Napco Security Technologies (NASDAQ: NSSC) plummeted in pre-market trading on Monday after the company announced the restatement of its financial results for the prior fiscal three quarters. The company stated that while preparing the financial statements for FY23, it found certain errors related to the NSSC’s calculation of the cost of goods sold (COGS) and inventory for each of the prior three-quarters of FY23.
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The manufacturer and designer of high-tech electronic security equipment, and wireless communication devices stated in its press release, “Specifically, although the costs of several components fluctuated substantially during fiscal 2023, the Company’s costing procedures did not appropriately account for such fluctuations. As a result, inventories were overstated and COGS was understated, resulting in overstated gross profit, operating income, and net income for each period.”
Napco expects to report Q4 and FY23 results on August 28 and expects preliminary revenues of $44.7 million in Q4 while net income is estimated to be between $10 million and $11 million.
The company added that it has identified a significant flaw in its internal controls over financial reporting throughout the initial three quarters of fiscal 2023. In order to change this, Napco is in the process of fortifying its internal control protocols concerning the evaluation of inventory cost in adherence to the First in, First Out (FIFO) and COGS methods at the end of each fiscal quarter.
Today’s fall in price aside, NSSC stock has surged by more than 40% year-to-date.
