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What changed in NAPCO SECURITY TECHNOLOGIES, INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of NAPCO SECURITY TECHNOLOGIES, INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+186 added−132 removedSource: 10-K (2025-08-25) vs 10-K (2024-08-29)

Top changes in NAPCO SECURITY TECHNOLOGIES, INC's 2025 10-K

186 paragraphs added · 132 removed · 103 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn order to maintain a high level of talent in our workforce, Napco offers comprehensive benefits programs, competitive wages, incentive programs, performance reviews and various employee activities and awards. We also provide training and management support for employees to enhance their success and to identify outstanding talent and development opportunities.
Biggest changeMaintaining a talented workforce at all levels is critical to our ability to deliver high quality products and services to our customers as well as maintain shareholder value. ​ Table of Contents In order to maintain a high level of talent in our workforce, Napco offers comprehensive benefits programs, competitive wages, incentive programs, performance reviews and various employee activities and awards.
Our Products and Services Since 1969, NAPCO has established a heritage and proven record in the professional security community for reliably delivering both advanced technology and high-quality security solutions, building many of the industry’s widely recognized brands, such as NAPCO Security Systems, Alarm Lock, Continental Access, Marks USA, and other popular product lines.
Our Products and Services Since 1969, NAPCO has established a heritage and proven record in the professional security community for reliably delivering both advanced technology and high-quality security solutions, building many of the industry’s widely recognized brands, such as NAPCO Security Systems, Alarm Lock, NAPCO Access Pro, Marks USA, and other popular product lines.
The Company believes that any vendor that is currently the sole source of a component can be replaced without a material impact on the Company. Corporate Information and History The Company was founded in 1969 and incorporated as NAPCO Security Systems, Inc. in December 1971 in the State of Delaware.
The Company believes that any vendor that is currently the sole source of a component can be replaced without a material impact on the Company. Company Information The Company was founded in 1969 and incorporated as NAPCO Security Systems, Inc. in December 1971 in the State of Delaware.
Communication equipment such as a cellular or digital communicator may be used to transmit the alarm signal to a central station or another person selected by a customer. Cellular ​ Table of Contents communicators have become more popular and panels and communicators are trending towards integration so that many alarm panels will contain an integrated cellular communication device.
Communication equipment such as a cellular or digital communicator may be used to transmit the alarm signal to a central station or another person selected by a customer. Cellular communicators have become more popular and panels and communicators are trending towards integration so that many alarm panels will contain an integrated cellular communication device.
Marketing The Company's staff of approximately 59 sales and marketing support employees sells and markets our products primarily to independent distributors, wholesalers and dealers of security alarm and security hardware equipment.
Marketing The Company's staff of approximately 63 sales and marketing support employees sells and markets our products primarily to independent distributors, wholesalers and dealers of security alarm and security hardware equipment.
As copper land lines are phased out and more people switch to cellular phone service for their homes, our cellular communication services become increasingly attractive in these installations, both new and existing.
As copper land lines continue to be phased out and more people are required to switch to cellular phone service for their homes, our cellular communication services become increasingly attractive in these installations, both new and existing.
Many colleges and universities have large endowments which are starting to be utilized to address this critical issue. Security equipment and services focused on education has reached over $3 billion in revenues and this segment is still in the early stages as many K-12 schools, colleges and universities have still not addressed this issue.
Security equipment and services focused on education has reached over $3 billion in revenues and this segment is still in the early stages as many K-12 schools, colleges and universities have still not addressed this issue.
Competitive Strengths The security products industry is highly competitive. The Company's primary competitors are comprised of approximately 12 other companies that manufacture and market security equipment to distributors, dealers, central stations and original equipment manufacturers. The Company believes that none of these competitors is dominant in the industry.
The Company's primary competitors are comprised of approximately 12 other companies that manufacture and market security equipment to distributors, dealers, central stations and original equipment manufacturers. The Company believes that none of these competitors is dominant in the industry. Most of these companies have substantially greater financial and other resources than the Company.
When an identification card or other identifying information is entered into the reader, the information is transmitted to the control panel/PC, which then validates the data and determines whether or not to grant access by electronically deactivating the door locking device.
When an identification card or other identifying information is entered into the reader, the information is transmitted to the control panel/PC, which then validates the data and determines whether or not to grant access by electronically deactivating the door locking device. An electronic log is kept which records various types of data regarding access activity. Video Surveillance Systems.
These services are provided to the Company’s service customers on a month-to-month basis. Access Control Systems . Access control systems consist of one or more of the following: various types of identification readers (e.g. card readers, hand scanners), a control panel, a PC-based computer and electronically activated door-locking devices.
Access control systems consist of one or more of the following: various types of identification readers (e.g. card readers, hand scanners), a control panel, a PC-based computer and electronically activated door-locking devices.
Passive infrared heat detectors respond to the change in heat patterns caused by an intruder moving within a protected area. Combination units respond to both changes in heat patterns and changes in microwave patterns occurring at the same time. Cellular Communication (Recurring Service Revenues) The Company provides cellular access for the cellular communication devices described above.
Passive infrared heat detectors respond to the change in heat patterns caused by an intruder moving within a protected area. Combination units respond to both changes in heat patterns and changes in microwave patterns occurring at the same time. Access Control Systems .
NAPCO went public on NASDAQ with the ticker symbol “NSSC”, in 1972. In December 2008 the Company changed its name to NAPCO Security Technologies, Inc. Our executive offices are located at 333 Bayview Ave, Amityville NY 11701. Our telephone number is (631) 842-9400.
In December 2008 the Company changed its name to NAPCO Security Technologies, Inc. Our executive offices are located at 333 Bayview Ave, Amityville NY 11701 and our telephone number is (631) 842-9400. Our website is http://www.napcosecurity.com.
When activated by any one of the various types of intrusion detectors, it can activate an audible alarm and/or various types of communication devices. ● Combination Control Panels/Digital Communicators and Digital Keypad Systems. A combination control panel, digital communicator and a digital keypad has continued to be the leading configuration in terms of dealer and consumer preference.
When activated by any one of the various types of intrusion detectors, it can activate an audible alarm and/or various types of communication devices. ● Combination Control Panels/Digital Communicators and Digital Keypad Systems.
We continue to introduce additional products generating recurring revenues, primarily in cellular communication devices. These products are installed at the premises of end users and we generate revenue from the installers by both the upfront purchase of our products and the monthly subscription fees for cellular communication services.
These products are installed at the premises of end users, and we generate revenue from the installers by both the upfront purchase of our products and the monthly subscription fees for access to our Networx Operations Center (NOC) that provides cellular communication services to the devices.
Benefits of the combination format include the cost efficiency resulting from a single microcomputer function, as well as the reliability and ease of installation gained from the simplicity and sophistication of micro-computer technology. ● Fire Alarm Control Panel.
A combination control panel, digital communicator and a digital keypad has continued to be the leading configuration in terms of dealer and consumer preference. ​ Table of Contents Benefits of the combination format include the cost efficiency resulting from a single microcomputer function, as well as the reliability and ease of installation gained from the simplicity and sophistication of micro-computer technology. ● Fire Alarm Control Panel.
ITEM 1: BUSINESS. Overview Napco Security Technologies, Inc (“NAPCO”, “the Company”, “we”) is one of the leading manufacturers and designers of high-tech electronic security devices, cellular communication services for intrusion and fire alarm systems as well as a leading provider of school safety solutions.
ITEM 1: BUSINESS. Overview NAPCO 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.
As more security installations include multiple security-related systems, which can include, intrusion, fire, access control, door-locking and connectivity, there is more demand for the various systems to communicate with each other.
However, unlike the Company, we believe that none of these competitors manufactures all key building security products: Intrusion Alarms and Access Control, Connectivity, and Locking devices. As more security installations include multiple security-related systems, which can include, intrusion, fire, access control, door-locking and connectivity, there is more demand for the various systems to communicate with each other.
We spend approximately 6% of our revenues on research and development. ​ Table of Contents Our Human Capital Resources As of June 30, 2024, the Company had 1,070 full-time employees. 276 of these were located in the United States (“U.S.”) and 794 were located at our manufacturing facility in the Dominican Republic (“DR”). 40 of our U.S. employees are covered by a collective bargaining agreement.
Our Human Capital Resources As of June 30, 2025, the Company had 1,061 full-time employees. 290 of these were located in the United States (“U.S.”) and 771 were located at our manufacturing facility in the Dominican Republic (“DR”). 41 of our U.S. employees are covered by a collective bargaining agreement. We also engage consultants from time to time.
In the U.S., there are over 100,000 K-12 schools, over 5,000 colleges and universities and over 350,000 houses of worship. Management estimates many of these institutions do not have adequate protection from an active shooter or intruder. As a result of increased “active shooter” incidents, a number of U.S. states and local governments have substantially increased school security budgets.
