Investing.com -- Shares in Napco Security Technologies Inc (NASDAQ:NSSC) shed over a third of their value in premarket U.S. trading Monday after the high-tech electronic security equipment manufacturer said it would revise its financial statements over the first three quarters of its 2023 fiscal year.
If the losses hold, the stock will be on course for its largest decline since September 2008.
In a statement, the Amityville, New York-based group said it had identified certain errors related to its calculation of cost of goods sold and inventory. Specifically, Napco noted that its books did not appropriately account for the costs of several components that had "fluctuated substantially."
Inventories were overstated and costs of goods sold were understated in prior earnings reports, Napco said. As a result, previously disclosed net income is set to be lowered in the three-month periods ended on September 30, 2022, December 31, 2022, and March 31 of this year.
"[M]anagement [...] has determined that a material weakness existed in the Company's internal controls over financial reporting for each of the first three quarters of fiscal 2023, rendering the Company's disclosure controls and procedures ineffective at the end of each such quarter," Napco said. It added that it has begun a process to "enhance" its procedures for determining inventory costs.
However, the firm warned that there can be "no assurance" as to when these changes will be fully developed and implemented, or even if these measures will be effective.