10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2015

OR

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

Commission File number: 0-10004

          NAPCO SECURITY TECHNOLOGIES, INC.        

(Exact name of Registrant as specified in its charter)

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

333 Bayview Avenue
Amityville, New York	11701
(Address of principal executive offices)	(Zip Code)

                                           (631) 842-9400                                                     

(Registrant’s telephone number including area code)

_____________________________________________________

(Former name, former address and former fiscal year if

changed from last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).     Yes x  No ¨

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

Large Accelerated Filer  ¨ Accelerated Filer  ¨ Non-Accelerated Filer  ¨ Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ¨                                  No x

Number of shares outstanding of each of the issuer’s classes of common stock, as of: November 4, 2015

COMMON STOCK, $.01 PAR VALUE PER SHARE    18,950,893

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

		Page
PART I:  FINANCIAL INFORMATION
ITEM 1.	Financial Statements (unaudited, except where noted)
	NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX – SEPTEMBER 30, 2015
	Condensed Consolidated Balance Sheets September 30, 2015 and June 30, 2015 (audited)	3
	Condensed Consolidated Statements of Income for the Three Months ended September 30, 2015 and 2014	4
	Condensed Consolidated Statements of Cash Flows for the Three Months ended September 30, 2015 and 2014	5
	Notes to Condensed Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	20
ITEM 4.	Controls and Procedures	20
PART II:  OTHER INFORMATION
ITEM 1A.	Risk Factors	21
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
ITEM 6.	Exhibits	21
SIGNATURE PAGE		22

2

PART I:           FINANCIAL INFORMATION

Item 1.    Financial Statements

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2015			June 30, 2015
	(unaudited)			(audited)
	(in thousands, except for share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,806		$	2,346
Accounts receivable, net of reserves and allowances		15,269			17,994
Inventories		23,168			22,757
Prepaid expenses and other current assets		957			1,046
Income tax receivable		24			—
Deferred income taxes		900			880
Total Current Assets		43,124			45,023
Inventories - non-current		4,612			4,113
Deferred income taxes		625			634
Property, plant and equipment, net		6,162			6,234
Intangible assets, net		8,749			8,886
Other assets		144			147
TOTAL ASSETS	$	63,416		$	65,037
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt	$	1,600		$	1,600
Accounts payable		3,468			3,954
Accrued expenses		1,528			1,624
Accrued salaries and wages		2,363			2,250
Accrued income taxes		—			5
Total Current Liabilities		8,959			9,433
Long-term debt, net of current maturities		7,700			9,100
Total Liabilities		16,659			18,533
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, par value $0.01 per share; 40,000,000 shares authorized;  21,049,243 and 21,049,243 shares issued; and 18,949,936 and 18,966,028 shares outstanding, respectively		210			210
Additional paid-in capital		16,165			16,133
Retained earnings		40,714			40,399
		57,089			56,742
Less: Treasury Stock, at cost (2,099,307 and 2,083,215 shares, respectively)		(10,332	)		(10,238	)
TOTAL STOCKHOLDERS' EQUITY		46,757			46,504
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	63,416		$	65,037

See accompanying notes to condensed consolidated financial statements.

3

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

	Three months ended September 30,
	2015			2014
	(In thousands, except share and per share data)
Net sales	$	18,149		$	17,336
Cost of sales		12,512			12,081
Gross Profit		5,637			5,255
Selling, general, and administrative expenses		5,313			5,009
Operating Income		324			246
Other expense:
Interest expense, net		49			55
Other, net		4			(5	)
Income before Income Taxes		271			196
Income tax (benefit) expense		(44	)		37
Net Income	$	315		$	159
Net Income per share:
Basic	$	0.02		$	0.01
Diluted	$	0.02		$	0.01
Weighted average number of shares outstanding:
Basic		18,965,000			19,412,000
Diluted		18,986,000			19,412,000

See accompanying notes to condensed consolidated financial statements.

4

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	Three months ended September 30,
	2015			2014
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	315		$	159
Adjustments to reconcile net income to net cash provided  by operating activities:
Depreciation and amortization		344			372
Provision for doubtful accounts		(75	)		(15	)
Deferred income taxes		(11	)		55
Stock based compensation expense		32			33
Changes in operating assets and liabilities:
Accounts receivable		2,800			2,989
Inventories		(910	)		(1,410	)
Prepaid expenses and other current assets		89			140
Income tax receivable		(23	)		(48	)
Other assets		—			5
Accounts payable, accrued expenses and accrued income taxes		(474	)		(10	)
Net Cash Provided by Operating Activities		2,087			2,270
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment		(133	)		(103	)
Net Cash Used in Investing Activities		(133	)		(103	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt		(1,400	)		(400	)
Cash paid for purchase of treasury stock		(94	)		(509	)
Net Cash Used in Financing Activities		(1,494	)		(909	)
Net Increase  in Cash and Cash Equivalents		460			1,258
CASH AND CASH EQUIVALENTS - Beginning		2,346			2,483
CASH AND CASH EQUIVALENTS - Ending	$	2,806		$	3,741
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net	$	52		$	56
Income taxes paid	$	—		$	30
NON-CASH FINANCING ACTIVITIES:
Shares surrendered and held in treasury for common stock options exercised	$	—		$	—
Shares surrendered and cancelled for shares for common stock options exercised	$	—		$	—

See accompanying notes to condensed consolidated financial statements.

5

NAPCO SECURITY TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

SEPTEMBER 30, 2015

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

Nature of Business:

Napco Security Technologies, Inc. and Subsidiaries (the "Company") is a diversified manufacturer of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance products for commercial and residential use. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment.

The Company's fiscal year begins on July 1 and ends on June 30. Historically, the end users of the Company's products want to install its products prior to the summer; therefore sales of its products historically peak in the period April 1 through June 30, the Company's fiscal fourth quarter, and are reduced in the period July 1 through September 30, the Company's fiscal first quarter. In addition, demand is affected by the housing and construction markets.

Significant Accounting Policies:

Basis of Presentation

The unaudited condensed consolidated financial statements of the Company, including these notes, have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations promulgated by the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2015 and the notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on September 10, 2015. Results of consolidated operations for the interim periods are not necessarily indicative of a full year’s operating results. The unaudited condensed consolidated financial statements herein include the accounts of the Company and its wholly owned subsidiaries. All material inter-company accounts and transactions have been eliminated.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical estimates include management's judgments associated with reserves for sales returns and allowances, concentration of credit risk, inventory reserves, intangible assets and income taxes. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The methods and assumptions used to estimate the fair value of the following classes of financial instruments were: Current Assets and Current Liabilities - The carrying amount of cash, certificates of deposits, current receivables and payables and certain other short-term financial instruments approximate their fair value as of September 30, 2015 due to their short-term maturities; Long-Term Debt - The carrying amount of the Company’s long-term debt, including the current portion, at September 30, 2015 in the amount of $9,300,000 approximates fair value.

Cash and Cash Equivalents

Cash and cash equivalents include approximately $460,000 of short-term time deposits at September 30, 2015 and June 30, 2015. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of September 30, 2015 and June 30, 2015. The Company has historically not experienced any credit losses with balances in excess of FDIC limits.

6

Accounts receivable is stated net of the reserves for doubtful accounts of $100,000 and $175,000 and for returns and other allowances of $930,000 and $1,260,000 as of September 30, 2015 and June 30, 2014, respectively. Our reserves for doubtful accounts and for returns and other allowances are subjective critical estimates that have a direct impact on reported net earnings. These reserves are based upon the evaluation of accounts receivable agings, specific exposures, sales levels and historical trends.

Inventories

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

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

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

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred; costs of major renewals and improvements are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts and the profit or loss on such disposition is reflected in income.

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

Intangible Assets

Intangible assets determined to have indefinite lives are not amortized but are tested for impairment at least annually. Intangible assets with definite lives are amortized over their useful lives. Intangible assets are reviewed for impairment at least annually at the Company’s fiscal year end of June 30 or more often whenever there is an indication that the carrying amount may not be recovered.

The Company’s acquisition of substantially all of the assets and certain liabilities of G. Marks Hardware, Inc. (“Marks”) in August 2008 included intangible assets recorded at fair value on the date of acquisition. The intangible assets are amortized over their estimated useful lives of twenty years (customer relationships) and seven years (non-compete agreement). The Marks trade name was deemed to have an indefinite life.

Changes in intangible assets are as follows (in thousands):

	September 30, 2015							June 30, 2015
	Cost		Accumulated amortization			Net book value		Cost		Accumulated amortization			Net book value
Customer relationships	$	9,800	$	(6,951	)	$	2,849	$	9,800	$	(6,820	)	$	2,980
Non-compete agreement		340		(340	)		—		340		(334	)		6
Trade name		5,900		—			5,900		5,900		—			5,900
	$	16,040	$	(7,291	)	$	8,749	$	16,040	$	(7,154	)	$	8,886

7

Amortization expense for intangible assets subject to amortization was approximately $137,000 and $166,000 for the three months ended September 30, 2015 and 2014, respectively. Amortization expense for each of the next five fiscal years is estimated to be as follows: 2016 - $529,000; 2017 - $441,000; 2018 - $371,000; 2019 - $313,000 and 2020 - $264,000. The weighted average amortization period for intangible assets was 12.9 years and 13.7 years at September 30, 2015 and 2014, respectively.

Long-Lived Assets

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

Revenue Recognition

The Company recognizes revenue when the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) there is a fixed and determinable price for the Company's product or service, (iii) shipment and passage of title occurs or service has been provided, and (iv) collectability is reasonably assured. Revenues from product sales are recorded at the time the product is shipped or delivered to the customer pursuant to the terms of the sale. Revenues for services are recorded at the time the service is provided to the customer pursuant to the terms of sale. The Company reports its sales on a net sales basis, with net sales being computed by deducting from gross sales the amount of actual sales returns and other allowances and the amount of reserves established for anticipated sales returns and other allowances.

Sales Returns and Other Allowances

The Company analyzes sales returns and is able to make reasonable and reliable estimates of product returns based on the Company’s past history. Estimates for sales returns are based on several factors including actual returns and based on expected return data communicated to it by its customers. Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns. Actual results could differ from those estimates. As a percentage of gross sales, sales returns, rebates and allowances were 7% and 8% for the each of the three months ended September 30, 2015 and 2014, respectively.

Advertising and Promotional Costs

Advertising and promotional costs are included in "Selling, General and Administrative" expenses in the consolidated statements of operations and are expensed as incurred. Advertising expense for the three months ended September 30, 2015 and 2014 was $558,000 and $544,000, respectively.

Research and Development Costs

Research and development costs incurred by the Company are charged to expense as incurred and are included in "Cost of Sales" in the consolidated statements of operations. Company-sponsored research and development expense for the three months ended September 30, 2015 and 2014 was $1,489,000 and $1,311,000, respectively.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company measures and recognizes the tax implications of positions taken or expected to be taken in its tax returns on an ongoing basis.

Net Income Per Share

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

8

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

	Net Income				Weighted Average Shares				Net Income per Share
	2015		2014		2015		2014		2015		2014
Basic EPS	$	315	$	159		18,965		19,412	$	0.02	$	0.01
Effect of Dilutive Securities:
Stock Options		—		—		21		—		—		—
Diluted EPS	$	315	$	159		18,986		19,412	$	0.02	$	0.01

Options to purchase 170,000 and 145,500 shares of common stock for the three months ended September 30, 2015 and 2014, respectively, were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive. These options were still outstanding at the end of the respective periods.

Stock-Based Compensation

The Company has established two share incentive programs as discussed in Note 7.

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors.

Stock-based compensation costs of $32,000 and $33,000 were recognized for three months ended September 30, 2015 and 2014, respectively. The effect on both Basic and Diluted Earnings per share was $0.00 for the three months ended September 30, 2015 and 2014.

Foreign Currency

All assets and liabilities of foreign subsidiaries are translated into U.S. Dollars at fiscal period-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the fiscal year. The realized and unrealized gains and losses associated with foreign currency translation, as well as related other comprehensive income, were not material for the three months ended September 30, 2015 and 2014.

Comprehensive Income

For the three months ended September 30, 2015 and 2014, the Company's operations did not give rise to material items includable in comprehensive income, which were not already included in net income. Accordingly, the Company's comprehensive income approximates its net income for all periods presented.

Segment Reporting

The Company’s reportable operating segments are determined based on the Company's management approach. The management approach is based on the way that the chief operating decision maker organizes the segments within an enterprise for making operating decisions and assessing performance. The Company's results of operations are reviewed by the chief operating decision maker on a consolidated basis and the Company operates in only one segment. The Company has presented required geographical data in Note 11, and no additional segment data has been presented.

Shipping and Handling Revenues and Costs

The Company records the amount billed to customers for shipping and handling in net sales ($131,000 and $127,000 in the three months ended September 30, 2015 and 2014, respectively) and classifies the costs associated with these revenues in cost of sales ($216,000 and $241,000 in the three months ended September 30, 2015 and 2014, respectively).

