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:
         DECEMBER 31, 2007
                                       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 SYSTEMS, 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)

                                      None
              ----------------------------------------------------
             (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 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  X   Non-Accelerated Filer
                        ---                    ---                        ---
Smaller reporting company
                          ---


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:  FEBRUARY 11, 2008

              COMMON STOCK, $.01 PAR VALUE PER SHARE        19,091,393


                                       1



                                                                           Page
                                                                          ------
PART I:  FINANCIAL INFORMATION

         ITEM 1.   Financial Statements

             NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
             INDEX - DECEMBER 31, 2007

                 Condensed Consolidated Balance Sheets, December 31,
                  2007 and June 30, 2007                                      3

                 Condensed Consolidated Statements of Income for the
                  Three Months ended December 31, 2007 and 2006               4

                 Condensed Consolidated Statements of Income for the
                  Six Months ended December 31, 2007 and 2006                 5

                 Condensed Consolidated Statements of Cash Flows for
                  the Six Months ended December 31, 2007 and 2006             6

                 Notes to Condensed Consolidated Financial Statements         7


         ITEM 2.     Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                    14

         ITEM 3.     Quantitative and Qualitative Disclosures About
                      Market Risk                                            19

         ITEM 4.     Controls and Procedures                                 19


PART II: OTHER INFORMATION                                                   20


SIGNATURE PAGE                                                               21


                                       2



PART I:  FINANCIAL INFORMATION

ITEM 1.  Financial Statements




                  NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                        December 31,              June 30,
                                    ASSETS                            2007 (unaudited)              2007
                                    ------                            ----------------        ----------------
                                                                         (in thousands, except share data)
Current Assets:
                                                                                        
       Cash and cash equivalents                                      $           971         $         1,748
       Accounts receivable, less reserve for doubtful accounts                 21,251                  25,579
       Inventories, net                                                        24,504                  21,342
       Prepaid expenses and other current assets                                1,243                   1,171
       Deferred income taxes                                                    1,182                   1,050
                                                                      ----------------        ----------------

           Total Current Assets                                                49,151                  50,890

Inventories - non-current, net                                                  8,150                   6,881
Property, plant and equipment, net                                              9,021                   9,135
Goodwill, net                                                                   9,686                   9,686
Other assets                                                                      374                     193
                                                                      ----------------        ----------------

           Total Assets                                               $        76,382         $        76,785
                                                                      ================        ================


                LIABILITIES AND STOCKHOLDERS' EQUITY
                ------------------------------------

Current Liabilities:
       Accounts payable                                               $         5,027         $         5,045
       Accrued expenses                                                         1,072                   1,638
       Accrued salaries and wages                                               2,436                   2,631
       Accrued income taxes                                                       268                      96
                                                                      ----------------        ----------------

           Total Current Liabilities                                            8,803                   9,410

Long-term debt                                                                 12,400                  10,900
Accrued income taxes                                                            2,653                   1,836
Deferred income taxes                                                           1,027                   1,235
Minority interest in subsidiary                                                   147                     147
                                                                      ----------------        ----------------

           Total Liabilities                                                   25,030                  23,528
                                                                      ----------------        ----------------
Stockholders' Equity:
       Common stock, par value $.01 per share; 40,000,000 shares
        authorized, 20,091,393 and 20,090,313 shares issued and
        19,109,064 and 19,665,141 shares outstanding, respectively                201                     201
       Additional paid-in capital                                              13,300                  13,147
       Retained earnings                                                       43,361                  42,299
                                                                      ----------------        ----------------
                                                                               56,862                  55,647
       Less: Treasury Stock, at cost (982,329 and 425,172 shares,
        respectively)                                                          (5,510)                 (2,390)
                                                                      ----------------        ----------------

           Total stockholders' equity                                          51,352                  53,257
                                                                      ----------------        ----------------

            Total Liabilities and Stockholders' Equity                $        76,382         $        76,785
                                                                      ================        ================


     See accompanying notes to condensed consolidated financial statements.


                                       3





                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)



                                                                                 Three Months Ended
                                                                                    December 31,
                                                                      ----------------------------------------

                                                                            2007                    2006
                                                                      ----------------        ----------------
                                                                            (in thousands, except share
                                                                                and per share data)


                                                                                        
Net sales                                                             $        16,166         $        16,077
Cost of sales                                                                  10,910                  10,252
                                                                      ----------------        ----------------

         Gross Profit                                                           5,256                   5,825
Selling, general and administrative expenses                                    3,971                   3,981
                                                                      ----------------        ----------------

         Operating Income                                                       1,285                   1,844
                                                                      ----------------        ----------------

Interest expense, net                                                             224                     119
Other expenses, net                                                                11                       5
                                                                      ----------------        ----------------

         Other expenses                                                           235                     124
                                                                      ----------------        ----------------