In the U.S., there are over 100,000 K-12 schools, over 5,000 colleges and universities and over 350,000 houses of worship. As a result of increased “active shooter” incidents, a number of U.S. states and local governments have substantially increased school security budgets. Many colleges and universities have large endowments which are starting to be utilized to address this critical issue.
Government Regulation Our business and products are subject to various federal, state, local and international regulatory authorities and the regulatory authorities in the countries in which our products are produced or sold.
We also provide training and management support for employees to enhance their success and to identify outstanding talent and development opportunities. Government Regulation Our business and products are subject to various federal, state, local and international regulatory authorities and the regulatory authorities in the countries in which our products are produced or sold.
This has enabled us to create recurring revenue opportunities across product lines, and our goal is to expand such opportunities to generate recurring revenue that will account for over 50% of our total revenue and to sustain profitability from recurring revenue margins that recently have approximated 90%.
This has enabled us to create recurring revenue opportunities across product lines, and to sustain profitability from recurring revenue margins that recently have approximated 91%.
More advanced systems can also include a recording device and some type of remote communication device such as an internet connection to a PC or browser-enabled cell phone. The system allows the user to monitor various locations at once while recorders save the video images for future use.
Video surveillance systems typically consist of one or more video cameras, a control panel and a video monitor or PC. More advanced systems can also include a recording device and some type of remote communication device such as an internet connection to a PC or browser-enabled cell phone.
Monthly recurring service revenue generate higher gross margins, and allows us to generate a more consistent and predictable stream of income and mitigates the risk of fluctuation in market demand for our equipment products.
Monthly recurring service revenue generates substantially higher gross margins than do equipment sales and allows us to generate a more consistent stream of income.
Remote communication devices can allow the user to view and control the system from a remote location. The Company designs, engineers, and markets the software and control panels discussed above. It also buys and resells various video cameras, PC-based computers and peripheral equipment for video surveillance systems.
The system allows the user to monitor various locations at once while recorders save the video images for future use. Remote communication devices can allow the user to view and control the system from a remote location. The Company designs, engineers, and markets the software and control panels discussed above.
These revenues, which currently have a gross margin of approximately 90% for the fiscal year ended June 30, 2024, represent approximately 40% of our total revenue for the fiscal year ended of June 30, 2024. The Company’s long-term goal is to have revenues from these recurring services represent at least 50% of total revenue.
Revenues from these services have grown significantly over the past several years, increasing 44% from fiscal 2023 to fiscal 2025. These revenues, which currently have a gross margin of approximately 91% for the fiscal year ended June 30, 2025, represent approximately 48% of our total revenue for the fiscal year ended of June 30, 2025.
The D.R. facility allows us to maintain a lower manufacturing overhead and improve our gross margin. The building is self-contained with an ability to withstand a Category 5 hurricane. Shipping times from the D.R. to the Amityville facility are typically 6-8 days.
The D.R. manufacturing operation is vertically integrated and operates in a low-cost location, where the typical labor cost are significantly less than the cost for similar services in the U.S. The D.R. facility allows us to maintain a lower manufacturing overhead and improve our gross margin. The building is self-contained with the ability to withstand a Category 5 hurricane.
The Company’s products and services are comprised primarily of the following: ● Standalone and networked digital door locks ● Standard and custom Locksets, Panic Devices and Door Closers ● Intrusion alarm equipment ● Intrusion and fire alarm cellular communication devices and services ● Integrated cellular intrusion alarm systems ● Door controllers and hosted services for access control Door Security Products The Company manufactures a variety of door locking devices including microprocessor-based electronic door locks with push button, card reader and bio-metric operation, door alarms, mechanical door locks and simple dead bolt locks.
The Company’s products and services are comprised primarily of the following: ● Standalone and networked digital door locks ● Standard and custom Locksets, Panic Devices and Door Closers ● Intrusion alarm equipment ● Intrusion and fire alarm cellular communication devices and services from which we generate recurring monthly service revenues and which has been a key driver of our profitability growth ● Integrated cellular intrusion alarm systems ● Door controllers and hosted services for access control ​ Table of Contents Communication Services (Recurring Service Revenues) The Company provides.
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 principally to independent distributors, dealers and installers of security equipment.
These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold principally to independent distributors, dealers and installers of security equipment. We have established a national network of trusted independent security dealers and integrators that are experts at selling, installing and supporting our various technologies.
The increase in our net sales from fiscal 2023 to 2024 was driven primarily from the continued growth of our recurring services revenues ($15.8 million) as well as an increase in sales of equipment products ($3.0 million). The increase in equipment sales was due primarily to the increased demand for the Company’s door-locking products.
The decrease in our net sales from fiscal 2024 to 2025 was driven by the decrease in sales of equipment products ($17.8 million) offset by the continued growth of our recurring communication services ($10.6 million).
Our net income was $49.8 million, $27.1 million and $19.6 million for the fiscal years ended June 30, 2024, 2023 and 2022, respectively. The increase in net income during fiscal 2024 was due primarily to the growth of the recurring service revenues which generated a gross margin of 90% during the period.
Our net income was $43.4 million, $49.8 million and $27.1 million for the fiscal years ended June 30, 2025, 2024 and 2023, respectively. Net income for the fiscal year ended June 30, 2025 was down ($6.4 million) as a result of decreases in the sales of our equipment products and increased operating expenses.
We also engage consultants from time to time. Management considers its relationship with its employees to be very good. Hiring, motivating and retaining talented employees is an ongoing priority to Napco. Maintaining a talented workforce at all levels is critical to our ability to deliver high quality products and services to our customers as well as maintain shareholder value.
Management considers its relationship with its employees to be very good. Hiring, motivating and retaining talented employees is an ongoing priority to Napco.
Website Access to Company Reports Copies of our filings under the Securities Exchange Act of 1934 (including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports) are available free of charge on our website ( https://investor.napcosecurity.com/sec-filings ) on the same day they are electronically filed with the Securities and Exchange Commission.
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act are filed with the SEC.
We intend to continue pursuing recurring revenue opportunities by developing new and innovative products and continuing our aggressive sales and marketing efforts. School Security and Public Safety We have developed products to help address security concerns arising from the significant need for increased security in schools and other public spaces.
It also buys and resells various video cameras, PC-based computers and peripheral equipment for video surveillance systems. School Security and Public Safety School security and public safety continues to be an important market, and we have developed products to help address security concerns arising from the significant need for increased security in schools and other public spaces.
We are dedicated to developing innovative technology and producing the next generation of reliable security solutions that utilize remote communications and wireless networks. Our net sales were $188.8 million, $170.0 million and $143.6 million for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.
These dealers are dependent on our platform for communication services to our radio communicators and smart security devices, and they pay us a monthly fee for these services to operate and manage their businesses efficiently. Our net sales were $181.6 million, $188.8 million and $170.0 million for the fiscal years ended June 30, 2025, 2024 and 2023, respectively.
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An electronic log is kept which records various types of data regarding access activity. ​ Table of Contents Video Surveillance Systems. Video surveillance systems typically consist of one or more video cameras, a control panel and a video monitor or PC.
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The decrease in equipment sales was due primarily to reduced sales of door-locking products ($11.5 million) as a result of the timing of project work as well as softness in demand for locking products during the period related to distributor destocking of inventory and to a lesser extent general uncertainty over U.S. tariff policies.
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Our Growth Drivers Recurring Service Revenue In 2012, we began to generate monthly recurring service revenue by developing our cellular radio technology. Revenues from these services have grown significantly over the past several years, increasing 65% from fiscal 2022 to fiscal 2024.
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In 2012, we began to generate monthly recurring service revenue by providing secure cellular and cloud access for intrusion and fire alarm communicators and other smart security devices. These services are provided to the Company’s customers on a month-to-month basis in exchange for a monthly fee.
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Most of these companies have substantially greater financial and other resources than the Company. However, unlike the Company, we believe that none of these competitors manufactures all key building security products: Intrusion Alarms and Access Control, Connectivity, and Locking devices.
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Since 2012, we have continued to develop and sell additional equipment products that require communication services and generate recurring revenues. To date, the majority of our recurring revenue has been generated through the sale, installation and activation of our StarLink cellular communication devices.
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The Company also benefits from the lower tariffs available to it under The Dominican Republic-Central America FTA (CAFTA-DR). The D.R. manufacturing operation is vertically integrated and operates in a low-cost location, where the typical labor cost are significantly less than the cost for similar services in the U.S.
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We intend to continue pursuing recurring revenue opportunities by developing new and innovative products and continuing our aggressive sales and marketing efforts of these products. Door Security Products The Company manufactures a variety of door locking devices including microprocessor-based electronic door locks with push button, card reader and bio-metric operation, door alarms, mechanical door locks and simple dead bolt locks.