9

Recently Issued Accounting Standards

In July 2015, the FASB issued ASU 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory” (ASU 2015-11). The amendments in ASU 2015-11 simplify the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. ASU 2015-11 is effective for the Company’s quarter ended September 30, 2017. Early application is permitted. We have not early adopted ASU 2015-11. The new guidance must be applied prospectively after the date of adoption. We are in the process of evaluating the adoption of this ASU, and do not expect this to have a material effect on our consolidated results of operations and financial condition.

In May 2014, the FASB issued authoritative guidance that defines how companies should report revenues from contracts with customers.  The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  It provides companies with a single comprehensive five-step principles-based model to use in accounting for revenue and supersedes current revenue recognition requirements, including most industry-specific and transaction-specific revenue guidance.  In August 2015, the FASB deferred the effective date of the new revenue standard by one year.  As a result, the new standard would not be effective for the Company until fiscal 2019.  In addition, the FASB is allowing companies to early adopt this guidance for the Company’s fiscal 2018.  The guidance permits an entity to apply the standard retrospectively to all prior periods presented, with certain practical expedients, or apply the requirements in the year of adoption, through a cumulative adjustment.  The Company will apply this new guidance when it becomes effective and has not yet selected a transition method.  The Company is currently evaluating the impact of adoption on its consolidated financial statements.

NOTE 2 - Business and Credit Concentrations

An entity is more vulnerable to concentrations of credit risk if it is exposed to risk of loss greater than it would have had if it mitigated its risk through diversification of customers. Such risks of loss manifest themselves differently, depending on the nature of the concentration, and vary in significance. The Company had one customer with an accounts receivable balance that comprised 18% of the Company’s accounts receivable at September 30, 2015 and 22% of the Company’s accounts receivable at June 30, 2015. Sales to any one customer did not exceed 10% of net sales in the three months ended September 30, 2015 or 2014.

NOTE 3 - Inventories

Inventories, net of reserves are valued at lower of cost (first-in, first-out method) or market. The Company regularly reviews parts and finished goods inventories on hand and, when necessary, records a provision for excess or obsolete inventories. The Company also regularly reviews the period over which its inventories will be converted to sales. Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current.

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

	September 30, 2015		June 30, 2015
Component parts	$	15,546	$	15,037
Work-in-process		4,276		4,136
Finished product		7,958		7,697
	$	27,780	$	26,870
Classification of inventories, net of reserves:
Current	$	23,168	$	22,757
Non-current		4,612		4,113
	$	27,780	$	26,870

10

NOTE 4 – Property, Plant and Equipment

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

	September 30, 2015		June 30, 2015		Useful Life in Years
Land	$	904	$	904	—
Buildings		8,911		8,911	30 to 40
Molds and dies		7,023		7,002	3 to 5
Furniture and fixtures		2,484		2,478	5 to 10
Machinery and equipment		20,535		20,429	7 to 10
Leasehold improvements		294		294	Shorter of the lease term or life of asset
		40,151		40,018
Less: accumulated depreciation and amortization		33,989		33,784
	$	6,162	$	6,234

Depreciation and amortization expense on property, plant, and equipment was $205,000 and $202,000 for the three months ended September 30, 2015 and 2014, respectively.

NOTE 5 - Income Taxes

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

The Company does not expect that our unrecognized tax benefits will significantly change within the next twelve months. We file a consolidated U.S. income tax return and tax returns in certain state and local and foreign jurisdictions. As of September 30, 2015 we remain subject to examination in all tax jurisdictions for all relevant jurisdictional statutes for fiscal years 2012 and thereafter.

The Company has identified its U.S. Federal income tax return and its State return in New York as its major tax jurisdictions.

NOTE 6 - Long-Term Debt

As of September 30, 2015, long-term debt consisted of a revolving credit facility of $11,000,000 (the “Revolving Credit Facility”) which expires in June 2017 and two term loans, one for $6,000,000 which expires in June 2019, and one for $6,500,000 which expires in June 2017 (the “Term Loans”). Repayment of the Term Loans commenced on September 30, 2012. The $6,000,000 Term Loan is being repaid with 28 equal, quarterly payments of $75,000 and the remaining balance of $3,900,000 due on or before the expiration date. The $6,500,000 Term Loan is being repaid in 20 equal, quarterly payments of $325,000.

Outstanding balances and interest rates as of September 30, 2015 and June 30, 2015 are as follows:

	September 30, 2015					June 30, 2015
	Outstanding		Interest Rate			Outstanding		Interest Rate
Revolving line of credit	$	2,000		1.7	%	$	3,000		1.7	%
Term loans		7,300		1.7	%		7,700		1.7	%
Total debt	$	9,300		1.7	%	$	10,700		1.7	%

The Revolving Credit Facility and Term Loans (collectively the “Agreement”) also provides for a LIBOR-based interest rate option of LIBOR plus 1.5% to 2.75%, depending on the ratio of outstanding debt to EBITDA, which is to be measured and adjusted quarterly, a prime rate-based option of the prime rate plus 0.25% and other terms and conditions as more fully described in the Agreement. In addition, the Agreement provides for availability under the Revolving Credit Facility to be limited to the lesser of $11,000,000 or the result of a borrowing base formula based upon the Company’s Accounts Receivables and Inventory values net of certain deductions. The Company’s obligations under the Agreement continue to be secured by all of its assets, including but not limited to, deposit accounts, accounts receivable, inventory, and the Company’s corporate headquarters in Amityville, NY, equipment and fixtures and intangible assets. In addition, the Company’s wholly-owned subsidiaries, with the exception of the Company’s foreign subsidiaries, have issued guarantees and pledges of all of their assets to secure the Company’s obligations under the Agreement. All of the outstanding common stock of the Company’s domestic subsidiaries and 65% of the common stock of the Company’s foreign subsidiaries has been pledged to secure the Company’s obligations under the Agreement.

11

The Agreement contains various restrictions and covenants including, among others, restrictions on payment of dividends, restrictions on borrowings and compliance with certain financial ratios, as defined in the Agreement.

NOTE 7 - Stock Options

The Company follows ASC 718 (“Share-Based Payment”), which requires that all share based payments to employees, including stock options, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period.  For the three months ended September 30, 2015 and 2014, the Company recorded non-cash compensation expense of $32,000 ($.00 per basic and diluted share) and $33,000 ($.00 per basic and diluted share), respectively, relating to stock-based compensation.

2012 Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (the 2012 Employee Plan). The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 950,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (ISOs), to valued employees. Any plan participant who is granted ISOs and possesses more than 10% of the voting rights of the Company's outstanding common stock must be granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2012 Employee Plan, stock options may be granted to valued employees with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable, in whole or in part, at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At September 30, 2015, 112,500 stock options were granted, 29,500 stock options were exercisable and 837,500 stock options were available for grant under this plan.

The fair value of each option granted during fiscal 2015 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates	2.3	%
Expected lives	10 years
Expected volatility	54	%
Expected dividend yields	0	%

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

	2015					2014
	Options			Weighted average exercise price		Options			Weighted average exercise price
Outstanding, beginning of year		112,500		$	5.30		78,500		$	5.73
Granted		—			—		—			—
Terminated/Lapsed		(15,000	)		—		(10,000	)		4.88
Exercised		—			—		—			—
Outstanding, end of period		97,500		$	5.46		68,500		$	5.86
Exercisable, end of period		29,500		$	5.33		18,700		$	5.65
Weighted average fair value at grant date of options granted		n/a					n/a
Total intrinsic value of options exercised		n/a					n/a
Total intrinsic value of options outstanding	$	69,000				$	—
Total intrinsic value of options exercisable	$	24,000				$	—

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The following table summarizes information about stock options outstanding under the 2012 Employee Plan at September 30, 2015:

		Options outstanding						Options exercisable
Range of exercise prices		Number outstanding		Weighted average remaining contractual life		Weighted average exercise price		Number exercisable		Weighted average exercise price
	$4.29-$6.31		97,500		8.4	$	5.46		29,500	$	5.33
			97,500		8.4	$	5.46		29,500	$	5.33

As of September 30, 2015, there was $210,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. No options were granted during the three months ended September 30, 2015. The total fair value of the options vesting during each of the three months ended September 30, 2015 and 2014 under this plan was $16,000.

2012 Non-Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Non-Employee Stock Option Plan (the 2012 Non-Employee Plan). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 50,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2012 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At September 30, 2015, 35,000 stock options were granted, 17,000 stock options were exercisable and 15,000 stock options were available for grant under this plan.

The fair value of each option granted during fiscal 2015 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates	2.3	%
Expected lives	10 years
Expected volatility	54	%
Expected dividend yields	0	%

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

	2015				2014
	Options		Weighted average exercise price		Options		Weighted average exercise price
Outstanding, beginning of year		35,000	$	4.73		25,000	$	4.88
Granted		—		—		—		—
Terminated/Lapsed		—		—		—		—
Exercised		—		—		—		—
Outstanding, end of period		35,000	$	4.73		25,000	$	4.88
Exercisable, end of period		17,000	$	4.82		10,000	$	4.88
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	46,000			$	—
Total intrinsic value of options exercisable	$	21,000			$	—

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The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at September 30, 2015:

		Options outstanding						Options exercisable
Range of exercise prices		Number outstanding		Weighted average remaining contractual life		Weighted average exercise price		Number exercisable		Weighted average exercise price
	$4.37 - $4.88		35,000		8.3	$	4.73		17,000	$	4.82
			35,000		8.3	$	4.73		17,000	$	4.82

As of September 30, 2015, there was $56,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. No options were granted during the three months ended September 30, 2015. The total fair value of the options vesting during the three months ended September 30, 2015 and 2014 under this plan was $16,500 and $17,000, respectively.

2002 Employee Stock Option Plan

In December 2002, the stockholders approved the 2002 Employee Stock Option Plan (the 2002 Employee Plan). This plan expired in October 2012. This plan authorized the granting of awards, the exercise of which would allow up to an aggregate of 1,836,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may have granted stock options, which were intended to qualify as incentive stock options (ISOs), to key employees. Any plan participant who was granted ISOs and possessed more than 10% of the voting rights of the Company's outstanding common stock must have been granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2002 Employee Plan, stock options have been granted to key employees with a term of 10 years at an exercise price equal to the fair market value on the date of grant and are exercisable in whole or in part at 20% per year from the date of grant. At September 30, 2015, 1,471,480 stock options had been granted and 264,750 stock options were exercisable. No further stock options were available for grant under this plan after the plans expiration in October 2012.

The following table reflects activity under the 2002 Employee plan for the three months ended September 30,:

	2015				2014
	Options		Weighted average exercise price		Options			Weighted average exercise price
Outstanding, beginning of year		208,500	$	6.86		265,750		$	6.51
Granted		—		—		—			—
Terminated/Lapsed		—		—		(1,000	)		6.02
Exercised		—		—		—			—
Outstanding, end of period		208,500	$	6.86		264,750		$	6.51
Exercisable, end of period		208,500	$	6.86		264,750		$	6.51
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	37,000			$	—
Total intrinsic value of options exercisable	$	37,000			$	—

No stock options were exercised during the three months ended September 30, 2015 and 2014. No cash was received from option exercises during the three months ended September 30, 2015 and 2014 and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods.

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The following table summarizes information about stock options outstanding under the 2002 Employee Plan at September 30, 2015:

		Options outstanding and exercisable
Range of exercise prices		Number outstanding		Weighted average remaining contractual life		Weighted average exercise price
$	5.22-$6.62		171,000		0.9	$	5.92
$	11.16		37,500		0.5		11.16
			208,500		0.8	$	6.86

NOTE 8 – Stockholders’ Equity Transactions

On September 16, 2014 the Company’s board of directors authorized the repurchase of up to 1 million of the approximately 19.4 million shares of the Company’s common stock outstanding. The repurchase will be made from time to time in the open market or in privately negotiated transactions subject to market conditions and the market price of the common stock. Relative to the Loan Agreement described in Note 6, the Company’s lender gave its consent to this stock repurchase plan. During the three months ended September 30, 2015 the Company repurchased 16,092 shares of its outstanding common stock for a weighted average price of $5.87 per share. These repurchased shares are included in the Company’s Treasury Stock as of September 30, 2015.

NOTE 9 - 401(k) Plan

The Company maintains a 401(k) plan (“the Plan”) that covers all U.S. non-union employees with one or more years of service and is qualified under Sections 401(a) and 401(k) of the Internal Revenue Code. Company contributions to this plan are discretionary and totaled $28,000 and $26,000 for the three months ended September 30, 2015 and 2014.

NOTE 10 - Commitments and Contingencies

Leases

The Company is committed under various operating leases, not including the land lease discussed below, which do not extend beyond fiscal 2016.

Rent expense, with the exception of the land lease referred to below, totaled approximately $7,000 and $7,000 for the three months ended September 30, 2015 and 2014, respectively.

Land Lease

On April 26, 1993, one of the Company's foreign subsidiaries entered into a 99 year lease, expiring in 2092, for approximately four acres of land in the Dominican Republic at an annual cost of $288,000, on which the Company's principal production facility is located.