         Income Before Minority Interest and (Benefit) Provision
          for Income Taxes                                                      1,050                   1,720

Minority interest in loss of subsidiary                                            20                      41
                                                                      ----------------        ----------------

         Income Before (Benefit) Provision for Income Taxes                     1,070                   1,761

(Benefit) provision for income taxes                                             (102)                    617
                                                                      ----------------        ----------------

         Net Income                                                   $         1,172         $         1,144
                                                                      ================        ================



Earnings per common share (Note 4):
         Basic                                                        $          0.06         $          0.06
                                                                      ================        ================

         Diluted                                                      $          0.06         $          0.06
                                                                      ================        ================


Weighted average number of common shares outstanding (Note 4):
         Basic                                                             19,297,252              20,034,552
                                                                      ================        ================

         Diluted                                                           19,820,906              20,628,793
                                                                      ================        ================



     See accompanying notes to condensed consolidated financial statements.


                                       4





                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)



                                                                                  Six Months Ended
                                                                                    December 31,
                                                                      ----------------------------------------

                                                                            2007                    2006
                                                                      ----------------        ----------------
                                                                            (in thousands, except share
                                                                                and per share data)


                                                                                        
Net sales                                                             $        30,042         $        30,106
Cost of sales                                                                  19,657                  18,722
                                                                      ----------------        ----------------

         Gross Profit                                                          10,385                  11,384
Selling, general and administrative expenses                                    8,297                   7,979
                                                                      ----------------        ----------------

         Operating Income                                                       2,088                   3,405
                                                                      ----------------        ----------------

Interest expense, net                                                             419                     209
Other expenses, net                                                                18                       9
                                                                      ----------------        ----------------

         Other expenses                                                           437                     218
                                                                      ----------------        ----------------

         Income Before Minority Interest and Provision for
          Income Taxes                                                          1,651                   3,187

Minority interest in loss of subsidiary                                            59                      54
                                                                      ----------------        ----------------

         Income Before Provision for Income Taxes                               1,710                   3,241

Provision for income taxes                                                        163                   1,145
                                                                      ----------------        ----------------

         Net Income                                                   $         1,547         $         2,096
                                                                      ================        ================



Earnings per common share (Note 4):
         Basic                                                        $          0.08         $          0.10
                                                                      ================        ================

         Diluted                                                      $          0.08         $          0.10
                                                                      ================        ================


Weighted average number of common shares outstanding (Note 4):
         Basic                                                             19,432,471              19,992,925
                                                                      ================        ================

         Diluted                                                           19,985,412              20,715,830
                                                                      ================        ================



     See accompanying notes to condensed consolidated financial statements.


                                       5





                  NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


                                                                                  Six Months Ended
                                                                                    December 31,
                                                                      ----------------------------------------

                                                                            2007                    2006
                                                                      ----------------        ----------------
                                                                                   (in thousands)

Cash Flows from Operating Activities:
                                                                                        
         Net income                                                   $         1,547         $         2,096
         Adjustments to reconcile net income to net cash and cash
          equivalents provided by (used in) operating activities:
                 Depreciation and amortization                                    561                     564
                 Recovery of doubtful accounts                                    (35)                    (70)
                 Deferred income taxes                                           (340)                    (25)
                 Non-cash stock based compensation expense                        151                     228
         Changes in operating assets and liabilities:
                 Accounts receivable                                            4,363                   2,449
                 Inventories                                                   (4,431)                 (8,100)
                 Prepaid expenses and other current assets                        (72)                   (413)
                 Other assets                                                    (181)                   (116)
                 Accounts payable, accrued expenses, accrued salaries
                  and wages, and accrued income taxes                            (275)                 (1,201)
                                                                      ----------------        ----------------

Net Cash Provided by (Used in) Operating Activities                             1,288                  (4,588)
                                                                      ----------------        ----------------

Cash Flows Used in Investing Activities:
         Purchases of property, plant and equipment                              (447)                   (587)
                                                                      ----------------        ----------------

Cash Flows from Financing Activities:
         Proceeds from exercise of employee stock options                           2                     168
         Proceeds from long-term debt borrowings                                3,500                   3,000
         Principle payments on long-term debt                                  (2,000)                      -
         Cash paid for purchase of treasury stock                              (3,120)                      -
                                                                      ----------------        ----------------

Net Cash (Used in) Provided by Financing Activities                            (1,618)                  3,168
                                                                      ----------------        ----------------

Net (decrease) in Cash and Cash Equivalents                                      (777)                 (2,007)

Cash and Cash Equivalents, Beginning of Period                                  1,748                   2,738
                                                                      ----------------        ----------------

Cash and Cash Equivalents, End of Period                              $           971         $           731
                                                                      ================        ================


Cash Paid During the Period for:
--------------------------------

         Interest                                                     $           377         $           182
                                                                      ================        ================

         Income taxes                                                 $             -         $         2,488
                                                                      ================        ================


Non-cash Investing activities:
------------------------------

         Adjustment to Retained earnings relating to adoption
          of FIN 48 (see Note 8)                                      $           485         $             -
                                                                      ================        ================



     See accompanying notes to condensed consolidated financial statements.