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The Company has one class of Common Stock which trades on the NASDAQ Global Market under the symbol “NSSC”. ​ Table of Contents
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While we continue to win new school security projects, due to the nature of selling our security products through distribution, total visibility into quantifying the revenue from this market is difficult. Competition The security products industry is highly competitive.
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Shipping times from the D.R. to the Amityville facility are typically 6-8 days.
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We spend approximately 7% of our revenues on research and development.
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Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities Exchange Commission (the “SEC”).
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The contents of or accessible through our website are not incorporated into this Annual Report. Further, our references to the URLs for these websites are intended to be inactive textual reference only.
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We are subject to the informational requirements of the Exchange Act and file or furnish reports, proxy statements, and other information with the SEC. Our filings are also available to the public over the Internet at the SEC’s website at http://www.sec.gov.
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Our website provides a link to our SEC filings, which are available free of charge on the same day such filings are made. The specific location on the website where these reports can be found is https://investor.napcosecurity.com.
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Our website also provides a link to Section 16 filings which are available free of charge on the same day as such filings are made. Information contained on or accessible through these websites is not a part of this Annual Report on Form 10-K. ​ Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

33 edited+54 added−10 removed94 unchanged
Biggest changeA significant financial reporting failure or material weakness in internal control over financial reporting could cause a loss of investor confidence and a decline in the market price of our stock, and we could be subject to litigation and sanctions or investigation by regulatory authorities, such as Nasdaq, the SEC, or other regulatory authorities.
Biggest changeIf we identify any additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 of the SOX Act in a timely manner, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be materially adversely affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
We rely on the effort and continuing service of our senior management members The success of the Company is largely dependent on the effort and service of our senior management members, including Mr. Richard Soloway, the founder, Chief Executive Officer, Chairman of our board of directors, and Mr. Kevin Buchel, President, Chief Operating Officer and Chief Financial Officer.
We rely on the effort and continuing service of our senior management members The success of the Company is largely dependent on the effort and service of our senior management members, including Mr. Richard Soloway, the founder, Chief Executive Officer, Chairman of our board of directors, and Mr. Kevin Buchel, President and Chief Operating Officer.
These factors may result in a decline of demand for our school security products, which in turn may adversely affect our financial performance. We rely on distributors to sell our products and an adverse change in our relationship with such distributors may adversely affect our financial performance.
These factors may result in a decline in demand for our school security products, which in turn may adversely affect our financial performance. We rely on distributors to sell our products and an adverse change in our relationship with such distributors may adversely affect our financial performance.
While the economic recovery from this pandemic has resulted in increased demand for our products beginning in the fiscal year ended June 30, 2021, re-institution of a prolonged stay-at-home order, or any other continued decrease in economic activity as a result of COVID-19 pandemic, could have a negative adverse impact on our customers and their financial condition, which could impact their ability to meet their financial ​ Table of Contents obligations and could result in elevated levels of delinquencies and bad debt losses.
While the economic recovery from this pandemic has resulted in increased demand for our products beginning in the fiscal year ended June 30, 2021, re-institution of a prolonged stay-at-home order, or any other continued decrease in economic activity as a result of COVID-19 pandemic, could have a negative adverse impact on our customers and their financial condition, which could impact their ability to meet their financial obligations and could result in elevated levels of delinquencies and bad debt losses.
In addition, cyber-attacks from computer hackers and cyber criminals and other malicious Internet-based activity continue to increase generally, and perpetrators of cyber-attacks may be able to develop and deploy viruses, worms, ransomware, malware, DNS attacks, wireless network attacks, attacks on our cloud networks, phishing attempts, social engineering attempts, distributed denial of service attacks and other advanced persistent threats or malicious ​ Table of Contents software programs that attack our products and services, our networks and network endpoints or otherwise exploit any security vulnerabilities of our products, services and networks.
In addition, cyber-attacks from computer hackers and cyber criminals and other malicious Internet-based activity continue to increase generally, and perpetrators of cyber-attacks may be able to develop and deploy viruses, worms, ransomware, malware, DNS attacks, wireless network attacks, attacks on our cloud networks, phishing attempts, social engineering attempts, distributed denial of service attacks and other advanced persistent threats or malicious software programs that attack our products and services, our networks and network endpoints or otherwise exploit any security vulnerabilities of our products, services and networks.
Furthermore, our relationship with distributors may change or terminate due to other factors beyond our control, including but are not limited to, acquisition of distributors by third parties may not be willing to continue the relationship with us; internal restructuring or refocus of business strategies; and changes in management, all of which may negatively impact our ability to continue to sell to such distributors.
Furthermore, our relationship with distributors may change or terminate due to other factors beyond ​ Table of Contents our control, including but are not limited to, acquisition of distributors by third parties may not be willing to continue the relationship with us; internal restructuring or refocus of business strategies; and changes in management, all of which may negatively impact our ability to continue to sell to such distributors.
If we engage in additional debt financing, the holders of such debt would have priority over the holders ​ Table of Contents of our common stock, and we may be required to accept terms that further restrict our operations or our ability to incur additional indebtedness or to take other actions that would otherwise be in the interests of the debt holders.
If we engage in additional debt financing, the holders of such debt would have priority over the holders of our common stock, and we may be required to accept terms that further restrict our operations or our ability to incur additional indebtedness or to take other actions that would otherwise be in the interests of the debt holders.
Additionally, the shares of common stock subject to outstanding options under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans, as well as shares issuable upon vesting of restricted stock awards, will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.
Additionally, the shares of common stock subject to outstanding options under our equity incentive plans and the shares reserved for future issuance under ​ Table of Contents our equity incentive plans, as well as shares issuable upon vesting of restricted stock awards, will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.
Our business could be materially adversely affected as a result of general economic and market conditions. We are subject to the effects of general economic and market conditions. In the event that any of these conditions deteriorate, our revenue, profit and cash-flow levels could be materially adversely affected in future periods.
Risks Related to Our Business Our business could be materially adversely affected as a result of general economic and market conditions. We are subject to the effects of general economic and market conditions. In the event that any of these conditions deteriorate, our revenue, profit and cash-flow levels could be materially adversely affected in future periods.
Future success will depend, in part, on our ability to continue to develop and market products and product enhancements cost-effectively. The Company’s research and development expenditures are principally targeted at enhancing existing products, and to a lesser extent at developing new ones.
Future success will depend, in part, on our ability to continue to develop and market products and product enhancements cost-effectively. The Company’s research and development expenditures are principally targeted at enhancing existing products, and to a lesser extent at ​ Table of Contents developing new ones.
Our distributors and wholesalers also sell our competitors’ products, and if they favor our competitors’ products for any ​ Table of Contents reason, they may fail or reduce their effort to market and sell our products as effectively or to devote resources necessary to provide effective sales, which would adversely affect our financial performance.
Our distributors and wholesalers also sell our competitors’ products, and if they favor our competitors’ products for any reason, they may fail or reduce their effort to market and sell our products as effectively or to devote resources necessary to provide effective sales, which would adversely affect our financial performance.
In addition, there is an increased risk during these periods that an increased percentage of independent distributors, dealers and installers of security equipment will file for bankruptcy protection, which may harm our reputation, revenue, profitability and results of operations. The markets we serve are highly competitive and we may be unable to compete effectively.
In addition, there is an increased risk during these periods that an increased percentage of independent distributors, dealers and installers of security equipment will file for bankruptcy protection, which may harm our reputation, revenue, profitability and results of operations. The markets we serve are highly competitive with many substantially larger competitors and we may be unable to compete effectively.
Our recurring revenue products, such as StarLink, iSecure and iBridge, tend to generate higher gross margin and are less susceptible to volatility of market demand and economic conditions.
Our recurring revenue products, such as StarLink, Prima, MVP Access, iSecure and iBridge, tend to generate higher gross margin and are less susceptible to volatility of market demand and economic conditions.
If production levels decline due to lower demand or reduced customer orders, our fixed costs are spread over reduced levels, which may contribute to decreasing margins and reduced profitability.
If production levels decline due to lower demand or reduced customer orders, our fixed ​ Table of Contents costs are spread over reduced levels, which may contribute to decreasing margins and reduced profitability.
In addition, our ​ Table of Contents products and systems are not installed by us, and if third parties do not install or maintain our products correctly, our products and systems may not function properly.
In addition, our products and systems are not installed by us, and if third parties do not install or maintain our products correctly, our products and systems may not function properly.
For example, if the U.S. dollars weakens and the currency exchange rate is less favorable, it may be more costly for us to pay expenses for our factory in the Dominican Republic, which may adversely affect our financial conditions and results of operations. Our business could be materially adversely affected by adverse tax consequences of offshore operations.
For example, if the U.S. dollars weakens and the currency exchange rate is less favorable, it may be more costly for us to pay expenses for our factory in the Dominican Republic, which may adversely affect our financial conditions and results of operations.