Litigation

In the normal course of business, the Company is a party to claims and/or litigation. Management believes that the settlement of such claims and/or litigation, considered in the aggregate, will not have a material adverse effect on the Company's financial position and results of operations.

Employment Agreements

As of September 30, 2015, the Company was obligated under two employment agreements and one severance agreement. The employment agreements are with the Company’s CEO and Senior Vice President of Sales and Marketing (“the SVP”). The employment agreement with the CEO provides for an annual salary of $670,000, as adjusted for inflation; incentive compensation as may be approved by the Board of Directors from time to time and a termination payment in an amount up to 299% of the average of the prior five calendar year's compensation, subject to certain limitations, as defined in the agreement. The employment agreement renews annually in August unless either party gives the other notice of non-renewal at least six months prior to the end of the applicable term. The employment agreement with the SVP expires in October 2016 and provides for an annual salary of $306,000, a bonus arrangement for fiscal 2015 and, if terminated by the Company without cause, severance of nine months’ salary and continued company-sponsored health insurance for nine months from the date of termination. The severance agreement is with the Senior Vice President of Operations and Finance and provides for payments equal to nine months of salary and six months of health insurance in the event of a non-voluntary termination of employment without cause.

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NOTE 11 - Geographical Data

The Company is engaged in one major line of business: the development, manufacture, and distribution of access control systems, door security products, intrusion and fire alarm systems and video surveillance products for commercial and residential use. Sales to unaffiliated customers are primarily shipped from the United States. The Company has customers worldwide with major concentrations in North America.

Financial Information Relating to Domestic and Foreign Operations

	Three months ended September 30,
	2015		2014
	(in thousands)
Sales to external customers(1):
Domestic	$	17,557	$	16,572
Foreign		592		764
Total Net Sales	$	18,149	$	17,336

Identifiable assets:	September 30, 2015		June 30, 2015
United States	$	49,217	$	50,998
Dominican Republic (2)		14,199		14,039
Total Identifiable Assets	$	63,416	$	65,037

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

(2) Consists primarily of inventories (September 30, 2015 = $10,735, June 30, 2015 = $10,546) and fixed assets (September 30, 2015 = $3,301, June 30, 2015 = $3,347) located at the Company's principal manufacturing facility in the Dominican Republic.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q and the information incorporated by reference may include "Forward-Looking Statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. The Company intends the Forward-Looking Statements to be covered by the Safe Harbor Provisions for Forward-Looking Statements. All statements regarding the Company's expected financial position and operating results, its business strategy, its financing plans and the outcome of any contingencies are Forward-Looking Statements. The Forward-Looking Statements are based on current estimates and projections about our industry and our business. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," or variations of such words and similar expressions are intended to identify such Forward-Looking Statements. The Forward-Looking Statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by any Forward-Looking Statements. For example, the Company is highly dependent on its Chief Executive Officer for strategic planning. If he is unable to perform his services for any significant period of time, the Company's ability to grow could be adversely affected. In addition, factors that could cause actual results to differ materially from the Forward-Looking Statements include, but are not limited to, uncertain economic, military and political conditions in the world, our ability to maintain and develop competitive products, adverse tax consequences of offshore operations, the ability to maintain adequate financing and significant fluctuations in the exchange rate between the Dominican Peso and the U.S. Dollar. The Company’s Risk Factors are discussed in more detail in Item 1A in the Company’s 2015 Annual Report on Form 10-K.

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Overview

The Company is a diversified manufacturer of security products, encompassing access control systems, door security products, intrusion and fire alarm systems and video surveillance products for commercial and residential use. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment. International sales accounted for approximately 3% and 4% of our revenues for the three months ended September 30, 2015 and 2014, respectively.

The Company owns and operates manufacturing facilities in Amityville, New York and the Dominican Republic. A significant portion of our operating costs are fixed, and do not fluctuate with changes in production levels or utilization of our manufacturing capacity. As production levels rise and factory utilization increases, the fixed costs are spread over increased output, which should improve profit margins. Conversely, when production levels decline our fixed costs are spread over reduced levels, thereby decreasing margins.

The security products market is characterized by constant incremental innovation in product design and manufacturing technologies. Generally, the Company devotes 6-8% of revenues to research and development (R&D) on an annual basis. The Company does not expect products resulting from our R&D investments in fiscal 2015 or thereafter to contribute materially to revenue during this fiscal year, but should benefit the Company over future years. In general, the new products introduced by the Company are initially shipped in limited quantities, and increase over time. Prices and manufacturing costs tend to decline over time as products and technologies mature.

Economic and Other Factors

We are subject to the effects of general economic and market conditions. In the event that the U.S. or international economic conditions deteriorate, our revenue, profit and cash-flow levels could be materially adversely affected in future periods. In the event of such deterioration, many of our current or potential future customers may experience serious cash flow problems and as a result may, modify, delay or cancel purchases of our products. Additionally, customers may not be able to pay, or may delay payment of, accounts receivable that are owed to us. If such events do occur, they may result in our expenses being too high in relation to our revenues and cash flows.

Seasonality

The Company's fiscal year begins on July 1 and ends on June 30. Historically, the end users of Napco's products want to install its products prior to the summer; therefore sales of its products historically peak in the period April 1 through June 30, the Company's fiscal fourth quarter, and are reduced in the period July 1 through September 30, the Company's fiscal first quarter. In addition, demand is affected by the housing and construction markets. Deterioration of the current economic conditions may also affect this trend.

Critical Accounting Policies and Estimates

The Company's significant accounting policies are fully described in Note 1 to the Company's consolidated financial statements included in its 2015 Annual Report on Form 10-K.  Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

The Company recognizes revenue when the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) there is a fixed and determinable price for the Company's product or service, (iii) shipment and passage of title occurs or service has been provided, and (iv) collectability is reasonably assured. Revenues from product sales are recorded at the time the product is shipped or delivered to the customer pursuant to the terms of the sale. Revenues for services are recorded at the time the service is provided to the customer pursuant to the terms of sale. The Company reports its sales on a net sales basis, with net sales being computed by deducting from gross sales the amount of actual sales returns and other allowances and the amount of reserves established for anticipated sales returns and other allowances.

The Company analyzes sales returns and is able to make reasonable and reliable estimates of product returns based on the Company’s past history. Estimates for sales returns are based on several factors including actual returns and based on expected return data communicated to it by its customers. Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns. Actual results could differ from those estimates.

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Concentration of Credit Risk

An entity is more vulnerable to concentrations of credit risk if it is exposed to risk of loss greater than it would have had if it mitigated its risk through diversification of customers. Such risks of loss manifest themselves differently, depending on the nature of the concentration, and vary in significance. The Company had one customer with an accounts receivable balance that comprised 18% of the Company’s accounts receivable at September 30, 2015 and 22% of the Company’s accounts receivable at June 30, 2015. Sales to any one customer did not exceed 10% of net sales in the three months ended September 30, 2015 or 2014.

In the ordinary course of business, we have established a reserve for doubtful accounts and customer deductions in the amount of $100,000 and $175,000 as of September 30, 2015 and June 30, 2015, respectively. Our reserve for doubtful accounts is a subjective critical estimate that has a direct impact on reported net earnings. This reserve is based upon the evaluation of accounts receivable agings, specific exposures and historical or anticipated events.

Inventories

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

In addition, the Company records an inventory obsolescence reserve, which represents the difference between the cost of the inventory and its estimated market value, based on various product sales projections. This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age, historical trends, requirements to support forecasted sales, and the ability to find alternate applications of its raw materials and to convert finished product into alternate versions of the same product to better match customer demand. There is inherent professional judgment and subjectivity made by both production and engineering members of management in determining the estimated obsolescence percentage. In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events. The Company also regularly reviews the period over which its inventories will be converted to sales. Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current.

Intangible Assets

The Company evaluates its Intangible Assets for impairment at least on an annual basis and will evaluate them earlier if there are indicators of a potential impairment. Those intangible assets that are classified as goodwill or as other intangibles with indefinite lives are not amortized. Impairment testing is performed in two steps: (i) the Company determines if there is impairment by comparing the fair value of a reporting unit with its carrying value, and (ii) if there is impairment, the Company measures the amount of impairment loss by comparing the implied fair value of intangible assets with the carrying amount of the intangible assets.

Income Taxes

The Company has identified the United States and New York State as its major tax jurisdictions. The fiscal 2012 and forward years are still open for examination.

For the three months ended September 30, 2015, the Company recognized a net income tax expense of $46,000. During the three months ending September 30, 2015 there was no change in the Company’s reserve for uncertain income tax positions. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense and accrued income taxes. As of September 30, 2015, the Company had accrued interest totaling $0 and $102,000 of unrecognized net tax benefits that, if recognized, would favorably affect the Company’s effective income tax rate in any future period. The Company uses the flow through method to account for investment tax credits earned on eligible research and development expenditures. Under this method, the investment tax credits are recognized as a reduction to income tax expense.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company measures and recognizes the tax implications of positions taken or expected to be taken in its tax returns on an ongoing basis.

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Results of Operations

	Three months ended September 30, (dollars in thousands)
	2015			2014			% Increase/ (decrease)
Net sales	$	18,149		$	17,336			4.7	%
Gross profit		5,637			5,255			7.3	%
Gross profit as a % of net sales		31.1	%		30.3	%		2.6	%
Selling, general and administrative		5,313			5,009			6.1	%
Selling, general and administrative as a percentage of net sales		29.3	%		28.9	%		1.4	%
Operating income		324			246			31.7	%
Interest expense, net		49			55			(10.9	)%
Other (income) expense		4			(5	)		180.0	%
(Benefit) provision for income taxes		(44	)		37			(118.9	)%
Net income		315			159			98.1	%

Sales for the three months ended September 30, 2015 increased by $813,000 to $18,149,000 as compared to $17,336,000 for the same period a year ago. The increase in sales for the three months ended September 30, 2015 was due primarily to increased sales of the Company’s door-locking products ($955,000) and intrusion products ($14,000) as partially offset by decreased sales of access control products ($156,000). Sales of the Company’s door-locking products increased primarily from an increase in domestic installations of the Company’s digital lock products.

Gross profit for the three months ended September 30, 2015 increased to $5,637,000 or 31.1% of sales as compared to $5,255,000 or 30.3% of sales for the same period a year ago. The increase in gross profit for the three months was primarily due to increased sales as well as a continued positive shift in product mix to the Company’s door-locking products.

Selling, general and administrative expenses for the three months ended September 30, 2015 increased by $304,000 to $5,313,000 from $5,009,000 for the same period a year ago. Selling, general and administrative expenses as a percentage of net sales increased to 29.3% for the three months ended September 30, 2015 from 28.9% for the same period a year ago. The increase in dollars and as a percentage of sales for the three months was due primarily from the addition of selling personnel and increased advertising.

Interest expense, net for the three months ended September 30, 2015 decreased by $6,000 to $49,000 as compared to $55,000 for the same period a year ago. The decrease in interest expense for the three months ended September 30, 2015 resulted from lower average outstanding debt during the current periods as compared to the same periods a year ago.

The Company’s provision for income taxes for the three months ended September 30, 2015 decreased by $81,000 to a benefit of $46,000 as compared to a provision of $37,000 for the same period a year ago. The change in the provision for income taxes for the three months was caused primarily by the reversal of a liability that is no longer required relating to foreign source income as partially offset by the increase in income before income taxes as compared to the same period a year ago. As a result, the Company’s effective rate for income tax was (16)% and 19% for the three months ended September 30, 2015 and 2014, respectively.

Net income increased by $156,000 to $315,000 or $0.02 per diluted share for the three months ended September 30, 2015 as compared to $159,000 or $0.01 per diluted share for the same period a year ago. The change in net income for the three months ended September 30, 2015 was primarily due to the items as described above.

Liquidity and Capital Resources

During the three months ended September 30, 2015 the Company utilized a portion of its cash from operations ($1,627,000 of $2,087,000) to repay outstanding debt ($1,400,000), purchase treasury stock ($94,000) and purchase property, plant and equipment ($133,000). The Company believes its current working capital, cash flows from operations and its revolving credit agreement will be sufficient to fund the Company’s operations through the next twelve months.

19

Accounts Receivable at September 30, 2015 decreased $2,725,000 to $15,269,000 as compared to $17,994,000 at June 30, 2015. This decrease is primarily the result of the lower sales volume during the quarter ended September 30, 2015 as compared to the quarter ended June 30, 2015, which is typically the Company’s highest.

Inventories at September 30, 2015 increased $910,000 to $27,780,000 as compared to $26,870,000 at June 30, 2015. This increase is primarily the result of the Company level-loading its production facility in the Dominican Republic, whereas the Company’s sales are typically highest in the fourth quarter.

Accounts payable and accrued expenses decreased $476,000 to $7,359,000 as of September 30, 2015 as compared to $7,833,000 at June 30, 2015.

