cash for investing activities from 2024 to 2025 was a increase in the redemption of investments in term deposits (other investments).

Cash Flows from Financing Activities

The cash used in financing activities of $45.9 million for the nine months ended March 31, 2025 was primarily related to the purchase of treasury shares and the payment of stockholder dividends. The cash used in financing activities of $9.1 million for the nine months ended March 31, 2024 was primarily related to the payment of stockholder dividends.

Contractual Obligations and Commitments

As of March 31, 2025, the Company had no material commitments for capital expenditures or inventory purchases other than purchase orders issued in the normal course of business. On April 26, 1993, the Company's foreign subsidiary entered into a 99-year land lease of approximately 4 acres of land in the Dominican Republic, on which the Company’s principle manufacturing facility is located, at an annual base rent of approximately $235,000 and $105,000 in annual service charges. The service charges increase 2% annually over the remaining life of the lease.

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market rate risk for changes in interest rates primarily relates to our investment portfolio. We internally manage our investment portfolios considering investment opportunities and risks, tax consequences, and overall financing strategies. Our investment portfolio includes equity securities and U.S. treasury securities with a total fair value of approximately $15.9 million at March 31, 2025. These securities are subject to interest rate risk and, based on our investment portfolio at March 31, 2025, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of approximately $318,000. While an increase in interest rates may reduce the fair value of the investment portfolio, we will not realize the losses in the Consolidated Statements of Income unless the individual fixed-income securities are sold prior to recovery or the loss is determined to be other-than-temporary.

Foreign Currency Exchange Risk

We conduct business with non-U.S. customers, however all foreign sales transactions by the Company are denominated in U.S. dollars. As such, the Company has shifted foreign currency exposure onto its foreign customers.

If changes in exchange rates were to negatively effect these customers, the Company could have trouble collecting unsecured receivables, and or experience 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.

We are also exposed to foreign currency risk relative to expenses incurred in Dominican Pesos ("RD$"), the local currency of the Company's production facility in the Dominican Republic. The result of a 10% strengthening or weakening in the U.S. dollar to the RD$ would result in an annual increase or decrease in income from operations of approximately $832,000.

Tariff and Inflation Risks

Inflation generally affects us by increasing our cost of transportation, labor and manufacturing costs. In recent years, we have seen fluctuating transportation costs caused by global supply chain disruptions or geopolitical instability and general inflation effects, which may cause pressure on our costs and margins. More specifically, we source a large amount of our raw materials from international countries, which exposes us to international supply chain inflation, particularly ocean freight, and to changes in the strength of the U.S.

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dollar. General inflationary pressures continue to increase the other elements of our cost of goods and operating expenses. During the first quarter of 2025, various tariffs were announced on imports into the U.S. On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, plus significant additional country-specific tariffs for select trading partners, on all U.S. imports. The reciprocal country-specific tariffs were subsequently paused for 90 days on most countries. The imposition of the baseline 10% tariff will increase the cost of our products and could impact product margins. The uncertainty of future tariffs could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs.

ITEM 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure as of March 31, 2025. Management applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025. Based on that evaluation, management concluded that such disclosure controls and procedures were not effective, at the reasonable assurance level, as of March 31, 2025, as a result of the material weaknesses in internal control over financial reporting discussed below.

Previously Identified Material Weaknesses in Internal Control over Financial Reporting

As disclosed in our Annual Report on Form 10-K for the year ended June 30, 2024, management identified a material weakness in internal control related to inventory costing. The material weakness was a result of ineffective review of information used in the inventory costing process.

Plans for Remediation of Material Weakness

Management, with the oversight of the audit committee of our Board of Directors, has designed and implemented reconciliation procedures to determine that the information used in the costing of inventory is complete and accurate. We expect the steps taken to date will remediate the underlying cause of this material weakness and will improve the effectiveness of our internal control over financial reporting.

The material weakness cannot be considered remediated until applicable controls have operated for a sufficient period of time that would allow management to test and conclude that these controls are operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting in the areas affected by the material weakness, and the Company will continue to devote time, attention and financial resources to this effort.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2025, there were no changes in the Company’s internal controls over financial reporting, except for the remediation efforts described above, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting except as described above.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

The information called for by this item is incorporated herein by reference to Note 13, Commitments and Contingencies, in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

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Item 1A. Risk Factors

Information regarding the Company’s Risk Factors are set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024 as well as the Form 424(b)(7) Prospectus, filed on March 7, 2024. There has been no material change in the risk factors previously disclosed in the Company’s Form 10-K and Form 424(b)(7) for the three and nine months ended March 31, 2025 other than the risks associated with the uncertain nature of the tariff environment described on Page 32 above.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 16, 2014 the Company’s board of directors authorized the repurchase of up to 2 million of the approximately 38.8 million shares of the Company’s common stock then outstanding. Such repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions and the market price of the common stock. In December of Fiscal 2018, the board of directors authorized the repurchase of up to an additional 1 million shares. In November of Fiscal 2025, the board authorized the repurchase of up to an additional 1 million shares. During the first quarter of the fiscal year ended June 30, 2025, the Company repurchased 193,252 shares of its outstanding common stock at a weighted average price of $37.67. During the second quarter of the fiscal year ended June 30, 2025, the Company repurchased 282,647 shares of its outstanding common stock at a weighted average price of $37.95. During the third quarter of the fiscal year ended June 30, 2025, the Company repurchased 745,000 shares of its outstanding common stock at a weighted average price of $25.22. Shares repurchased through the nine months ended March 31, 2025, are included in the Company’s Treasury Stock as of March 31, 2025. The Company currently has available 359,741 shares that can be repurchased under this authorization.

The following tables summarizes information about shares repurchased by the Company for the nine months ended March 31, 2025:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | ​ |  | Total Number of |  | Maximum
​ | ​ | Total | ​ | ​ | ​ | Shares Purchased as | ​ | Number of Shares
​ | ​ | Number of | ​ | Average | ​ | Part of Publicly | ​ | that May Yet Be
​ | ​ | Shares | ​ | Price Paid | ​ | Announced Plans or | ​ | Purchased Under
Period |  | Purchased |  | per Share |  | Programs |  | Plans or Programs
September 10, 2024 - September 19, 2024 |  | 193,252 |  | $ 37.67 |  | 193,252 |  | 1,387,388
November 7, 2024 - December 19, 2024 | ​ | 282,647 | ​ | $ 37.95 | ​ | 282,647 | ​ | 1,104,741
February 6, 2025 - March 20, 2025 | ​ | 745,000 | ​ | $ 25.22 | ​ | 745,000 | ​ | 359,741
Total for the 9 months ended March 31, 2025 |  | 1,220,899 |  | $ 30.14 |  | 1,220,899 |  | 359,741

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

N o n e

Item 6. Exhibits

31.1 | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Richard L. Soloway, Chairman of the Board and President
31.2 | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Kevin S. Buchel, Executive Vice President and Chief Financial Officer
32.1 | Section 1350 Certifications
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH | Inline XBRL Taxonomy Extension Schema Document

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101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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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 5, 2025

NAPCO SECURITY TECHNOLOGIES, INC.

(Registrant)

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By: | /s/ RICHARD L. SOLOWAY |
| Richard L. Soloway
| Chairman of the Board of Directors & Chief Executive Officer
| (Chief Executive Officer) |
By: | /s/ KEVIN S. BUCHEL |
| Kevin S. Buchel
| President, Chief Operating Officer & Chief Financial Officer
| (Principal Financial and Accounting Officer)

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