We depend on them for various aspects of our business operation, including their experience and knowledge in the industry, extensive relationships with distributors and customers, and their leadership to develop and implement business strategies. The loss or reduction of services by Mr. Soloway and Mr. Buchel could have a material adverse effect on the Company’s business and prospects.
We depend on them for various aspects of our business operation, including their experience and knowledge in the industry, extensive relationships with distributors and customers, and their leadership to develop and implement business strategies. The loss or reduction of services by Mr. Soloway and Mr.
We are subject to the effects of housing and commercial building market conditions. The sales of our security products tend to increase during period in which new housing and commercial real estate constructions are increasing.
The sales of our security products tend to increase during period in which new housing and commercial real estate constructions are increasing.
A significant portion of our assets that result from these earnings remain outside the United States. If these indefinitely reinvested earnings were repatriated into the United States as dividends, we would be subject to additional withholding taxes. The effects of an epidemic, pandemic, or similar outbreak have negatively impacted and could negatively impact, our business and financial results.
If these indefinitely reinvested earnings were repatriated into the United States as dividends, we would be subject to additional withholding taxes. ​ Table of Contents The effects of an epidemic, pandemic, or similar outbreak have negatively impacted and could negatively impact, our business and financial results.
We may not be able to grow our recurring service revenue business to generate consistent revenue and profitability. A significant driver of our growth is our recurring revenue business in which customers who purchased our products and equipment are required to pay monthly fees for communications services to maintain the operation of such products.
A significant driver of our growth is our recurring revenue business in which customers who purchased our products and equipment are required to pay monthly fees for communications services to maintain the operation of such products.
Failure to remediate any material weakness in our internal control over financial reporting, or to maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
Failure to remediate any material weakness in our internal control over financial reporting, or to maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. Cost of operating as a public company, and compliance with SEC regulations.
Cybersecurity incidents and other disruptions to our information and technology systems, or the information systems of third parties whom we do business with, may compromise our information and expose us to liability that could adversely impact our financial condition, business operations, and reputation.
See Item 3: Legal Proceedings and Note 14, “Commitments and Contingencies” to the Consolidated Financial Statements. ​ Table of Contents Cybersecurity incidents and other disruptions to our information and technology systems, or the information systems of third parties whom we do business with, may compromise our information and expose us to liability that could adversely impact our financial condition, business operations, and reputation.
Certain of our expenses are fixed or semi-variable, including our costs for operating our manufacturing facilities. While expense levels relative to current sales levels result in positive net income and cash flows, if sales levels decrease significantly and we are unable to reduce expenses proportionately, our business may be adversely affected.
While expense levels relative to current sales levels result in positive net income and cash flows, if sales levels decrease significantly and we are unable to reduce expenses proportionately, our business may be adversely affected.
In addition, ongoing instability and current conflicts, including in Eastern Europe, the Middle East, and Asia, and the potential for other conflicts and future terrorist activities and other recent geopolitical events throughout the world, including the ongoing conflict between Russia and Ukraine, the ongoing Israel/Hamas conflict and its regional effects, and increased tensions in Asia, have created and may continue to create economic and political uncertainties and impacts that could have a material adverse effect on our business, operations, and profitability.
In addition, ongoing instability and current conflicts, and the potential for other conflicts and future terrorist activities and other recent geopolitical events throughout the world, have created and may continue to create economic and political uncertainties and impacts that could have a material adverse effect on our business, operations, and profitability.
If we issue additional equity or equity-linked securities, our stockholders may experience significant dilution of their ownership interests and the market price of our common stock could decline.
We also may seek to obtain additional financing by issuing equity securities or equity-linked securities or obtaining debt financing to obtain additional funds to expand our business. If we issue additional equity or equity-linked securities, our stockholders may experience significant dilution of their ownership interests and the market price of our common stock could decline.
We may become subject to short selling strategies driving down the market price of our common stock. Short selling is the practice of selling securities that the seller does not own but may have borrowed with the intention of buying identical securities back at a later date.
Short selling is the practice of selling securities that the seller does not own but may have borrowed with the intention of buying identical securities back at a later date.
We recently experienced significant growth of demand for our security products from schools, universities and other educational institutions as a result of the national focus on prevention of school violence.
Demand for our security products from schools, universities and other educational institutions as a result of the national focus on prevention of school violence continues to be an important market for us.
We have operations both within the United States and offshore, with a portion of our operating income generated outside the United States. We intend to reinvest these earnings in our foreign operations indefinitely, except where we are able to repatriate these earnings to the United States without material incremental tax expense.
We intend to reinvest these earnings in our foreign operations indefinitely, except where we are able to repatriate these earnings to the United States without material incremental tax expense. A significant portion of our assets that result from these earnings remain outside the United States.
We may face heightened inflationary pressure, which could impact the cost of doing business in both supply and labor markets. Any potential inflationary pressures could be exacerbated by geopolitical turmoil and economic policy actions, and the duration of any such pressures is uncertain. Our business could be adversely affected as a result of housing and commercial building market conditions.
Any potential inflationary pressures could be exacerbated by geopolitical turmoil and economic policy actions, and the duration of any such pressures is uncertain. ​ Table of Contents Our business could be adversely affected as a result of housing and commercial building market conditions. We are subject to the effects of housing and commercial building market conditions.
Our business could be materially adversely affected as a result of the inability to maintain adequate financing. While our business currently does not have any debt and finances operations and capital expenditures solely utilizing cash-flows from operations, we have an unused credit facility in the event that we need to supplement current cash-flows with outside financing.
While our business currently does not have any debt and finances operations and capital expenditures solely utilizing cash-flows from operations, we have an unused credit facility in the event that we need to supplement current cash-flows with outside financing. The credit facility provides for certain financial covenants relating to ratios affected by profit, asset and debt levels.
The credit facility provides for certain financial covenants relating to ratios affected by profit, asset and debt levels. If the Company’s profits, asset or cash-flow levels decline below the minimums required to meet these covenants and we require outside financing, the Company may be materially adversely affected.
If the Company’s profits, asset or cash-flow levels decline below the minimums required to meet these covenants and we require outside financing, the Company may be materially adversely affected. Effects on the Company could include higher interest costs, reduction in borrowing availability or revocation of these credit facilities.
Further, there can be no assurance that the Company will not experience additional price competition, and that such competition may not adversely affect the Company’s revenues and results of operations ​ Table of Contents We may not be able to maintain or control our expenses proportionate to our sales volumes to generate profit for our business.
Further, there can be no assurance that the Company will not experience additional price competition, and that such competition may not adversely affect the Company’s revenues and results of operations We expect our results of operations to fluctuate on a quarterly and annual basis, which could cause our stock price to fluctuate as well.
For example, we are subject to a purported class action related to the restatement of our previously issued condensed financial statements with respect to the first three quarters of the fiscal year ended June 30, 2023. Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.
Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.
Removed
ITEM 1A: RISK FACTORS The risks described below are among those that could materially and adversely affect the Company’s business, financial condition or results of operations. These risks could cause actual results to differ materially from historical results and from any results predicted by any forward-looking statements related to conditions or events that may occur in the future.
Added
ITEM 1A: RISK FACTORS Investing in our common stock involves substantial risk.
Removed
Effects on the Company could include higher interest costs, reduction in borrowing availability or revocation of these credit facilities. We also may seek to obtain additional financing by issuing equity securities or equity-linked securities or obtaining debt financing to obtain additional funds to expand our business.
Added
You should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” when evaluating our business and before deciding whether to invest in shares of our common stock.
Removed
Failure to remediate any material weakness in our internal control over financial reporting, or to maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. We have identified a material weakness in our system of internal controls and are in the process of remediation.
Added
We describe below what we believe are currently the material risks and uncertainties we face, but they are not the only risks and uncertainties we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.
Removed
If not remediated, this material weakness could result in material misstatements in our financial statements. We may be unable to develop, implement and maintain appropriate controls in future periods. We identified a material weakness in our internal controls over financial reporting as of June 30, 2024.
Added
If any of the following risks actually occur, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the market price of our common stock could decline and you could lose part or all of your investment.
Removed
Refer to Part II —Item 9A, “Controls and Procedures” of this Annual Report on Form 10-K for management’s assessment as of June 30, 2024. Based on this material weakness, the Company’s management has concluded that as of June 30, 2024, the Company’s internal controls over financial reporting were not effective.
Added
Our results of operations are difficult to predict and may fluctuate substantially from quarter-to-quarter or year-to-year for a variety of reasons, many of which are beyond our control.
Removed
A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis. Management identified a material weakness related to inventory costing.
Added
If our actual results were to fall below the expectations of public market analysts or investors, our quarterly and annual results would be negatively impacted and the price of our stock could fluctuate.