As of September 30, 2015, long-term debt consisted of a revolving credit facility of $11,000,000 (the “Revolving Credit Facility”) which expires in June 2017 and two term loans, one for $6,000,000 which expires in June 2019, and one for $6,500,000 which expires in June 2017 (the “Term Loans”). Repayment of the Terms Loans commenced on September 30, 2012. The $6,000,000 Term Loan is being repaid with 28 equal, quarterly payments of $75,000 and the remaining balance of $3,900,000 due on or before the expiration date. The $6,500,000 Term Loan is being repaid in 20 equal, quarterly payments of $325,000. As of September 30, 2015, the Company had $2,000,000 in outstanding borrowings and $9,000,000 in availability under the Revolving Credit Facility. The Company’s long-term debt is described more fully in Note 6 to the condensed consolidated financial statements.

The agreements contain various restrictions and covenants including, among others, restrictions on payment of dividends, restrictions on borrowings and compliance with certain financial ratios, as defined in the restated agreement.

As of September 30, 2015 the Company had no material commitments for capital expenditures or inventory purchases other than purchase orders issued in the normal course of business.

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

The Company's principal financial instrument is long-term debt (consisting of a revolving credit facility and term loans) that provides for interest based on the prime rate or LIBOR as described in the agreement. The Company is affected by market risk exposure primarily through the effect of changes in interest rates on amounts payable by the Company under these credit facilities. At September 30, 2015, an aggregate principal amount of approximately $9,300,000 was outstanding under the Company's credit facilities with a weighted average interest rate of approximately 1.7%. If principal amounts outstanding under the Company's credit facilities remained at this level for an entire year and the interest rate increased or decreased, respectively, by 1% the Company would pay or save, respectively, an additional $107,000 in interest that year.

All foreign sales transactions by the Company are denominated in U.S. dollars. As such, the Company has shifted foreign currency exposure onto its foreign customers. As a result, if exchange rates move against foreign customers, the Company could experience difficulty collecting unsecured accounts receivable, the cancellation of existing orders or the loss of future orders. The foregoing could materially adversely affect the Company's business, financial condition and results of operations. We are also exposed to foreign currency risk relative to expenses incurred in Dominican Pesos ("RD$"), the local currency of the Company's production facility in the Dominican Republic. The result of a 10% strengthening or weakening in the U.S. dollar to the RD$ would result in an annual increase or decrease in income from operations of approximately $600,000.

ITEM 4: Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.

At the conclusion of the period ended September 30, 2015, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at September 30, 2015.

During the three months ended September 30, 2015, there were no changes in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

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PART II: OTHER INFORMATION

Item 1A.       Risk Factors

Information regarding the Company’s Risk Factors are set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2015. There has been no material change in the risk factors previously disclosed in the Company’s Form 10-K for the year ended June 30, 2015 during the three months ended September 30, 2015.

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

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publically Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs
July 1, 2015 - July 31, 2015		—	$	—		—		543,663
August 1, 2015 – August 31, 2015		—	$	—		—		543,663
September 1, 2015 – September 30, 2015		16,092	$	5.87		16,092		527,571
Total for the Quarter ended September 30, 2015		16,092	$	5.87		16,092		527,571

On September 16, 2014 the Company’s board of directors authorized the repurchase of up to 1 million of the approximately 19.4 million shares of the Company’s common stock then outstanding. The repurchase will be made from time to time in the open market or in privately negotiated transactions subject to market conditions and the market price of the common stock.

Item 6.         Exhibits

31.1	Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Richard L. Soloway, Chairman of the Board and President
31.2	Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Kevin S. Buchel, Senior Vice President of Operations and Finance
32.1	Section 1350 Certifications
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

21

SIGNATURES

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

November 9, 2015

NAPCO SECURITY TECHNOLOGIES, INC.

(Registrant)

By:	/s/ RICHARD L. SOLOWAY
	Richard L. Soloway
	Chairman of the Board of Directors, President and Secretary
	(Chief Executive Officer)
By:	/s/ KEVIN S. BUCHEL
	Kevin S. Buchel
	Senior Vice President of Operations and Finance and Treasurer
	(Principal Financial and Accounting Officer)

22

EXHIBITS

Exhibit No.	Title
Ex-31.1	Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Richard L. Soloway, Chairman of the Board and President
Ex-31.2	Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Kevin S. Buchel, Senior Vice President of Operations and Finance
Ex-32.1	Section 1350 Certifications
Ex-101.INS	XBRL Instance Document
Ex-101.SCH	XBRL Taxonomy Extension Schema Document
Ex-101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
Ex-101.LAB	XBRL Taxonomy Extension Label Linkbase Document
Ex-101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
Ex-101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

23

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, Richard Soloway, certify that:

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

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

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

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

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

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2015
	/s/RICHARD SOLOWAY
	Richard Soloway
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, Kevin S. Buchel, certify that:

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

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

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

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

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

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2015
	/s/KEVIN S. BUCHEL
	Kevin S. Buchel
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Napco Security Technologies, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2015 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, RICHARD L. SOLOWAY, Chief Executive Officer of the Company, certify, that to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Dated:  November 9, 2015

/s/ RICHARD L. SOLOWAY

Richard L. Soloway, Chief Executive Officer

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

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Napco Security Technologies, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2015 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, KEVIN S. BUCHEL, Chief Financial Officer of the Company, certify, that to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Dated: November 9, 2015

/s/ KEVIN S. BUCHEL

Kevin S. Buchel, Chief Financial Officer

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

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Commitments and Contingencies (Narrative) (Detail) - USD ($)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Employment Contracts [Member] | Chief executive officer [Member]
Property Subject to or Available for Operating Lease [Line Items]
Annual salary commitment	$ 670,000
Termination pay commitment rate applied to the average of the prior five calendar years compensation	299.00%
Employment Contracts [Member] | Senior Vice President of Sales and Marketing [Member]
Property Subject to or Available for Operating Lease [Line Items]
Expiration Year	2016
Annual salary commitment	$ 306,000
Land lease in Dominican Republic expiring 2092 [Member]
Property Subject to or Available for Operating Lease [Line Items]
Expiration Year	2092
Annual minimum rent	$ 288,000
Leased property and equipment, excluding foreign land [Member]
Property Subject to or Available for Operating Lease [Line Items]
Rent expense	$ 7,000	$ 7,000

XML

Nature of Business and Summary of Significant Accounting Policies - Intangible Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Intangible Assets by Major Class [Line Items]
Intangible assets, cost	$ 16,040	$ 16,040
Finite-lived intangible assets, Accumulated amortization	(7,291)	(7,154)
Finite-lived intangible assets, net	8,749	8,886
Customer relationships [Member]
Intangible Assets by Major Class [Line Items]
Intangible assets, cost	9,800	9,800
Finite-lived intangible assets, Accumulated amortization	(6,951)	(6,820)
Finite-lived intangible assets, net	2,849	2,980
Non-compete agreement [Member]
Intangible Assets by Major Class [Line Items]
Intangible assets, cost	340	340
Finite-lived intangible assets, Accumulated amortization	(340)	(334)
Finite-lived intangible assets, net	0	6
Trade Name [Member]
Intangible Assets by Major Class [Line Items]
Intangible assets, cost	5,900	5,900
Finite-lived intangible assets, Accumulated amortization	0	0
Finite-lived intangible assets, net	$ 5,900	$ 5,900

XML

Stockholders' Equity Transactions (Narrative) (Detail) - $ / shares	3 Months Ended
	Sep. 30, 2015	Jun. 30, 2015	Sep. 16, 2014
Stockholders Equity Note [Line Items]
Stock Repurchase Program, Number of Shares Authorized to be Repurchased			1,000,000
Common Stock Shares Outstanding	18,949,936	18,966,028	19,400,000
Treasury Stock, Shares, Acquired	16,092
Treasury Stock Acquired, Average Cost Per Share	$ 5.87

XML

Property, Plant and Equipment

3 Months Ended

Sep. 30, 2015

Property Plant And Equipment [Abstract]

Property, Plant, and Equipment

NOTE 4 – Property, Plant and Equipment

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

	September		June 30,
	30, 2015		2015		Useful Life in Years
Land	$	904	$	904	—
Buildings		8,911		8,911	30 to 40
Molds and dies		7,023		7,002	3 to 5
Furniture and fixtures		2,484		2,478	5 to 10
Machinery and equipment		20,535		20,429	7 to 10
Leasehold improvements		294		294	Shorter of the lease term or life of asset
		40,151		40,018
Less: accumulated depreciation and amortization		33,989		33,784
	$	6,162	$	6,234

Depreciation and amortization expense on property, plant, and equipment was $205,000 and $202,000 for the three months ended September 30, 2015 and 2014, respectively.

XML

Property, Plant and Equipment (Narrative) (Detail) - USD ($)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Property, Plant and Equipment [Line Items]
Depreciation and amortization	$ 205,000	$ 202,000

XML

Inventories (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Inventory [Line Items]
Component parts	$ 15,546	$ 15,037
Work-in-process	4,276	4,136
Finished product	7,958	7,697
Total Inventory	27,780	26,870
Current	23,168	22,757
Non-current	4,612	4,113
Total Inventory	$ 27,780	$ 26,870

XML

Property, Plant and Equipment (Detail) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Jun. 30, 2015
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 40,151	$ 40,018
Less: accumulated depreciation and amortization	33,989	33,784
Property, plant and equipment, net	6,162	6,234
Land [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	904	904
Buildings [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 8,911	8,911
Buildings [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	30 years
Buildings [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	40 years
Molds and dies [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 7,023	7,002
Molds and dies [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	3 years
Molds and dies [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	5 years
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 2,484	2,478
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	5 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	10 years
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 20,535	20,429
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	7 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	10 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 294	$ 294
Property, plant and equipment, useful life	Shorter of the lease term or life of asset

XML

Long-Term Debt (Narrative) (Detail)	3 Months Ended
	Sep. 30, 2015 USD ($)
Debt Instrument [Line Items]
Initial amount of loan	$ 6,000,000
Number of required loan repayments from inception	28
Quarterly principal repayment amount	$ 75,000
Payoff amount at maturity	3,900,000
Term loan expiring June 2017 [Member]
Debt Instrument [Line Items]
Initial amount of loan	$ 6,500,000
Number of required loan repayments from inception	20
Quarterly principal repayment amount	$ 325,000
Third Amended and Restated Credit Agreement [Member]
Debt Instrument [Line Items]
Percentage of common stock of foreign subsidiaries pledged as collateral	65.00%
Third Amended and Restated Credit Agreement [Member] | Variable Interest Rate Option One [Member] | Minimum [Member]
Debt Instrument [Line Items]
Interest rate over the reference rate	1.50%
Third Amended and Restated Credit Agreement [Member] | Variable Interest Rate Option Two [Member]
Debt Instrument [Line Items]
Interest rate over the reference rate	0.25%
Third Amended and Restated Credit Agreement [Member] | Variable Interest Rate Option Two [Member] | Maximum [Member]
Debt Instrument [Line Items]
Interest rate over the reference rate	2.75%
Revolving line of credit expiring June 2017 [Member]
Debt Instrument [Line Items]
Revolving credit loan facility, maximum borrowing capacity	$ 11,000,000

XML

Inventories

3 Months Ended

Sep. 30, 2015

Inventory Disclosure [Abstract]

Inventories

NOTE 3 - Inventories

Inventories, net of reserves are valued at lower of cost (first-in, first-out method) or market. The Company regularly reviews parts and finished goods inventories on hand and, when necessary, records a provision for excess or obsolete inventories. The Company also regularly reviews the period over which its inventories will be converted to sales. Any inventories expected to convert to sales beyond 12 months from the balance sheet date are classified as non-current.

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

	September		June 30,
	30, 2015		2015
Component parts	$	15,546	$	15,037
Work-in-process		4,276		4,136
Finished product		7,958		7,697
	$	27,780	$	26,870
Classification of inventories, net of reserves:
Current	$	23,168	$	22,757
Non-current		4,612		4,113
	$	27,780	$	26,870

XML

Long-Term Debt (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Debt Instrument [Line Items]
Total debt	$ 9,300	$ 10,700
Interest rate	1.70%	1.70%
Revolving line of credit [Member]
Debt Instrument [Line Items]
Outstanding	$ 2,000	$ 3,000
Interest rate	1.70%	1.70%
Term loans [Member]
Debt Instrument [Line Items]
Outstanding	$ 7,300	$ 7,700
Interest rate	1.70%	1.70%

XML

Geographical Data (Detail) - USD ($) $ in Thousands		3 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Jun. 30, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
Total Net Sales	[1]	$ 18,149	$ 17,336
Total Identifiable Assets		63,416		$ 65,037
Domestic [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	[1]	17,557	16,572
Foreign [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	[1]	592	$ 764
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total Identifiable Assets		49,217		50,998
Dominican Republic [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total Identifiable Assets	[2]	$ 14,199		$ 14,039

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

[2] Consists primarily of inventories (September 30, 2015 = $10,735, June 30, 2015 = $10,546) and fixed assets (September 30, 2015 = $3,301, June 30, 2015 = $3,347) located at the Company's principal manufacturing facility in the Dominican Republic.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
CURRENT ASSETS
Cash and cash equivalents	$ 2,806	$ 2,346
Accounts receivable, net of reserves and allowances	15,269	17,994
Inventories	23,168	22,757
Prepaid expenses and other current assets	957	1,046
Income tax receivable	24	0
Deferred income taxes	900	880
Total Current Assets	43,124	45,023
Inventories - non-current	4,612	4,113
Deferred income taxes	625	634
Property, plant and equipment, net	6,162	6,234
Intangible assets, net	8,749	8,886
Other assets	144	147
TOTAL ASSETS	63,416	65,037
CURRENT LIABILITIES
Current maturities of long term debt	1,600	1,600
Accounts payable	3,468	3,954
Accrued expenses	1,528	1,624
Accrued salaries and wages	2,363	2,250
Accrued income taxes	0	5
Total Current Liabilities	8,959	9,433
Long-term debt, net of current maturities	7,700	9,100
Total Liabilities	$ 16,659	$ 18,533
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, par value $0.01 per share; 40,000,000 shares authorized; 21,049,243 and 21,049,243 shares issued; and 18,949,936 and 18,966,028 shares outstanding, respectively	$ 210	$ 210
Additional paid-in capital	16,165	16,133
Retained earnings	40,714	40,399
Stockholders' Equity before Treasury Stock, Total	57,089	56,742
Less: Treasury Stock, at cost (2,099,307 and 2,083,215 shares, respectively)	(10,332)	(10,238)
TOTAL STOCKHOLDERS' EQUITY	46,757	46,504
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 63,416	$ 65,037

XML

Nature of Business and Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Nature of Business and Summary of Significant Accounting Policies

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

Nature of Business:

Napco Security Technologies, Inc. and Subsidiaries (the "Company") is a diversified manufacturer of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance products for commercial and residential use. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment.

