Napco Security Technologies, a leading manufacturer and designer of electronic security equipment and wireless communication devices, has experienced a significant decline in its shares. The stock plummeted by 41% to $22.72 following the company’s recent disclosure of errors in its past financial statements.
These errors have resulted in the overstatement of figures for a significant portion of fiscal 2023. As a result, the stock is currently on track for its lowest close since July 2022 and is also facing the largest percentage decrease on record. Despite this decline, the stock has already been down 17% for the year.
Napco has identified that the errors are specifically related to the calculation of its cost of goods sold and inventory for each quarter. The company’s costing procedures did not adequately account for fluctuations in the costs of various components, leading to the overstatement of inventories and the understatement of the cost of goods sold.
Consequently, Napco’s gross profit, operating income, and net income for the first three quarters of fiscal 2023 have all been overstated. In light of these findings, the company has provided estimates for its restated net income for each quarter. These restated figures indicate a decrease in net income from $6.4 million to $2.9 million for the first quarter, from $8.4 million to $3.7 million for the second quarter, and from $10.8 million to $9.5 million for the third quarter.
This revelation of errors has had a substantial impact on Napco Security Technologies and its shareholders. However, the company remains committed to rectifying these issues and ensuring accurate financial reporting moving forward.