Removed
The material weakness was a result of ineffective review of information used in the inventory costing process. Management, with the oversight of the audit committee of our Board of Directors, is currently designing and implementing reconciliation procedures to determine that the information used is complete and accurate and expects to complete these actions during fiscal 2025.
Added
Other factors that could affect our quarterly and annual operating results include, but are not limited to: ● changes in the pricing policies of, or the introduction of new products by, us or our competitors; ● delays in the introduction of new products by us or market acceptance of these products; ● health epidemics and other outbreaks, which could significantly disrupt our operations; ● introductions of new technologies and changes in consumer preferences that result in either unanticipated or unexpectedly rapid product category shifts; ● competition with greater resources may cause us to lower prices and in turn could result in reduced margins and loss of market share; ● epidemic or widespread product failure, or unanticipated safety issues, in one or more of our products; ● unanticipated decreases or delays in purchases of our products by our significant distributors, and other channel partners; ● component supply constraints from our vendors; ● unanticipated increases in costs, including air freight, associated with shipping and delivery of our products; ● the inability to maintain stable operations by our suppliers and other parties with whom we have commercial relationships; ● discovery of security vulnerabilities in our products, services or systems, leading to negative publicity, decreased demand, or potential liability; ● foreign currency exchange rate fluctuations in the jurisdictions where we transact in local currency; ● excess levels of inventory and low turns; ● changes in or consolidation of our sales channels and wholesale distributor relationships or failure to manage our sales channel inventory and warehousing requirements; ● delay or failure to fulfill orders for our products on a timely basis; ● delay or failure of our distributors, and other channel partners to purchase at their historic volumes or at the volumes that they or we forecast; ● changes in tax rates or adverse changes in tax laws that expose us to additional income tax liabilities; ● changes in U.S. and international tax policy, including changes that adversely affect customs, tax or duty rates such as tariffs on product imports, as well as income tax legislation and regulations that affect the countries where we conduct business; ● operational disruptions, such as transportation delays or failure of our order processing system, particularly if they occur at the end of a fiscal quarter; ● disruptions or delays related to our financial and enterprise resource planning systems; ● our inability to accurately forecast product demand, resulting in increased inventory exposure; ​ Table of Contents ● geopolitical disruption, including sudden changes in immigration policies, leading to disruption in our workforce or delay or even stoppage of our operations in manufacturing, transportation, technical support, and research and development; ● terms of our contracts with channel partners or suppliers that cause us to incur additional expenses or assume additional liabilities; ● an increase in redemptions of marketing rebates, product warranty and discretionary stock rotation returns or allowance for credit losses; ● our inability to monitor and ensure compliance with our code of ethics, our anti-corruption compliance program, and domestic and international anti-corruption laws and regulations, whether in relation to our employees or with our suppliers or retailers, distributors, or other channel partners; ● failure to implement and maintain the appropriate internal controls over financial reporting, which may result in restatements of our financial statements; and ● any changes in accounting rules.
Removed
While the Company has begun the process to take measures which it believes will remediate the underlying cause of this material weakness, there can be no assurance as to when the remediation plan will be fully developed and implemented and whether such measures will be effective.
Added
As a result, period-to-period comparisons of our results of operations may be volatile, and you should not rely on them as an indication of our future performance. If disruptions in our transportation network occur or our shipping costs substantially increase, we may be unable to sell or timely deliver our products, and our operating expenses could increase.
Removed
Until the Company’s remediation plan is fully implemented and effective, the Company will continue to devote time, attention and financial resources to this effort. ​ Table of Contents If we do not adequately complete our remediation in a timely fashion, we cannot be certain that we will be able to maintain adequate controls over our financial processes and reporting.
Added
We are highly dependent upon the transportation systems we use to ship our products, including surface, ocean and air freight. Our attempts to closely match our inventory levels to our product demand intensify the need for our transportation systems to function effectively and without delay.
Removed
Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and in a timely manner or to detect and prevent fraud.
Added
On a quarterly basis, our shipping volume also tends to steadily increase as the quarter progresses, which means that any disruption in our transportation network in the latter half of a quarter will likely have a more material effect on our business than a disruption at the beginning of a quarter.
Added
The transportation network is subject to disruption or congestion from a variety of causes, including labor disputes or port strikes, international conflicts, natural disasters, and congestion resulting from higher shipping volumes.
Added
Labor disputes among freight carriers and at ports of entry are common, and we expect labor unrest and its effects on shipping our products to be a continuing challenge for us. A port worker strike, work slow-down, or other transportation disruption in locations where we import our products to fulfill our orders, could significantly disrupt our business.
Added
Our international freight is regularly subject to inspection by governmental entities. If our delivery times increase unexpectedly for these or any other reasons, our ability to deliver products on time would be materially and adversely affected and result in delayed or lost revenue as well as customer imposed penalties.
Added
In addition, if increases in fuel prices occur, our transportation costs would likely increase. Moreover, the cost of shipping our products by air freight is greater than by other methods.
Added
From time to time in the past, we have shipped products using extensive air freight to meet unexpected spikes in demand and shifts in demand between product categories, to bring new product introductions to market quickly and to timely ship products previously ordered.
Added
If we continue to rely more heavily upon air freight to deliver our products, our overall shipping costs will increase. A prolonged transportation disruption or a significant increase in the cost of freight could materially and adversely affect our business, results of operations, and financial condition.
Added
We may not be able to maintain or control our expenses proportionate to our sales volumes to generate profit for our business. Certain of our expenses are fixed or semi-variable, including our costs for operating our manufacturing facilities.
Added
We may face heightened inflationary pressure, which could impact the cost of doing business in both supply and labor markets.
Added
We may not be able to sustain the growth of our recurring service revenue business, which has been the large driver of our revenue and profitability.
Added
Future changes to U.S. income tax or trade policies impacting multi-national companies, including tariffs, could materially affect our financial condition and results of operations.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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 enacted and proposed reciprocal tariffs on certain of these countries.
Added
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.
Added
Our business could be materially adversely affected by adverse tax consequences of offshore operations. We have operations both within the United States and offshore, with a portion of our operating income generated outside the United States.
Added
Buchel could have a ​ Table of Contents material adverse effect on the Company’s business and prospects. Messrs Soloway and Buchel are 79 and 72 years old, respectively. Our business could be materially adversely affected as a result of the inability to maintain adequate financing.
Added
As a public company, we are obligated to file with the SEC annual and quarterly reports and other reports that are specified in Section 13 and other sections of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Added
We are also required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis.
Added
In addition, we are and will continue to become subject to other reporting and corporate governance requirements, including certain requirements of the NASDAQ Stock Market (“NASDAQ”), and certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX Act”) and the regulations promulgated thereunder, which will impose significant compliance obligations upon us. ​ Table of Contents Section 404 of the SOX Act, as well as rules subsequently implemented by the SEC and the NASDAQ, have imposed increased regulation and disclosure and required enhanced corporate governance practices of public companies.
Added
We are committed to maintaining high standards of corporate governance and public disclosure, and our efforts to comply with evolving laws, regulations and standards in this regard are likely to result in increased selling, general, and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.
Added
These changes will require a significant commitment of additional resources. We may not be successful in implementing these requirements and implementing them could materially and adversely affect our business, results of operations and financial condition.
Added
In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our operating results on a timely and accurate basis could be impaired.
Added
If we do not implement such requirements in a timely manner or with adequate compliance, we might be subject to sanctions or investigation by regulatory authorities, such as the SEC and the NASDAQ.
Added
Any such action could harm our reputation and the confidence of investors and customers in us and could materially and adversely affect our business and cause our share price to fall.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+0 added−0 removed13 unchanged
Biggest changeBased on the information available as of the date of this Annual Report on Form 10-K, we are not aware of any risks from cybersecurity threats, including as a result of any cybersecurity incidents, which have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Biggest changeBased on the information available as of the date of this Annual Report on Form 10-K, we are not aware of any risks from cybersecurity threats, which have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
These processes include, among other things, annual security awareness training for employees, programs to increase awareness of phishing attempts, tools to detect and monitor unusual network activity, and processes to contain, escalate and respond to incidents.
These processes include, among other things, annual security awareness training for employees, instituting programs to increase awareness of phishing attempts, tools to detect and monitor unusual network activity, and processes to contain, escalate and respond to incidents.
Based on this information, our AC monitors the Company's cybersecurity program, including potential threats, weaknesses and vulnerabilities, and reviews the policies and procedures in place to prevent, detect and respond to cybersecurity threats and unauthorized access to our information security systems.
Based on this information, our AC monitors the Company's cybersecurity program, including potential threats, weaknesses and vulnerabilities, the policies and procedures in place to prevent, detect and respond to cybersecurity threats and unauthorized access to our information security systems.
The AC receives regular updates from management, including the information technology and legal teams, on cybersecurity risk resulting from risk assessments and reviews any information on relevant internal and industry cybersecurity incidents and is notified between such updates relative to any incidents which could materially affect the Company.