The Company's fiscal year begins on July 1 and ends on June 30. Historically, the end users of the Company's products want to install its products prior to the summer; therefore sales of its products historically peak in the period April 1 through June 30, the Company's fiscal fourth quarter, and are reduced in the period July 1 through September 30, the Company's fiscal first quarter. In addition, demand is affected by the housing and construction markets.

Significant Accounting Policies:

Basis of Presentation

The unaudited condensed consolidated financial statements of the Company, including these notes, have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations promulgated by the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2015 and the notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on September 10, 2015. Results of consolidated operations for the interim periods are not necessarily indicative of a full year’s operating results. The unaudited condensed consolidated financial statements herein include the accounts of the Company and its wholly owned subsidiaries. All material inter-company accounts and transactions have been eliminated.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical estimates include management's judgments associated with reserves for sales returns and allowances, concentration of credit risk, inventory reserves, intangible assets and income taxes. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The methods and assumptions used to estimate the fair value of the following classes of financial instruments were: Current Assets and Current Liabilities - The carrying amount of cash, certificates of deposits, current receivables and payables and certain other short-term financial instruments approximate their fair value as of September 30, 2015 due to their short-term maturities; Long-Term Debt - The carrying amount of the Company’s long-term debt, including the current portion, at September 30, 2015 in the amount of $9,300,000 approximates fair value.

Cash and Cash Equivalents

Cash and cash equivalents include approximately $460,000 of short-term time deposits at September 30, 2015 and June 30, 2015. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of September 30, 2015 and June 30, 2015. The Company has historically not experienced any credit losses with balances in excess of FDIC limits.

Accounts receivable is stated net of the reserves for doubtful accounts of $100,000 and $175,000 and for returns and other allowances of $930,000 and $1,260,000 as of September 30, 2015 and June 30, 2014, respectively. Our reserves for doubtful accounts and for returns and other allowances are subjective critical estimates that have a direct impact on reported net earnings. These reserves are based upon the evaluation of accounts receivable agings, specific exposures, sales levels and historical trends.

Inventories

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

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

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

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred; costs of major renewals and improvements are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts and the profit or loss on such disposition is reflected in income.

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

Intangible Assets

Intangible assets determined to have indefinite lives are not amortized but are tested for impairment at least annually. Intangible assets with definite lives are amortized over their useful lives. Intangible assets are reviewed for impairment at least annually at the Company’s fiscal year end of June 30 or more often whenever there is an indication that the carrying amount may not be recovered.

The Company’s acquisition of substantially all of the assets and certain liabilities of G. Marks Hardware, Inc. (“Marks”) in August 2008 included intangible assets recorded at fair value on the date of acquisition. The intangible assets are amortized over their estimated useful lives of twenty years (customer relationships) and seven years (non-compete agreement). The Marks trade name was deemed to have an indefinite life.

Changes in intangible assets are as follows (in thousands):

	September 30, 2015						June 30, 2015
			Accumulated		Net book				Accumulated		Net book
	Cost		amortization		value		Cost		amortization		value
Customer relationships	$	9,800	$	(6,951)	$	2,849	$	9,800	$	(6,820)	$	2,980
Non-compete agreement		340		(340)		—		340		(334)		6
Trade name		5,900		—		5,900		5,900		—		5,900
	$	16,040	$	(7,291)	$	8,749	$	16,040	$	(7,154)	$	8,886

Amortization expense for intangible assets subject to amortization was approximately $137,000 and $166,000 for the three months ended September 30, 2015 and 2014, respectively. Amortization expense for each of the next five fiscal years is estimated to be as follows: 2016 - $529,000; 2017 - $441,000; 2018 - $371,000; 2019 - $313,000 and 2020 - $264,000. The weighted average amortization period for intangible assets was 12.9 years and 13.7 years at September 30, 2015 and 2014, respectively.

Long-Lived Assets

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

Revenue Recognition

The Company recognizes revenue when the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) there is a fixed and determinable price for the Company's product or service, (iii) shipment and passage of title occurs or service has been provided, and (iv) collectability is reasonably assured. Revenues from product sales are recorded at the time the product is shipped or delivered to the customer pursuant to the terms of the sale. Revenues for services are recorded at the time the service is provided to the customer pursuant to the terms of sale. The Company reports its sales on a net sales basis, with net sales being computed by deducting from gross sales the amount of actual sales returns and other allowances and the amount of reserves established for anticipated sales returns and other allowances.

Sales Returns and Other Allowances

The Company analyzes sales returns and is able to make reasonable and reliable estimates of product returns based on the Company’s past history. Estimates for sales returns are based on several factors including actual returns and based on expected return data communicated to it by its customers. Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns. Actual results could differ from those estimates. As a percentage of gross sales, sales returns, rebates and allowances were 7% and 8% for the each of the three months ended September 30, 2015 and 2014, respectively.

Advertising and Promotional Costs

Advertising and promotional costs are included in "Selling, General and Administrative" expenses in the consolidated statements of operations and are expensed as incurred. Advertising expense for the three months ended September 30, 2015 and 2014 was $558,000 and $544,000, respectively.

Research and Development Costs

Research and development costs incurred by the Company are charged to expense as incurred and are included in "Cost of Sales" in the consolidated statements of operations. Company-sponsored research and development expense for the three months ended September 30, 2015 and 2014 was $1,489,000 and $1,311,000, respectively.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company measures and recognizes the tax implications of positions taken or expected to be taken in its tax returns on an ongoing basis.

Net Income Per Share

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

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

	Net Income				Weighted Average Shares				Net Income per Share
	2015		2014		2015		2014		2015		2014
Basic EPS	$	315	$	159		18,965		19,412	$	0.02	$	0.01
Effect of Dilutive Securities:
Stock Options		—		—		21		—		—		—
Diluted EPS	$	315	$	159		18,986		19,412	$	0.02	$	0.01

Options to purchase 170,000 and 145,500 shares of common stock for the three months ended September 30, 2015 and 2014, respectively, were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive. These options were still outstanding at the end of the respective periods.

Stock-Based Compensation

The Company has established two share incentive programs as discussed in Note 7.

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors.

Stock-based compensation costs of $32,000 and $33,000 were recognized for three months ended September 30, 2015 and 2014, respectively. The effect on both Basic and Diluted Earnings per share was $0.00 for the three months ended September 30, 2015 and 2014.

Foreign Currency

All assets and liabilities of foreign subsidiaries are translated into U.S. Dollars at fiscal period-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the fiscal year. The realized and unrealized gains and losses associated with foreign currency translation, as well as related other comprehensive income, were not material for the three months ended September 30, 2015 and 2014.

Comprehensive Income

For the three months ended September 30, 2015 and 2014, the Company's operations did not give rise to material items includable in comprehensive income, which were not already included in net income. Accordingly, the Company's comprehensive income approximates its net income for all periods presented.

Segment Reporting

The Company’s reportable operating segments are determined based on the Company's management approach. The management approach is based on the way that the chief operating decision maker organizes the segments within an enterprise for making operating decisions and assessing performance. The Company's results of operations are reviewed by the chief operating decision maker on a consolidated basis and the Company operates in only one segment. The Company has presented required geographical data in Note 11, and no additional segment data has been presented.

Shipping and Handling Revenues and Costs

The Company records the amount billed to customers for shipping and handling in net sales ($131,000 and $127,000 in the three months ended September 30, 2015 and 2014, respectively) and classifies the costs associated with these revenues in cost of sales ($216,000 and $241,000 in the three months ended September 30, 2015 and 2014, respectively).

Recently Issued Accounting Standards

In July 2015, the FASB issued ASU 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory” (ASU 2015-11). The amendments in ASU 2015-11 simplify the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. ASU 2015-11 is effective for the Company’s quarter ended September 30, 2017. Early application is permitted. We have not early adopted ASU 2015-11. The new guidance must be applied prospectively after the date of adoption. We are in the process of evaluating the adoption of this ASU, and do not expect this to have a material effect on our consolidated results of operations and financial condition.

In May 2014, the FASB issued authoritative guidance that defines how companies should report revenues from contracts with customers.  The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  It provides companies with a single comprehensive five-step principles-based model to use in accounting for revenue and supersedes current revenue recognition requirements, including most industry-specific and transaction-specific revenue guidance.  In August 2015, the FASB deferred the effective date of the new revenue standard by one year.  As a result, the new standard would not be effective for the Company until fiscal 2019.  In addition, the FASB is allowing companies to early adopt this guidance for the Company’s fiscal 2018.  The guidance permits an entity to apply the standard retrospectively to all prior periods presented, with certain practical expedients, or apply the requirements in the year of adoption, through a cumulative adjustment.  The Company will apply this new guidance when it becomes effective and has not yet selected a transition method.  The Company is currently evaluating the impact of adoption on its consolidated financial statements.

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Stock Options (Detail) - USD ($)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Employee 2012 Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, beginning of year	112,500	78,500
Granted	0	0
Terminated/Lapsed	(15,000)	(10,000)
Exercised	0	0
Outstanding, end of period	97,500	68,500
Exercisable, end of period	29,500	18,700
Weighted average fair value at grant date of options granted	$ 0	$ 0
Total intrinsic value of options exercised	$ 0	$ 0
Total intrinsic value of options outstanding	69,000	0
Total intrinsic value of options exercisable	$ 24,000	$ 0
Outstanding, beginning of period, weighted average exercise price	$ 5.30	$ 5.73
Granted, weighted average exercise price	0	0
Terminated/Lapsed, weighted average exercise price	0	4.88
Exercised, weighted average exercise price	0	0
Outstanding, end of period, weighted average exercise price	5.46	5.86
Exercisable, end of period, weighted average exercise price	$ 5.33	$ 5.65
NonEmployee 2012 Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, beginning of year	35,000	25,000
Granted	0	0
Terminated/Lapsed	0	0
Exercised	0	0
Outstanding, end of period	35,000	25,000
Exercisable, end of period	17,000	10,000
Weighted average fair value at grant date of options granted	$ 0	$ 0
Total intrinsic value of options exercised	$ 0	$ 0
Total intrinsic value of options outstanding	46,000	0
Total intrinsic value of options exercisable	$ 21,000	$ 0
Outstanding, beginning of period, weighted average exercise price	$ 4.73	$ 4.88
Granted, weighted average exercise price	0	0
Terminated/Lapsed, weighted average exercise price	0	0
Exercised, weighted average exercise price	0	0
Outstanding, end of period, weighted average exercise price	4.73	4.88
Exercisable, end of period, weighted average exercise price	$ 4.82	$ 4.88
Employee Stock Option Plan 2002 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, beginning of year	208,500	265,750
Granted	0	0
Terminated/Lapsed	0	(1,000)
Exercised	0	0
Outstanding, end of period	208,500	264,750
Exercisable, end of period	208,500	264,750
Weighted average fair value at grant date of options granted	$ 0	$ 0
Total intrinsic value of options exercised	$ 0	$ 0
Total intrinsic value of options outstanding	37,000	0
Total intrinsic value of options exercisable	$ 37,000	$ 0
Outstanding, beginning of period, weighted average exercise price	$ 6.86	$ 6.51
Granted, weighted average exercise price	0	0
Terminated/Lapsed, weighted average exercise price	0	6.02
Exercised, weighted average exercise price	0	0
Outstanding, end of period, weighted average exercise price	6.86	6.51
Exercisable, end of period, weighted average exercise price	$ 6.86	$ 6.51

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Stock Options (Tables)

