Napco Security Technologies (NSSC) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01Our business could be materially adversely affected as a result of general economic and market conditions
2. 02The markets we serve are highly competitive with many substantially larger competitors and we may be unable to compete effectively
3. 03We expect our results of operations to fluctuate on a quarterly and annual basis, which could cause our stock price to fluctuate as well
4. 04If disruptions in our transportation network occur or our shipping costs substantially increase, we may be unable to sell or timely deliver our products, and our operating expenses could increase
5. 05We may not be able to maintain or control our expenses proportionate to our sales volumes to generate profit for our business
6. 06Our business could be adversely affected as a result of housing and commercial building market conditions
7. 07We may not be able to sustain the growth of our recurring service revenue business, which has been the large driver of our revenue and profitability
8. 08We may not be able to sustain and continue the growth of school security products
9. 09We rely on distributors to sell our products and an adverse change in our relationship with such distributors may adversely affect our financial performance
10. 10We may not be able to gain widespread or timely market acceptance of our new products and continue to build and enhance our brand to achieve growth
11. 11Our financial results could be materially adversely affected as a result of offering extended payment terms to customers or if we are not able to collect our accounts receivables on a timely basis from major customers
12. 12We sell security products and systems and if our solutions fail for any reason, we could be subject to liability and our business could suffer
13. 13We are subject to risks relating to the operation of a manufacturing facility in Dominican Republic
14. 14Our business could be materially adversely affected by a weakening of the U.S. dollar against the Dominican peso
15. 15Future changes to U.S. income tax or trade policies impacting multi-national companies, including tariffs, could materially affect our financial condition and results of operations
16. 16Our business could be materially adversely affected by adverse tax consequences of offshore operations
17. 17The effects of an epidemic, pandemic, or similar outbreak have negatively impacted and could negatively impact, our business and financial results
18. 18Our business and operations expose us to numerous legal and regulatory requirements, and any violation of these requirements could harm our business
19. 19Investigations, claims, disputes, enforcement actions, litigation, arbitration, or other legal proceedings could require us to pay potentially large damage awards or penalties and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation
20. 20Cybersecurity incidents and other disruptions to our information and technology systems, or the information systems of third parties whom we do business with, may compromise our information and expose us to liability that could adversely impact our financial condition, business operations, and reputation
21. 21We rely on the effort and continuing service of our senior management members
22. 22Our business could be materially adversely affected as a result of the inability to maintain adequate financing
23. 23We are obligated to develop and maintain a system of effective internal controls over financial reporting. These internal controls may be determined to be not effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock
24. 24Cost of operating as a public company, and compliance with SEC regulations
25. 25Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the SOX Act could materially and adversely affect our business, results of operations, financial condition, and stock price

Risks Related to Ownership of Our Common Stock

1. 26If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline
2. 27Sales of a substantial number of shares of our common stock in the public market could cause our market price to decline
3. 28Our business and operations could be negatively affected if we become subject to stockholder activism, which could cause us to incur significant expense, disrupt our business, result in a proxy contest or litigation, or impact our stock price
4. 29We may become subject to short selling strategies driving down the market price of our common stock