The AC receives quarterly reports from management, including the information technology and legal teams, on cybersecurity risk resulting from risk assessments and reviews any information on relevant internal and industry cybersecurity incidents and is notified between such updates relative to any incidents which could materially affect the Company.
An internal team, led by our Vice President of Information Technology, who has over 30 years’ of experience in IT security matters, oversees and works collaboratively with this third-party vendor to evaluate the strength of our cybersecurity protocols and the results of testing to determine what additional actions, such as trainings or remedial actions, are necessary to lessen cybersecurity risks.
An internal team, led by our Senior Vice President of Information Technology, who has extensive years of experience in IT security matters, oversees and works collaboratively with this third-party vendor to evaluate the strength of our cybersecurity protocols and the results of testing to determine what additional actions, such as trainings or remedial actions, are necessary to lessen cybersecurity risks.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeAs of June 30, 2024, a majority of the Company’s products were manufactured at this facility, utilizing U.S. quality control standards. Management believes that these facilities are more than adequate to meet the needs of the Company in the foreseeable future.
Biggest changeAs of June 30, 2025, a majority of the Company’s products were manufactured at this facility, utilizing U.S. quality control standards. Management believes that these facilities are more than adequate to meet the needs of the Company in the foreseeable future.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+1 added−0 removed4 unchanged
Biggest changeBecause many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders Dividend Information ​ ​ ​ ​ ​ ​ ​ Dividend Declaration Date ​ Stockholders of Record Date ​ Dividend Payable Date ​ Per Share Cash Dividend Amount ​ ​ ​ ​ ​ ​ ​ 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, 2024 ​ $ 0.08 August 18, 2023 ​ September 1, 2023 ​ September 22, 2023 ​ $ 0.08 May 5, 2023 ​ May 22, 2023 ​ June 12, 2023 ​ $0.0625 Equity Compensation Plan Information as of June 30, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NUMBER OF SECURITIES ​ ​ NUMBER OF SECURITIES ​ WEIGHTED AVERAGE ​ REMAINING AVAILABLE FOR ​ ​ TO BE ISSUED UPON ​ EXERCISE PRICE OF ​ FUTURE ISSUANCE (EXCLUDING ​ ​ EXERCISE OF ​ OUTSTANDING ​ SECURITIES REFLECTED IN ​ ​ OUTSTANDING OPTIONS ​ OPTIONS ​ COLUMN (a) PLAN CATEGORY (a) (b) ​ Equity compensation plans approved by security holders (1): 639,236 ​ $ 24.71 863,100 Equity compensation plans not approved by security holders: — ​ — — Total 639,236 ​ $ 24.71 863,100 (1) In August 2022, the stockholders approved the 2022 Employee Stock Option Plan which 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.
Biggest changeDividend Information: ​ ​ ​ ​ ​ ​ ​ Dividend Declaration Date ​ Stockholders of Record Date ​ Dividend Payable Date ​ Per Share Cash Dividend Amount ​ ​ ​ ​ ​ ​ ​ May 2, 2025 ​ June 12, 2025 ​ July 3, 2025 ​ $ 0.14 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 May 5, 2023 ​ May 22, 2023 ​ June 12, 2023 ​ $0.0625 Equity Compensation Plan Information as of June 30, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NUMBER OF SECURITIES ​ ​ NUMBER OF SECURITIES ​ WEIGHTED AVERAGE ​ REMAINING AVAILABLE FOR ​ ​ TO BE ISSUED UPON ​ EXERCISE PRICE OF ​ FUTURE ISSUANCE (EXCLUDING ​ ​ EXERCISE OF ​ OUTSTANDING ​ SECURITIES REFLECTED IN ​ ​ OUTSTANDING OPTIONS ​ OPTIONS ​ COLUMN (a) PLAN CATEGORY (a) (b) ​ Equity compensation plans approved by security holders (1): 628,236 ​ $ 24.70 869,100 Equity compensation plans not approved by security holders: — ​ — — Total 628,236 ​ $ 24.70 869,100 (1) In August 2022, the stockholders approved the 2022 Employee Stock Option Plan which 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.
ITEM 5: MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is quoted on The NASDAQ Global Select Market under the symbol “NSSC.” As of August 28, 2024, there were approximately 56 stockholders of record of our common stock.
ITEM 5: MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is quoted on The NASDAQ Global Select Market under the symbol “NSSC.” As of August 22, 2025, there were approximately 46 stockholders of record of our common stock.
Added
Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

26 edited+16 added−14 removed21 unchanged
Biggest changeLiquidity and Capital Resources Our cash and cash equivalents and short-term investments are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2024 June 30, 2023 ​ ​ ​ Cash ​ $ 18,823 ​ $ 20,713 Money Market Fund ​ 41,116 ​ 63 Certificate of Deposits ​ ​ 5,402 ​ ​ 15,179 ​ ​ $ 65,341 ​ $ 35,955 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. ​ Table of Contents A summary of the cash flow activity for the year ended June 30, 2024 and 2023 is as follows: Cash Flows from Operating Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ended June 30, ​ 2024 2023 ​ ​ (in thousands) ​ ​ ​ ​ Net income ​ $ 49,818 ​ $ 27,127 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ Depreciation and amortization ​ 2,163 ​ 1,930 Gain on disposal of fixed asset ​ ​ — ​ ​ (15) Interest expense (income) on other investments ​ ​ 31 ​ ​ (470) Unrealized (gain) loss on marketable securities ​ ​ (56) ​ ​ 80 (Recovery of) Provision for credit losses ​ (99) ​ (112) Change to inventory reserve ​ 1,691 ​ (445) Deferred income taxes ​ (2,776) ​ (2,818) Stock based compensation expense ​ 1,733 ​ 1,464 Changes in operating assets and liabilities: ​ (7,137) ​ ​ (2,041) Net Cash Provided by Operating Activities ​ $ 45,368 ​ $ 24,700 Net cash provided by operating activities was $45.4 million for the year ended June 30, 2024 and was due to net income of $49.8 million and adjustments for non-cash items of $2.7 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $7.1 million.
Biggest changeWe believe that there is minimal credit risk associated with the investments in cash equivalents and short-term investments due to the types of investment entered. ​ Table of Contents A summary of the cash flow activity for the year ended June 30, 2025 and 2024 is as follows: Cash Flows from Operating Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ended June 30, ​ 2025 2024 ​ ​ (in thousands) ​ ​ ​ ​ Net income ​ $ 43,406 ​ $ 49,818 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ Depreciation and amortization ​ 2,276 ​ 2,163 Change in accrued Interest on other investments ​ ​ — ​ ​ 31 Unrealized (gain) loss on marketable securities ​ ​ (177) ​ ​ (56) Realized (gain) loss on sales of marketable securities ​ ​ (56) ​ ​ — (Recovery of) credit losses ​ (7) ​ (99) Change to inventory reserve ​ 643 ​ 1,691 Deferred income taxes ​ (1,048) ​ (2,776) Stock-based compensation expense ​ 1,513 ​ 1,733 Changes in operating assets and liabilities: ​ 6,977 ​ ​ (7,137) Net Cash Provided by Operating Activities ​ $ 53,527 ​ $ 45,368 Net cash provided by operating activities was $53.5 million for the year ended June 30, 2025 and was due to net income of $43.4 million, adjustments for non-cash items of $3.1 million and an increase in cash flow from changes in operating assets and liabilities of $7.0 million.
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.
On April 26, 1993, the Company's foreign subsidiary entered into a 99-year land lease for 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.
MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements (Item 8 of this Form 10-K). This section generally discusses the results of our operations for the year ended June 30, 2024 compared to the year ended June 30, 2023.
MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements (Item 8 of this Form 10-K). This section generally discusses the results of our operations for the year ended June 30, 2025 compared to the year ended June 30, 2024.
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. Service Revenue Service revenue is primarily generated from the sale of monthly cellular communication services to customers.
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. ​ Table of Contents Service Revenue Service revenue is primarily generated from the sale of monthly cellular communication services to customers.
For a discussion of the year ended June 30, 2023 compared to the year ended June 30, 2022, please refer to, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended June 30, 2023.
For a discussion of the year ended June 30, 2024 compared to the year ended June 30, 2023, please refer to, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended June 30, 2024.
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 ​ Table of Contents raw materials as compared to the manufacture and assembly of finished products.
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.
As of June 30, 2024, the Company’s available revolving credit line was $20,000,000, which expires in February 2029. As of June 30, 2024 and 2023, the Company has no outstanding debt.
As of June 30, 2025, the Company’s available revolving credit line was $20,000,000, which expires in February 2029. As of June 30, 2025 and 2024, the Company has no outstanding debt.