3 Months Ended

Sep. 30, 2015

Employee 2012 Stock Option Plan [Member]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The fair value of each option granted during fiscal 2015 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates	2.3	%
Expected lives	10 years
Expected volatility	54	%
Expected dividend yields	0	%

Schedule of Share-based Compensation, Stock Options, Activity

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

	2015				2014
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		112,500	$	5.30		78,500	$	5.73
Granted		—		—		—		—
Terminated/Lapsed		(15,000)		—		(10,000)		4.88
Exercised		—		—		—		—
Outstanding, end of period		97,500	$	5.46		68,500	$	5.86
Exercisable, end of period		29,500	$	5.33		18,700	$	5.65
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	69,000			$	—
Total intrinsic value of options exercisable	$	24,000			$	—

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at September 30, 2015:

		Options outstanding							Options exercisable
				Weighted average
Range of		Number			remaining		Weighted average		Number		Weighted average
exercise prices		outstanding			contractual life		exercise price		exercisable		exercise price
	$4.29-$6.31		97,500			8.4	$	5.46		29,500	$	5.33
			97,500			8.4	$	5.46		29,500	$	5.33

Non Employee 2012 Stock Option Plan [Member]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The fair value of each option granted during fiscal 2015 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates	2.3	%
Expected lives	10 years
Expected volatility	54	%
Expected dividend yields	0	%

Schedule of Share-based Compensation, Stock Options, Activity

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

	2015				2014
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		35,000	$	4.73		25,000	$	4.88
Granted		—		—		—		—
Terminated/Lapsed		—		—		—		—
Exercised		—		—		—		—
Outstanding, end of period		35,000	$	4.73		25,000	$	4.88
Exercisable, end of period		17,000	$	4.82		10,000	$	4.88
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	46,000			$	—
Total intrinsic value of options exercisable	$	21,000			$	—

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at September 30, 2015:

		Options outstanding							Options exercisable
				Weighted average			Weighted				Weighted
Range of		Number			remaining		average exercise		Number		average exercise
exercise prices		outstanding			contractual life		price		exercisable		price
	$4.37 - $4.88		35,000			8.3	$	4.73		17,000	$	4.82
			35,000			8.3	$	4.73		17,000	$	4.82

Employee Stock Option Plan 2002 [Member]

Schedule of Share-based Compensation, Stock Options, Activity

The following table reflects activity under the 2002 Employee plan for the three months ended September 30,:

	2015				2014
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		208,500	$	6.86		265,750	$	6.51
Granted		—		—		—		—
Terminated/Lapsed		—		—		(1,000)		6.02
Exercised		—		—		—		—
Outstanding, end of period		208,500	$	6.86		264,750	$	6.51
Exercisable, end of period		208,500	$	6.86		264,750	$	6.51
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	37,000			$	—
Total intrinsic value of options exercisable	$	37,000			$	—

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range

The following table summarizes information about stock options outstanding under the 2002 Employee Plan at September 30, 2015:

		Options outstanding and exercisable
Range of		Number		Weighted average		Weighted average
exercise prices		outstanding		remaining contractual life		exercise price
$	5.22-$6.62		171,000		0.9	$	5.92
$	11.16		37,500		0.5		11.16
			208,500		0.8	$	6.86

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Stock Options by Range of Exercise Prices (Detail)	3 Months Ended
	Sep. 30, 2015 $ / shares shares
Employee 2012 Stock Option Plan [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding, Number outstanding | shares	97,500
Options Outstanding, Weighted average remaining contractual life	8 years 4 months 24 days
Options Outstanding, weighted average exercise price	$ 5.46
Options exercisable, Number exercisable | shares	29,500
Options exercisable, Weighted average exercise price	$ 5.33
Employee 2012 Stock Option Plan [Member] | Exercise price range $ 4.29 - $ 6.31 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower limit	4.29
Range of exercise prices, upper limit	$ 6.31
Options Outstanding, Number outstanding | shares	97,500
Options Outstanding, Weighted average remaining contractual life	8 years 4 months 24 days
Options Outstanding, weighted average exercise price	$ 5.46
Options exercisable, Number exercisable | shares	29,500
Options exercisable, Weighted average exercise price	$ 5.33
NonEmployee 2012 Stock Option Plan [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding, Number outstanding | shares	35,000
Options Outstanding, Weighted average remaining contractual life	8 years 3 months 18 days
Options Outstanding, weighted average exercise price	$ 4.73
Options exercisable, Number exercisable | shares	17,000
Options exercisable, Weighted average exercise price	$ 4.82
NonEmployee 2012 Stock Option Plan [Member] | Exercise price range $4.37- $ 4.88 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower limit	4.37
Range of exercise prices, upper limit	$ 4.88
Options Outstanding, Number outstanding | shares	35,000
Options Outstanding, Weighted average remaining contractual life	8 years 3 months 18 days
Options Outstanding, weighted average exercise price	$ 4.73
Options exercisable, Number exercisable | shares	17,000
Options exercisable, Weighted average exercise price	$ 4.82
2002 Employee Stock Option Plan [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding, Number outstanding | shares	208,500
Options Outstanding, Weighted average remaining contractual life	9 months 18 days
Options Outstanding, weighted average exercise price	$ 6.86
2002 Employee Stock Option Plan [Member] | Exercise price range $ 5.22 - $ 6.62 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower limit	5.22
Range of exercise prices, upper limit	$ 6.62
Options Outstanding, Number outstanding | shares	171,000
Options Outstanding, Weighted average remaining contractual life	10 months 24 days
Options Outstanding, weighted average exercise price	$ 5.92
2002 Employee Stock Option Plan [Member] | Exercise price range $11.16 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower limit	$ 11.16
Options Outstanding, Number outstanding | shares	37,500
Options Outstanding, Weighted average remaining contractual life	6 months
Options Outstanding, weighted average exercise price	$ 11.16

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Nature of Business and Summary of Significant Accounting Policies (Narrative) (Detail) - USD ($)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Significant Accounting Policies [Line Items]
Carrying amount of long-term debt, including current portion	$ 9,300,000		$ 10,700,000
Short-term time deposits	460,000		$ 460,000
Intangible assets amortization expense	137,000	$ 166,000
Estimated amortization expense-2016	529,000
Estimated amortization expense-2017	441,000
Estimated amortization expense-2018	371,000
Estimated amortization expense-2019	313,000
Estimated amortization expense-2020	$ 264,000
Weighted average amortization period for acquired intangible assets	12 years 10 months 24 days	13 years 8 months 12 days
Antidilutive options outstanding excluded from diluted EPS computations	170,000	145,500
Stock-based compensation costs	$ 32,000	$ 33,000
Sales Returns And Allowances Percentage	7.00%	8.00%
Stock-based compensation costs, effect on EPS	$ 0.00	$ 0.00
Selling, General and Administrative Expenses [Member]
Significant Accounting Policies [Line Items]
Advertising and promotion costs	$ 558,000	$ 544,000
Sales revenue, net [Member]
Significant Accounting Policies [Line Items]
Shipping and handling revenue	216,000	241,000
Cost of sales [Member]
Significant Accounting Policies [Line Items]
Research and development costs	1,489,000	1,311,000
Shipping and handling expense	131,000	$ 127,000
Allowance for doubtful accounts current [Member]
Significant Accounting Policies [Line Items]
Valuation allowances and reserves, balance	100,000			$ 175,000
Returns and other allowances [Member]
Significant Accounting Policies [Line Items]
Valuation allowances and reserves, balance	$ 930,000			$ 1,260,000

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Business and Credit Concentrations

3 Months Ended

Sep. 30, 2015

Risks And Uncertainties [Abstract]

Business and Credit Concentrations

NOTE 2 - Business and Credit Concentrations

An entity is more vulnerable to concentrations of credit risk if it is exposed to risk of loss greater than it would have had if it mitigated its risk through diversification of customers. Such risks of loss manifest themselves differently, depending on the nature of the concentration, and vary in significance. The Company had one customer with an accounts receivable balance that comprised 18% of the Company’s accounts receivable at September 30, 2015 and 22% of the Company’s accounts receivable at June 30, 2015. Sales to any one customer did not exceed 10% of net sales in the three months ended September 30, 2015 or 2014.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2015	Jun. 30, 2015
Common Stock, par value	$ 0.01	$ 0.01
Common Stock, shares authorized	40,000,000	40,000,000
Common Stock, shares issued	21,049,243	21,049,243
Common Stock, shares outstanding	18,949,936	18,966,028
Treasury Stock, shares	2,099,307	2,083,215

XML

Nature of Business and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Nature of Business

Nature of Business:

Napco Security Technologies, Inc. and Subsidiaries (the "Company") is a diversified manufacturer of security products, encompassing access control systems, door-locking products, intrusion and fire alarm systems and video surveillance products for commercial and residential use. These products are used for commercial, residential, institutional, industrial and governmental applications, and are sold worldwide principally to independent distributors, dealers and installers of security equipment.

The Company's fiscal year begins on July 1 and ends on June 30. Historically, the end users of the Company's products want to install its products prior to the summer; therefore sales of its products historically peak in the period April 1 through June 30, the Company's fiscal fourth quarter, and are reduced in the period July 1 through September 30, the Company's fiscal first quarter. In addition, demand is affected by the housing and construction markets.

Basis of Presentation

Basis of Presentation

The unaudited condensed consolidated financial statements of the Company, including these notes, have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations promulgated by the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2015 and the notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on September 10, 2015. Results of consolidated operations for the interim periods are not necessarily indicative of a full year’s operating results. The unaudited condensed consolidated financial statements herein include the accounts of the Company and its wholly owned subsidiaries. All material inter-company accounts and transactions have been eliminated.

Accounting Estimates

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical estimates include management's judgments associated with reserves for sales returns and allowances, concentration of credit risk, inventory reserves, intangible assets and income taxes. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The methods and assumptions used to estimate the fair value of the following classes of financial instruments were: Current Assets and Current Liabilities - The carrying amount of cash, certificates of deposits, current receivables and payables and certain other short-term financial instruments approximate their fair value as of September 30, 2015 due to their short-term maturities; Long-Term Debt - The carrying amount of the Company’s long-term debt, including the current portion, at September 30, 2015 in the amount of $9,300,000 approximates fair value.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include approximately $460,000 of short-term time deposits at September 30, 2015 and June 30, 2015. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of September 30, 2015 and June 30, 2015. The Company has historically not experienced any credit losses with balances in excess of FDIC limits.

Accounts receivable is stated net of the reserves for doubtful accounts of $100,000 and $175,000 and for returns and other allowances of $930,000 and $1,260,000 as of September 30, 2015 and June 30, 2014, respectively. Our reserves for doubtful accounts and for returns and other allowances are subjective critical estimates that have a direct impact on reported net earnings. These reserves are based upon the evaluation of accounts receivable agings, specific exposures, sales levels and historical trends.

Inventories

Inventories

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

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

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

Property, Plant, and Equipment

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred; costs of major renewals and improvements are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts and the profit or loss on such disposition is reflected in income.

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

Intangible Assets

Intangible Assets

Intangible assets determined to have indefinite lives are not amortized but are tested for impairment at least annually. Intangible assets with definite lives are amortized over their useful lives. Intangible assets are reviewed for impairment at least annually at the Company’s fiscal year end of June 30 or more often whenever there is an indication that the carrying amount may not be recovered.

The Company’s acquisition of substantially all of the assets and certain liabilities of G. Marks Hardware, Inc. (“Marks”) in August 2008 included intangible assets recorded at fair value on the date of acquisition. The intangible assets are amortized over their estimated useful lives of twenty years (customer relationships) and seven years (non-compete agreement). The Marks trade name was deemed to have an indefinite life.

Changes in intangible assets are as follows (in thousands):

	September 30, 2015						June 30, 2015
			Accumulated		Net book				Accumulated		Net book
	Cost		amortization		value		Cost		amortization		value
Customer relationships	$	9,800	$	(6,951)	$	2,849	$	9,800	$	(6,820)	$	2,980
Non-compete agreement		340		(340)		—		340		(334)		6
Trade name		5,900		—		5,900		5,900		—		5,900
	$	16,040	$	(7,291)	$	8,749	$	16,040	$	(7,154)	$	8,886

Amortization expense for intangible assets subject to amortization was approximately $137,000 and $166,000 for the three months ended September 30, 2015 and 2014, respectively. Amortization expense for each of the next five fiscal years is estimated to be as follows: 2016 - $529,000; 2017 - $441,000; 2018 - $371,000; 2019 - $313,000 and 2020 - $264,000. The weighted average amortization period for intangible assets was 12.9 years and 13.7 years at September 30, 2015 and 2014, respectively.

Long-Lived Assets

Long-Lived Assets

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

Revenue Recognition

Revenue Recognition

The Company recognizes revenue when the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) there is a fixed and determinable price for the Company's product or service, (iii) shipment and passage of title occurs or service has been provided, and (iv) collectability is reasonably assured. Revenues from product sales are recorded at the time the product is shipped or delivered to the customer pursuant to the terms of the sale. Revenues for services are recorded at the time the service is provided to the customer pursuant to the terms of sale. The Company reports its sales on a net sales basis, with net sales being computed by deducting from gross sales the amount of actual sales returns and other allowances and the amount of reserves established for anticipated sales returns and other allowances.

Sales Returns and Other Allowances

Sales Returns and Other Allowances

The Company analyzes sales returns and is able to make reasonable and reliable estimates of product returns based on the Company’s past history. Estimates for sales returns are based on several factors including actual returns and based on expected return data communicated to it by its customers. Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns. Actual results could differ from those estimates. As a percentage of gross sales, sales returns, rebates and allowances were 7% and 8% for the each of the three months ended September 30, 2015 and 2014, respectively.

Advertising and Promotional Costs

Advertising and Promotional Costs

Advertising and promotional costs are included in "Selling, General and Administrative" expenses in the consolidated statements of operations and are expensed as incurred. Advertising expense for the three months ended September 30, 2015 and 2014 was $558,000 and $544,000, respectively.

Research and Development Costs

Research and Development Costs

Research and development costs incurred by the Company are charged to expense as incurred and are included in "Cost of Sales" in the consolidated statements of operations. Company-sponsored research and development expense for the three months ended September 30, 2015 and 2014 was $1,489,000 and $1,311,000, respectively.

Income Taxes

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company measures and recognizes the tax implications of positions taken or expected to be taken in its tax returns on an ongoing basis.

Net Income Per Share

Net Income Per Share

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

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

	Net Income				Weighted Average Shares				Net Income per Share
	2015		2014		2015		2014		2015		2014
Basic EPS	$	315	$	159		18,965		19,412	$	0.02	$	0.01
Effect of Dilutive Securities:
Stock Options		—		—		21		—		—		—
Diluted EPS	$	315	$	159		18,986		19,412	$	0.02	$	0.01

Options to purchase 170,000 and 145,500 shares of common stock for the three months ended September 30, 2015 and 2014, respectively, were not included in the computation of Diluted EPS because their inclusion would be anti-dilutive. These options were still outstanding at the end of the respective periods.

Stock-Based Compensation

Stock-Based Compensation

The Company has established two share incentive programs as discussed in Note 7.

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors.

Stock-based compensation costs of $32,000 and $33,000 were recognized for three months ended September 30, 2015 and 2014, respectively. The effect on both Basic and Diluted Earnings per share was $0.00 for the three months ended September 30, 2015 and 2014.

Foreign Currency

Foreign Currency

All assets and liabilities of foreign subsidiaries are translated into U.S. Dollars at fiscal period-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the fiscal year. The realized and unrealized gains and losses associated with foreign currency translation, as well as related other comprehensive income, were not material for the three months ended September 30, 2015 and 2014.

Comprehensive Income

Comprehensive Income

For the three months ended September 30, 2015 and 2014, the Company's operations did not give rise to material items includable in comprehensive income, which were not already included in net income. Accordingly, the Company's comprehensive income approximates its net income for all periods presented.

Segment Reporting

Segment Reporting

The Company’s reportable operating segments are determined based on the Company's management approach. The management approach is based on the way that the chief operating decision maker organizes the segments within an enterprise for making operating decisions and assessing performance. The Company's results of operations are reviewed by the chief operating decision maker on a consolidated basis and the Company operates in only one segment. The Company has presented required geographical data in Note 11, and no additional segment data has been presented.

Shipping and Handling Revenues and Costs

Shipping and Handling Revenues and Costs

The Company records the amount billed to customers for shipping and handling in net sales ($131,000 and $127,000 in the three months ended September 30, 2015 and 2014, respectively) and classifies the costs associated with these revenues in cost of sales ($216,000 and $241,000 in the three months ended September 30, 2015 and 2014, respectively).

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In July 2015, the FASB issued ASU 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory” (ASU 2015-11). The amendments in ASU 2015-11 simplify the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. ASU 2015-11 is effective for the Company’s quarter ended September 30, 2017. Early application is permitted. We have not early adopted ASU 2015-11. The new guidance must be applied prospectively after the date of adoption. We are in the process of evaluating the adoption of this ASU, and do not expect this to have a material effect on our consolidated results of operations and financial condition.

In May 2014, the FASB issued authoritative guidance that defines how companies should report revenues from contracts with customers.  The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  It provides companies with a single comprehensive five-step principles-based model to use in accounting for revenue and supersedes current revenue recognition requirements, including most industry-specific and transaction-specific revenue guidance.  In August 2015, the FASB deferred the effective date of the new revenue standard by one year.  As a result, the new standard would not be effective for the Company until fiscal 2019.  In addition, the FASB is allowing companies to early adopt this guidance for the Company’s fiscal 2018.  The guidance permits an entity to apply the standard retrospectively to all prior periods presented, with certain practical expedients, or apply the requirements in the year of adoption, through a cumulative adjustment.  The Company will apply this new guidance when it becomes effective and has not yet selected a transition method.  The Company is currently evaluating the impact of adoption on its consolidated financial statements.

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Document And Entity Information - shares	3 Months Ended
	Sep. 30, 2015	Nov. 04, 2015
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Entity Registrant Name	NAPCO SECURITY TECHNOLOGIES, INC
Entity Central Index Key	0000069633
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Trading Symbol	NSSC
Entity Common Stock, Shares Outstanding		18,950,893

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Nature of Business and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Schedule of intangible assets

Changes in intangible assets are as follows (in thousands):

	September 30, 2015						June 30, 2015
			Accumulated		Net book				Accumulated		Net book
	Cost		amortization		value		Cost		amortization		value
Customer relationships	$	9,800	$	(6,951)	$	2,849	$	9,800	$	(6,820)	$	2,980
Non-compete agreement		340		(340)		—		340		(334)		6
Trade name		5,900		—		5,900		5,900		—		5,900
	$	16,040	$	(7,291)	$	8,749	$	16,040	$	(7,154)	$	8,886

Schedule of Earnings Per Share Reconciliation

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

	Net Income				Weighted Average Shares				Net Income per Share
	2015		2014		2015		2014		2015		2014
Basic EPS	$	315	$	159		18,965		19,412	$	0.02	$	0.01
Effect of Dilutive Securities:
Stock Options		—		—		21		—		—		—
Diluted EPS	$	315	$	159		18,986		19,412	$	0.02	$	0.01

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands		3 Months Ended
		Sep. 30, 2015	Sep. 30, 2014
Net sales	[1]	$ 18,149	$ 17,336
Cost of sales		12,512	12,081
Gross Profit		5,637	5,255
Selling, general, and administrative expenses		5,313	5,009
Operating Income		324	246
Other expense:
Interest expense, net		49	55
Other, net		4	(5)
Income before Income Taxes		271	196
Income tax (benefit) expense		(44)	37
Net Income		$ 315	$ 159
Net Income per share:
Basic (in dollars per share)		$ 0.02	$ 0.01
Diluted (in dollars per share)		$ 0.02	$ 0.01
Weighted average number of shares outstanding:
Basic (in shares)		18,965,000	19,412,000
Diluted (in shares)		18,986,000	19,412,000

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

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Stock Options

3 Months Ended

Sep. 30, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Options

NOTE 7 - Stock Options

The Company follows ASC 718 (“Share-Based Payment”), which requires that all share based payments to employees, including stock options, be recognized as compensation expense in the consolidated financial statements based on their fair values and over the requisite service period.  For the three months ended September 30, 2015 and 2014, the Company recorded non-cash compensation expense of $32,000 ($.00 per basic and diluted share) and $33,000 ($.00 per basic and diluted share), respectively, relating to stock-based compensation.

2012 Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Employee Stock Option Plan (the 2012 Employee Plan). The 2012 Employee Plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 950,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options, which are intended to qualify as incentive stock options (ISOs), to valued employees. Any plan participant who is granted ISOs and possesses more than 10% of the voting rights of the Company's outstanding common stock must be granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2012 Employee Plan, stock options may be granted to valued employees with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable, in whole or in part, at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At September 30, 2015, 112,500 stock options were granted, 29,500 stock options were exercisable and 837,500 stock options were available for grant under this plan.

The fair value of each option granted during fiscal 2015 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates	2.3	%
Expected lives	10 years
Expected volatility	54	%
Expected dividend yields	0	%

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

	2015				2014
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		112,500	$	5.30		78,500	$	5.73
Granted		—		—		—		—
Terminated/Lapsed		(15,000)		—		(10,000)		4.88
Exercised		—		—		—		—
Outstanding, end of period		97,500	$	5.46		68,500	$	5.86
Exercisable, end of period		29,500	$	5.33		18,700	$	5.65
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	69,000			$	—
Total intrinsic value of options exercisable	$	24,000			$	—

The following table summarizes information about stock options outstanding under the 2012 Employee Plan at September 30, 2015:

		Options outstanding							Options exercisable
				Weighted average
Range of		Number			remaining		Weighted average		Number		Weighted average
exercise prices		outstanding			contractual life		exercise price		exercisable		exercise price
	$4.29-$6.31		97,500			8.4	$	5.46		29,500	$	5.33
			97,500			8.4	$	5.46		29,500	$	5.33

As of September 30, 2015, there was $210,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Employee Plan. No options were granted during the three months ended September 30, 2015. The total fair value of the options vesting during each of the three months ended September 30, 2015 and 2014 under this plan was $16,000.

2012 Non-Employee Stock Option Plan

In December 2012, the stockholders approved the 2012 Non-Employee Stock Option Plan (the 2012 Non-Employee Plan). This plan authorizes the granting of awards, the exercise of which would allow up to an aggregate of 50,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may grant stock options to non-employee directors and consultants to the Company and its subsidiaries.

Under the 2012 Non-Employee Plan, stock options may be granted with a term of up to 10 years at an exercise price equal to or greater than the fair market value on the date of grant and are exercisable in whole or in part at 20% per year beginning on the date of grant. An option granted under this plan shall vest in full upon a “change in control” as defined in the plan. At September 30, 2015, 35,000 stock options were granted, 17,000 stock options were exercisable and 15,000 stock options were available for grant under this plan.

The fair value of each option granted during fiscal 2015 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rates	2.3	%
Expected lives	10 years
Expected volatility	54	%
Expected dividend yields	0	%

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

	2015				2014
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		35,000	$	4.73		25,000	$	4.88
Granted		—		—		—		—
Terminated/Lapsed		—		—		—		—
Exercised		—		—		—		—
Outstanding, end of period		35,000	$	4.73		25,000	$	4.88
Exercisable, end of period		17,000	$	4.82		10,000	$	4.88
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	46,000			$	—
Total intrinsic value of options exercisable	$	21,000			$	—

The following table summarizes information about stock options outstanding under the 2012 Non-Employee Plan at September 30, 2015:

		Options outstanding							Options exercisable
				Weighted average			Weighted				Weighted
Range of		Number			remaining		average exercise		Number		average exercise
exercise prices		outstanding			contractual life		price		exercisable		price
	$4.37 - $4.88		35,000			8.3	$	4.73		17,000	$	4.82
			35,000			8.3	$	4.73		17,000	$	4.82

As of September 30, 2015, there was $56,000 of unearned stock-based compensation cost related to share-based compensation arrangements granted under the 2012 Non-Employee Plan. No options were granted during the three months ended September 30, 2015. The total fair value of the options vesting during the three months ended September 30, 2015 and 2014 under this plan was $16,500 and $17,000, respectively.

2002 Employee Stock Option Plan

In December 2002, the stockholders approved the 2002 Employee Stock Option Plan (the 2002 Employee Plan). This plan expired in October 2012. This plan authorized the granting of awards, the exercise of which would allow up to an aggregate of 1,836,000 shares of the Company's common stock to be acquired by the holders of such awards. Under this plan, the Company may have granted stock options, which were intended to qualify as incentive stock options (ISOs), to key employees. Any plan participant who was granted ISOs and possessed more than 10% of the voting rights of the Company's outstanding common stock must have been granted an option with a price of at least 110% of the fair market value on the date of grant.

Under the 2002 Employee Plan, stock options have been granted to key employees with a term of 10 years at an exercise price equal to the fair market value on the date of grant and are exercisable in whole or in part at 20% per year from the date of grant. At September 30, 2015, 1,471,480 stock options had been granted and 264,750 stock options were exercisable. No further stock options were available for grant under this plan after the plans expiration in October 2012.

The following table reflects activity under the 2002 Employee plan for the three months ended September 30,:

	2015				2014
			Weighted average				Weighted average
	Options		exercise price		Options		exercise price
Outstanding, beginning of year		208,500	$	6.86		265,750	$	6.51
Granted		—		—		—		—
Terminated/Lapsed		—		—		(1,000)		6.02
Exercised		—		—		—		—
Outstanding, end of period		208,500	$	6.86		264,750	$	6.51
Exercisable, end of period		208,500	$	6.86		264,750	$	6.51
Weighted average fair value at grant date of options granted		n/a				n/a
Total intrinsic value of options exercised		n/a				n/a
Total intrinsic value of options outstanding	$	37,000			$	—
Total intrinsic value of options exercisable	$	37,000			$	—

No stock options were exercised during the three months ended September 30, 2015 and 2014. No cash was received from option exercises during the three months ended September 30, 2015 and 2014 and the actual tax benefit realized for the tax deductions from option exercises was $0 for each of these periods.