The Company takes into consideration several factors in measuring its liquidity, including the ratios set forth below: ​ ​ ​ ​ ​ ​ ​ As of June 30, ​ 2024 2023 Current Ratio 7.6 to 1 6.7 to 1 Sales to Receivables 5.9 to 1 6.5 to 1 Working Capital.
The Company takes into consideration several factors in measuring its liquidity, including the ratios set forth below: ​ ​ ​ ​ ​ ​ ​ As of June 30, ​ 2025 2024 Current Ratio 6.8 to 1 7.6 to 1 Sales to Receivables 6.0 to 1 5.9 to 1 Working Capital.
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.
Industry Landscape Our industry continues to be 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.
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 expected value method.
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.
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.
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.
Working capital increased by $34,861,000 to $146,534,000 at June 30, 2024 from $111,673,000 at June 30, 2023.Working capital is calculated by deducting Current Liabilities from Current Assets. Contractual Obligations and Commitments As of June 30, 2024, the Company had no material commitments for capital expenditures or inventory purchases other than purchase orders issued in the normal course of business.
Working capital decreased by $8,147,000 to $138,387,000 at June 30, 2025 from $146,534,000 at June 30, 2024. Working capital is calculated by deducting Current Liabilities from Current Assets. Contractual Obligations and Commitments As of June 30, 2025, the Company had no material commitments for capital expenditures or inventory purchases other than purchase orders issued in the normal course of 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. The markets for security devices and services are dynamic and highly competitive.
Napco continually strives to innovate 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.
The Company’s effective tax rate for fiscal 2024 decreased to 12% as compared to 13% for fiscal 2023 as a result of a larger portion of the Company’s taxable income being attributable to foreign operations.
The Company’s effective tax rate for fiscal 2025 increased to 13% as compared to 12% for fiscal 2024 as a result of a larger portion of the Company’s taxable income being attributable to United States operations.
Net cash provided by operating activities was $24.7 million for the year ended June 30, 2023 and was due to net income of $27.1 million offset by a decrease in cash flow from operating activities due to changes in operating assets and liabilities of $2.0 million and an adjustment for non-cash items of $0.4 million.
Net cash provided by operating activities was $45.4 million for the year ended June 30, 2024 and was due to net income of $49.8 million and adjustments for non-cash items of $2.7 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $7.1 million.
Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Refer to Risk Factors (Part I, Item 1A of this Form 10-K) for a discussion of these factors and other risks. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
The changes in operating assets and liabilities was largely attributable to a decrease in accounts receivables and inventories offset by an increase in accounts payable and accrued expenses.
The changes in operating assets and liabilities were largely attributable to decreases in inventories, accounts receivables and prepaid expenses offset by decreases in accounts payables and accrued expenses.
Results of Operations Fiscal 2024 Compared to Fiscal 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended June 30, (dollars in thousands) ​ ​ ​ ​ ​ % Increase/ ​ ​ 2024 ​ 2023 ​ (decrease) Net sales: equipment revenues ​ $ 113,071 ​ $ 110,062 ​ 2.7 % service revenues ​ ​ 75,749 ​ ​ 59,935 ​ 26.4 % ​ ​ ​ 188,820 ​ ​ 169,997 11.1 % Gross Profit: equipment ​ ​ 33,209 ​ ​ 19,865 ​ 67.2 % services ​ ​ 68,545 ​ ​ 53,368 ​ 28.4 % ​ ​ 101,754 ​ 73,233 38.9 % Gross profit as a % of net sales ​ 53.9 % 43.1 % 25.1 % equipment ​ ​ 29.4 % ​ 18.0 % 63.3 % services ​ ​ 90.5 % ​ 89.0 % 1.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 10,763 ​ 9,328 15.4 % Selling, general and administrative ​ 37,173 ​ 33,580 10.7 % Selling, general and administrative as a % of net sales ​ 19.7 % 19.8 % (0.5) % Operating Income ​ 53,818 ​ 30,325 77.5 % Interest and other income (expense), net ​ 2,568 ​ 903 184.4 % Provision for income taxes ​ 6,568 ​ 4,101 60.2 % Net income ​ 49,818 ​ 27,127 83.6 % ​ ​ Table of Contents Net Sales Net sales in fiscal 2024 increased by $18,823,000 to $188,820,000 as compared to $169,997,000 in fiscal 2023.
Results of Operations Fiscal 2025 Compared to Fiscal 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended June 30, (dollars in thousands) ​ ​ ​ ​ ​ % Increase/ ​ ​ 2025 ​ 2024 ​ (decrease) Net sales: equipment revenues ​ $ 95,291 ​ $ 113,071 ​ (15.7) % service revenues ​ ​ 86,330 ​ ​ 75,749 ​ 14.0 % ​ ​ ​ 181,621 ​ ​ 188,820 (3.8) % Gross Profit: equipment ​ ​ 22,496 ​ ​ 33,209 ​ (32.3) % services ​ ​ 78,534 ​ ​ 68,545 ​ 14.6 % ​ ​ 101,030 ​ 101,754 (0.7) % Gross profit as a % of net sales ​ 55.6 % 53.9 % 3.2 % equipment ​ ​ 23.6 % ​ 29.4 % (19.6) % services ​ ​ 91.0 % ​ 90.5 % 0.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 12,581 ​ 10,763 16.9 % Selling, general and administrative ​ 42,190 ​ 37,173 13.5 % Selling, general and administrative as a % of net sales ​ 23.2 % 19.7 % 17.8 % Operating Income ​ 46,259 ​ 53,818 (14.0) % Interest and other income (expense), net ​ 3,810 ​ 2,568 48.4 % Provision for income taxes ​ 6,663 ​ 6,568 1.4 % Net income ​ 43,406 ​ 49,818 (12.9) % ​ ​ Table of Contents Net Sales Net sales in fiscal 2025 decreased by $7,199,000 to $181,621,000 as compared to $188,820,000 in fiscal 2024.
The change in use of cash for investing activities from 2023 to 2024 was a reduction in investments in term deposits (other investments). ​ Table of Contents Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ended June 30, ​ ​ 2024 2023 Proceeds from stock option exercises ​ $ 427 ​ $ 85 Cash paid for dividend ​ (13,258) ​ (2,298) Net Cash (Used in) Provided by Financing Activities ​ $ (12,831) ​ $ (2,213) The cash used in financing activities for the years ended June 30, 2024 and 2023 was primarily related to the payment of stockholder dividends.
The change in cash for investing activities from 2024 to 2025 was an increase in proceeds received from marketable securities and other investments. ​ Table of Contents Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ended June 30, ​ ​ 2025 2024 Proceeds from stock option exercises ​ $ 54 ​ $ 427 Dividends paid ​ (13,632) ​ (13,258) Repurchase of common stock ​ ​ (36,794) ​ ​ — Net Cash Used in Financing Activities ​ $ (50,372) ​ $ (12,831) The cash used in financing activities for the year ended June 30, 2025 was primarily related to the payment of stockholder dividends as well as purchase of treasury shares while the year ended June 30, 2024 was primarily related to the payment of stockholder dividends.
Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ended June 30, ​ ​ 2024 2023 Purchases of property, plant, and equipment ​ $ (1,594) ​ $ (2,962) Proceeds from disposal of fixed asset ​ ​ — ​ ​ 38 Purchases of marketable securities ​ ​ (206) ​ ​ (148) Purchases of other investments ​ ​ (1,351) ​ ​ (35,281) Redemption of other investments ​ ​ — ​ ​ 10,091 Net Cash Used in Investing Activities ​ $ (3,151) ​ $ (28,262) The cash used in investing activities during the year ended June 30, 2024 was primarily attributable to net cash used for capital expenditures and purchase of investments.
Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ended June 30, ​ ​ 2025 2024 Purchases of property, plant, and equipment ​ $ (2,116) ​ $ (1,594) Purchases of marketable securities ​ ​ (12,835) ​ ​ (206) Proceeds from sales of marketable securities ​ ​ 2,556 ​ ​ — Purchases of other investments ​ ​ — ​ ​ (1,351) Redemption of other investments ​ ​ 26,980 ​ ​ — Net Cash Provided by (Used in) Investing Activities ​ $ 14,585 ​ $ (3,151) The cash provided by investing activities during the year ended June 30, 2025 was primarily attributable to proceeds from the sale of marketable securities as well as the redemption of our Certificate of Deposits which were classified as other investments.
The cash used in investing activities during the year ended June 30, 2023 was primarily attributable to the net change in investments, as well as capital expenditures.
The Net cash provided by investing activities was partially offset by net cash used for capital expenditures and purchase of marketable securities. The cash used in investing activities during the year ended June 30, 2024 was primarily attributable to cash used for capital expenditures and purchase of certificates of deposits.
Gross profit on service revenues was $68,545,000 or 90.5% of net service revenues in fiscal 2024 and $53,368,000 or 89.0% of net service revenues, in fiscal 2023.