The following table summarizes information about stock options outstanding under the 2002 Employee Plan at September 30, 2015:

		Options outstanding and exercisable
Range of		Number		Weighted average		Weighted average
exercise prices		outstanding		remaining contractual life		exercise price
$	5.22-$6.62		171,000		0.9	$	5.92
$	11.16		37,500		0.5		11.16
			208,500		0.8	$	6.86

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Long-Term Debt

3 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Long Term Debt

NOTE 6 - Long-Term Debt

As of September 30, 2015, long-term debt consisted of a revolving credit facility of $11,000,000 (the “Revolving Credit Facility”) which expires in June 2017 and two term loans, one for $6,000,000 which expires in June 2019, and one for $6,500,000 which expires in June 2017 (the “Term Loans”). Repayment of the Term Loans commenced on September 30, 2012. The $6,000,000 Term Loan is being repaid with 28 equal, quarterly payments of $75,000 and the remaining balance of $3,900,000 due on or before the expiration date. The $6,500,000 Term Loan is being repaid in 20 equal, quarterly payments of $325,000.

Outstanding balances and interest rates as of September 30, 2015 and June 30, 2015 are as follows:

	September 30, 2015					June 30, 2015
	Outstanding		Interest Rate			Outstanding		Interest Rate
Revolving line of credit	$	2,000		1.7	%	$	3,000		1.7	%
Term loans		7,300		1.7	%		7,700		1.7	%
Total debt	$	9,300		1.7	%	$	10,700		1.7	%

The Revolving Credit Facility and Term Loans (collectively the “Agreement”) also provides for a LIBOR-based interest rate option of LIBOR plus 1.5% to 2.75%, depending on the ratio of outstanding debt to EBITDA, which is to be measured and adjusted quarterly, a prime rate-based option of the prime rate plus 0.25% and other terms and conditions as more fully described in the Agreement. In addition, the Agreement provides for availability under the Revolving Credit Facility to be limited to the lesser of $11,000,000 or the result of a borrowing base formula based upon the Company’s Accounts Receivables and Inventory values net of certain deductions. The Company’s obligations under the Agreement continue to be secured by all of its assets, including but not limited to, deposit accounts, accounts receivable, inventory, and the Company’s corporate headquarters in Amityville, NY, equipment and fixtures and intangible assets. In addition, the Company’s wholly-owned subsidiaries, with the exception of the Company’s foreign subsidiaries, have issued guarantees and pledges of all of their assets to secure the Company’s obligations under the Agreement. All of the outstanding common stock of the Company’s domestic subsidiaries and 65% of the common stock of the Company’s foreign subsidiaries has been pledged to secure the Company’s obligations under the Agreement.

The Agreement contains various restrictions and covenants including, among others, restrictions on payment of dividends, restrictions on borrowings and compliance with certain financial ratios, as defined in the Agreement.

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Geographical Data (Tables)

3 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Schedule Of Revenue From External Customers And Identifiable Assets By Geographical Areas

Financial Information Relating to Domestic and Foreign Operations

	Three months ended September 30,
	2015		2014
	(in thousands)
Sales to external customers(1):
Domestic	$	17,557	$	16,572
Foreign		592		764
Total Net Sales	$	18,149	$	17,336

	September 30,
Identifiable assets:	2015		June 30, 2015
United States	$	49,217	$	50,998
Dominican Republic (2)		14,199		14,039
Total Identifiable Assets	$	63,416	$	65,037

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

(2) Consists primarily of inventories (September 30, 2015 = $10,735, June 30, 2015 = $10,546) and fixed assets (September 30, 2015 = $3,301, June 30, 2015 = $3,347) located at the Company's principal manufacturing facility in the Dominican Republic.

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Inventories (Tables)

3 Months Ended

Sep. 30, 2015

Inventory Disclosure [Abstract]

Inventory

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

	September		June 30,
	30, 2015		2015
Component parts	$	15,546	$	15,037
Work-in-process		4,276		4,136
Finished product		7,958		7,697
	$	27,780	$	26,870
Classification of inventories, net of reserves:
Current	$	23,168	$	22,757
Non-current		4,612		4,113
	$	27,780	$	26,870

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Commitments and Contingencies

3 Months Ended

Sep. 30, 2015

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 10 - Commitments and Contingencies

Leases

The Company is committed under various operating leases, not including the land lease discussed below, which do not extend beyond fiscal 2016.

Rent expense, with the exception of the land lease referred to below, totaled approximately $7,000 and $7,000 for the three months ended September 30, 2015 and 2014, respectively.

Land Lease

On April 26, 1993, one of the Company's foreign subsidiaries entered into a 99 year lease, expiring in 2092, for approximately four acres of land in the Dominican Republic at an annual cost of $288,000, on which the Company's principal production facility is located.

Litigation

In the normal course of business, the Company is a party to claims and/or litigation. Management believes that the settlement of such claims and/or litigation, considered in the aggregate, will not have a material adverse effect on the Company's financial position and results of operations.

Employment Agreements

As of September 30, 2015, the Company was obligated under two employment agreements and one severance agreement. The employment agreements are with the Company’s CEO and Senior Vice President of Sales and Marketing (“the SVP”). The employment agreement with the CEO provides for an annual salary of $670,000, as adjusted for inflation; incentive compensation as may be approved by the Board of Directors from time to time and a termination payment in an amount up to 299% of the average of the prior five calendar year's compensation, subject to certain limitations, as defined in the agreement. The employment agreement renews annually in August unless either party gives the other notice of non-renewal at least six months prior to the end of the applicable term. The employment agreement with the SVP expires in October 2016 and provides for an annual salary of $306,000, a bonus arrangement for fiscal 2015 and, if terminated by the Company without cause, severance of nine months’ salary and continued company-sponsored health insurance for nine months from the date of termination. The severance agreement is with the Senior Vice President of Operations and Finance and provides for payments equal to nine months of salary and six months of health insurance in the event of a non-voluntary termination of employment without cause.

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Stockholders' Equity Transactions

3 Months Ended

Sep. 30, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stockholders' Equity Transactions

NOTE 8 – Stockholders’ Equity Transactions

On September 16, 2014 the Company’s board of directors authorized the repurchase of up to 1 million of the approximately 19.4 million shares of the Company’s common stock outstanding. The repurchase will be made from time to time in the open market or in privately negotiated transactions subject to market conditions and the market price of the common stock. Relative to the Loan Agreement described in Note 6, the Company’s lender gave its consent to this stock repurchase plan. During the three months ended September 30, 2015 the Company repurchased 16,092 shares of its outstanding common stock for a weighted average price of $5.87 per share. These repurchased shares are included in the Company’s Treasury Stock as of September 30, 2015.

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401(k) Plan

3 Months Ended

Sep. 30, 2015

Compensation And Retirement Disclosure [Abstract]

401(k) Plan

NOTE 9 - 401(k) Plan

The Company maintains a 401(k) plan (“the Plan”) that covers all U.S. non-union employees with one or more years of service and is qualified under Sections 401(a) and 401(k) of the Internal Revenue Code. Company contributions to this plan are discretionary and totaled $28,000 and $26,000 for the three months ended September 30, 2015 and 2014.

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Geographical Data

3 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Geographical Data

NOTE 11 - Geographical Data

The Company is engaged in one major line of business: the development, manufacture, and distribution of access control systems, door security products, intrusion and fire alarm systems and video surveillance products for commercial and residential use. Sales to unaffiliated customers are primarily shipped from the United States. The Company has customers worldwide with major concentrations in North America.

Financial Information Relating to Domestic and Foreign Operations

	Three months ended September 30,
	2015		2014
	(in thousands)
Sales to external customers(1):
Domestic	$	17,557	$	16,572
Foreign		592		764
Total Net Sales	$	18,149	$	17,336

	September 30,
Identifiable assets:	2015		June 30, 2015
United States	$	49,217	$	50,998
Dominican Republic (2)		14,199		14,039
Total Identifiable Assets	$	63,416	$	65,037

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

(2) Consists primarily of inventories (September 30, 2015 = $10,735, June 30, 2015 = $10,546) and fixed assets (September 30, 2015 = $3,301, June 30, 2015 = $3,347) located at the Company's principal manufacturing facility in the Dominican Republic.

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Stock Options Weighted Average Assumptions of Black-Scholes Option Pricing Model to Estimate Fair Value of Options Granted (Detail)	3 Months Ended
	Sep. 30, 2015
Employee 2012 Stock Option Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-free interest rates	2.30%
Expected lives	10 years
Expected volatility	54.00%
Expected dividend yields	0.00%
Nonemployee 2012 Stock Option Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-free interest rates	2.30%
Expected lives	10 years
Expected volatility	54.00%
Expected dividend yields	0.00%

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Long-Term Debt (Tables)

3 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Schedule Of Debt Instruments

Outstanding balances and interest rates as of September 30, 2015 and June 30, 2015 are as follows:

	September 30, 2015					June 30, 2015
	Outstanding		Interest Rate			Outstanding		Interest Rate
Revolving line of credit	$	2,000		1.7	%	$	3,000		1.7	%
Term loans		7,300		1.7	%		7,700		1.7	%
Total debt	$	9,300		1.7	%	$	10,700		1.7	%

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Nature of Business and Summary of Significant Accounting Policies - Earnings Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Schedule of Weighted Average Number of Diluted Shares Outstanding [Line Items]
Weighted Average Shares, Basic EPS	18,965,000	19,412,000
Effect of Dilutive Securities Stock Options	21,000	0
Weighted average shares, Diluted EPS	18,986,000	19,412,000
Net Income Available to Common Stockholders, Basic, Total	$ 315	$ 159
Net Income Available to Common Stockholders, Diluted, Total	$ 315	$ 159
Net Income Per Share Basic	$ 0.02	$ 0.01
Net Income Per Share Diluted	$ 0.02	$ 0.01

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Geographical Data (Parenthetical) (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
Inventories	$ 23,168	$ 22,757
Fixed assets	6,162	6,234
Dominican Republic [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Inventories	10,735	10,546
Fixed assets	$ 3,301	$ 3,347

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 315	$ 159
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	344	372
Provision for doubtful accounts	(75)	(15)
Deferred income taxes	(11)	55
Stock based compensation expense	32	33
Changes in operating assets and liabilities:
Accounts receivable	2,800	2,989
Inventories	(910)	(1,410)
Prepaid expenses and other current assets	89	140
Income tax receivable	(23)	(48)
Other assets	0	5
Accounts payable, accrued expenses and accrued income taxes	(474)	(10)
Net Cash Provided by Operating Activities	2,087	2,270
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment	(133)	(103)
Net Cash Used in Investing Activities	(133)	(103)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt	(1,400)	(400)
Cash paid for purchase of treasury stock	(94)	(509)
Net Cash Used in Financing Activities	(1,494)	(909)
Net Increase in Cash and Cash Equivalents	460	1,258
CASH AND CASH EQUIVALENTS - Beginning	2,346	2,483
CASH AND CASH EQUIVALENTS - Ending	2,806	3,741
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, net	52	56
Income taxes paid	0	30
NON-CASH FINANCING ACTIVITIES:
Shares surrendered and held in treasury for common stock options exercised	0	0
Shares surrendered and cancelled for shares for common stock options exercised	$ 0	$ 0

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Income Taxes

3 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 5 - Income Taxes

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

The Company does not expect that our unrecognized tax benefits will significantly change within the next twelve months. We file a consolidated U.S. income tax return and tax returns in certain state and local and foreign jurisdictions. As of September 30, 2015 we remain subject to examination in all tax jurisdictions for all relevant jurisdictional statutes for fiscal years 2012 and thereafter.

The Company has identified its U.S. Federal income tax return and its State return in New York as its major tax jurisdictions.

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Business and Credit Concentrations (Narrative) (Detail)	3 Months Ended
	Sep. 30, 2015	Jun. 30, 2015
Concentration Risk [Line Items]
Percentage that a major customer's balance is to total accounts receivable	18.00%	22.00%
Concentration Risk, Percentage	10.00%

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401(k) Plan (Narrative) (Detail) - USD ($)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Napco Technologies 401 k Plan [Member]
Schedule of Deferred Compensation Plans [Line Items]
Deferred compensation plan expense	$ 28,000	$ 26,000

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Property, Plant and Equipment (Tables)

3 Months Ended

Sep. 30, 2015

Property Plant And Equipment [Abstract]

Property, Plant and Equipment

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

	September		June 30,
	30, 2015		2015		Useful Life in Years
Land	$	904	$	904	—
Buildings		8,911		8,911	30 to 40
Molds and dies		7,023		7,002	3 to 5
Furniture and fixtures		2,484		2,478	5 to 10
Machinery and equipment		20,535		20,429	7 to 10
Leasehold improvements		294		294	Shorter of the lease term or life of asset
		40,151		40,018
Less: accumulated depreciation and amortization		33,989		33,784
	$	6,162	$	6,234