Gross profit on equipment sales was $22,496,000 or 23.6% of net equipment sales in fiscal 2025 and $33,209,000 or 29.4% of net equipment sales, in fiscal 2024. Gross profit on service revenues was $78,534,000 or 91% of net service revenues in fiscal 2025 and $68,545,000 or 90.5% of net service revenues, in fiscal 2024.
Income Taxes The Company’s provision for income taxes for fiscal 2024 increased by $2,467,000 to $6,568,000 as compared to $4,101,000 for the same period a year ago.
Interest income increased for fiscal 2025, compared to fiscal 2024, primarily due to the increase in our cash and cash equivalents as well as higher interest rates. Income Taxes The Company’s provision for income taxes for fiscal 2025 remained consistent at $6,663,000 as compared to $6,568,000 for the same period a year ago.
Highlights from fiscal year 2024 compared with fiscal year 2023 included: ● Net sales for the year increased 11% to a record $188.8 million as compared to $170.0 million. ● Recurring service revenue (“RSR”) for the year increased 26% to $75.7 million as compared to $59.9 million. ● Gross margin for recurring service revenue increased to 90.5% as compared to 89.0%. ● Gross margin for equipment revenue was 29.4% as compared to 18.0%. ● Net income increased 84% to a fiscal year record $49.8 million as compared to $27.1 million.
Highlights from fiscal year 2025 compared with fiscal year 2024 included: ● Net sales for the year decreased 4% to $181.6 million. ● Recurring service revenue (“RSR”) for the year increased 14% to $86.3 million. ● Gross margin for recurring service revenue was 91.0% for fiscal 2025. ● Gross margin for equipment revenue was 23.6% as compared to 29.4%. ● Net income decreased 13% to $43.4 million.
The increase in net sales was primarily due to increased sales of the Company’s recurring alarm communication services of $15,814,000, Alarm Lock brand door-locking products of $4,099,000, Marks brand door-locking products of $6,882,000 as partially offset by a decrease in sales of Continental brand access control products of $206,000 and Napco brand intrusion products of $7,766,000.
Net equipment revenue in fiscal 2025 decreased $17,780,000 to $95,291,000 as compared to $113,071,000 in fiscal 2024. The decrease in net sales was primarily due to decreased sales of the Alarm Lock brand door-locking products of $7,183,000, Marks brand door-locking products of $4,309,000, Napco Access Pro brand access control products of $2,274,000 and Napco brand intrusion products of $4,014,000.
Research and Development Research and Development expenses increased by $1,435,000 to $10,763,000 in fiscal 2024 as compared to $9,328,000 in fiscal 2023. This increase was due primarily to salary increases and additional staff. Selling, General and Administrative Selling, general and administrative expenses for fiscal 2024 increased by $3,593,000 to $37,173,000 as compared to $33,580,000 in fiscal 2023.
Research and Development Research and Development expenses increased by $1,818,000 in fiscal 2025 as compared to fiscal 2024, primarily due to increases of $1,750,000 in personnel-related expenses mainly from merit increases and the hiring of additional engineering staff.
Removed
Refer to Risk Factors (Part I, Item 1A of this Form 10-K) for a discussion of these factors and other risks. ​ Table of Contents Seasonality Our revenue fluctuates quarterly and is generally higher in the fourth quarter of our fiscal year.
Added
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.
Removed
Gross Profit The Company's gross profit increased by $28,521,000 to $101,754,000 or 54% of net sales in fiscal 2024 as compared to $73,233,000 or 43.1% of net sales in fiscal 2023. Gross profit on equipment sales was $33,209,000 or 29.4% of net equipment sales in fiscal 2024 and $19,865,000 or 18.0% of net equipment sales, in fiscal 2023.
Added
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.
Removed
The increase in Gross profit on equipment sales was primarily the result of the higher equipment sales, which increased overhead absorption, as well as the stabilization of component costs as partially offset by increased labor costs in both the U.S. and Dominican Republic.
Added
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.
Removed
Selling, general and administrative expenses as a percentage of net sales remained consistent at 19.7% in fiscal 2024 compared to 19.8% in fiscal 2023. The increases was a result of transaction costs associated with the Company’s Form S-3 filing, increased employee compensation costs, as well as increased accounting and legal expenses, partially offset by lower credit card fees.
Added
We are closely monitoring the evolving tariff landscape and ​ Table of Contents attempting to mitigate these impacts, including using pricing adjustments, sourcing strategies and other cost-mitigation measures.
Removed
Other Income (Expense) Other income (expense) for fiscal 2024 increased by $1,665,000 to $2,568,000 as compared to income of $903,000 for the same period a year ago. This increase was due primarily to interest and dividend income from the Company’s cash and short-term investments.
Added
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.
Removed
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ​ This Annual Report on Form 10-K 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.
Added
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 enacted and proposed reciprocal tariffs on certain of these countries.
Removed
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.
Added
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.
Removed
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.
Added
Liquidity and Capital Resources Our cash and cash equivalents and short-term investments are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2025 June 30, 2024 ​ ​ ​ Cash ​ $ 16,726 ​ $ 18,823 Money Market Fund ​ 66,355 ​ 41,116 Certificate of Deposits ​ ​ — ​ ​ 5,402 ​ ​ $ 83,081 ​ $ 65,341 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.
Removed
We cannot guarantee that we actually 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.
Added
The overall decrease in net equipment sales was attributable to the reduction of sales of approximately $6.4 million to one of the Company’s larger distributors, which purchases both our intrusion and locking products. In addition, the reduction in door locking device sales was primarily attributable to reduced purchases by three of the Company’s locking customers of approximately $9.4 million.
Removed
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.
Added
The decrease in equipment revenue was a result of these larger distributors extended destocking strategies throughout the year, in addition to the timing of large project work for our door-locking business and to a lesser extent general softness in demand due to customer uncertainty related to global tariff policies.
Removed
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.
Added
In fiscal 2024 our door-locking revenue was positively impacted by a large commercial real estate project. The timing of project work is difficult to predict from period to period due to numerous factors. Net service revenues for fiscal 2025 increased $10,581,000 to $86,330,000 as compared to $75,749,000 in fiscal 2024.
Removed
These factors and the other cautionary ​ Table of Contents 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.
Added
The increase in net service revenues was due to an increase in the number of our cellular communication devices put into service and activated. Gross Profit The Company's gross profit decreased by $724,000 to $101,030,000 in fiscal 2025 as compared to $101,754,000 in fiscal 2024.
Removed
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.
Added
Overall, gross margins increased to 56% of net sales in 2025 from 54% in 2024.
Removed
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.
Added
The decrease in Gross profit margins on equipment sales was primarily a result of overall lower equipment sales levels which results in less absorption of fixed manufacturing overhead costs in addition to the impact of tariff costs in the fourth quarter of Fiscal 2025 as a result of distributors pulling forward orders before our announced price increase went into effect.
Added
The head count of engineering staff increased by 11% from 72 at the end of Fiscal 2024 to 80 at the end of Fiscal 2025.
Added
Selling, General and Administrative Selling, general and administrative expenses for fiscal 2025 increased by $5,017,000 as compared to fiscal 2024, primarily due to increases of $3,451,000 in personnel-related expenses mainly from merit increases and the hiring of additional personnel in the finance and information technology departments, $500,000 in insurance, $370,000 in advertising, $313,000 in legal and professional fees, offset by decreases in $130,000 in Director fees and $500,000 in transactions costs associated with the Company’s Form S-3 filing during fiscal 2024. ​ ​ Table of Contents Interest and Other Income (Expense) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended June 30, (dollars in thousands) ​ 2025 2024 % Increase (Decrease) ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ $ 3,357 ​ $ 2,375 ​ 41% Investment income ​ ​ 444 ​ ​ 262 ​ ** Other, net ​ 9 ​ (69) ​ ** ​ ​ $ 3,810 ​ $ 2,568 ​ ​ **Percentage change not meaningful.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed5 unchanged
Biggest changeOur investment portfolio includes fixed-income securities with a fair value of approximately $5.4 million at June 30, 2024. These securities are subject to interest rate risk and, based on our investment portfolio at June 30, 2024, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of approximately $108,000.
Biggest changeOur investment portfolio includes fixed-income securities with a fair value of approximately $16.1 million at June 30, 2025. These securities are subject to interest rate risk and, based on our investment portfolio at June 30, 2025, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of approximately $322,000.
The result of a 10% strengthening or weakening in the U.S. dollar to the RD$ would result in an annual increase or decrease in income from operations of approximately $886,000. ​ ​ ​ Table of Contents
The result of a 10% strengthening or weakening in the U.S. dollar to the RD$ would result in an annual increase or decrease in income from operations of approximately $844,000. ​ ​ ​ Table of Contents

Other NSSC 10-K year-over-year comparisons