                                       6



                  NAPCO SECURITY SYSTEMS, INC AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)




1.)  Summary of Significant Accounting Policies and Other Disclosures
     ----------------------------------------------------------------

     The accompanying Condensed Consolidated Financial Statements are unaudited.
     In management's opinion, all adjustments (consisting of only normal
     recurring accruals) necessary for a fair presentation have been made. The
     results of operations for the period ended December 31, 2007 are not
     necessarily indicative of results that may be expected for any other
     interim period or for the full year.

     The unaudited Condensed Consolidated Financial Statements should be read in
     conjunction with the Consolidated Financial Statements and related notes
     contained in the Company's Annual Report on Form 10-K for the year ended
     June 30, 2007. The accounting policies used in preparing these unaudited
     Condensed Consolidated Financial Statements are consistent with those
     described in the June 30, 2007 Consolidated Financial Statements. However,
     for interim financial statements, inventories are calculated using a gross
     profit percentage.

     The consolidated financial statements include the accounts of Napco
     Security Systems, Inc. and all of its wholly-owned subsidiaries. The
     Company has also consolidated a 51%-owned joint venture. The 49% interest,
     held by a third party, is reflected as minority interest. All inter-company
     balances and transactions have been eliminated in consolidation.

     The Company has made a number of estimates and assumptions relating to the
     assets and liabilities, the disclosure of contingent assets and liabilities
     and the reporting of revenues and expenses to prepare these financial
     statements in conformity with accounting principles generally accepted in
     the United States. Actual results could differ from those estimates.

     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 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. To a lesser degree, sales in Europe are also adversely
     impacted in the Company's first fiscal quarter because of European vacation
     patterns, i.e., many distributors and installers are closed for the month
     of August. In addition, demand is affected by the housing and construction
     markets.

     Advertising and Promotional Costs

     Advertising and promotional costs are included in "Selling, General and
     Administrative" expenses in the condensed consolidated statements of income
     and are expensed as incurred. Advertising expense for the three months
     ended December 31, 2007 and 2006 was $196,000 and $340,000, respectively.
     Advertising expense for the six months ended December 31, 2007 and 2006 was
     $718,000 and $698,000, respectively.

     Research and Development Costs

     Research and development costs are included in "Cost of Sales" in the
     condensed consolidated statements of income and are expensed as incurred.
     Research and development expense for the three months ended December 31,
     2007 and 2006 was $1,390,000 and $1,320,000, respectively. Research and
     development expense for the six months ended December 31, 2007 and 2006 was
     $2,722,000 and $2,613,000, respectively.

     Business Concentration and 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 two customers with accounts receivable balances that
     aggregated 46% and 38% of the Company's accounts receivable at December 31,
     2007 and June 30, 2007, respectively. Sales to neither of these customers
     exceeded 10% of net sales in any of the past three fiscal years.


                                       7


     In the ordinary course of business, the Company has established a reserve
     for doubtful accounts and customer deductions in the amount of $330,000 and
     $365,000 as of December 31, 2007 and June 30, 2007, 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
     trends.

     Stock Options

     During the three and six months ended December 31, 2007 the Company granted
     40,000 stock options under its 2002 Employee Incentive Stock Option Plan
     and no options under its 2000 Non-employee Incentive Stock Option Plan.
     These grants have exercise prices between $5.35 and $5.89, a fair value of
     $145,000 and vest over a four year period from the date of grant. 1,080
     options were exercised under the 2002 Plan with proceeds of approximately
     $2,000 and none under the 2000 Plan during the three and six months ended
     December 31, 2007.

     Recent Accounting Pronouncements

     In June 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
     Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
     Taxes - An Interpretation of FASB Statement No. 109". FIN 48 clarifies the
     accounting for uncertainty in income taxes recognized in an enterprise's
     financial statements in accordance with SFAS No. 109, "Accounting for
     Income Taxes". This Interpretation prescribes a recognition threshold and
     measurement attribute for the financial statement recognition and
     measurement of a tax position taken or expected to be taken in a tax
     return. This Interpretation also provides guidance on de-recognition,
     classification, interest and penalties, accounting in interim periods,
     disclosure, and transition. FIN 48 is effective for financial statements
     issued for fiscal years beginning after December 15, 2006 and is to be
     applied to all open tax years as of the date of effectiveness. The Company
     has adopted the provisions of FIN 48 effective July 1, 2007. For the
     effects of this implementation see Note 8.

     In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements".
     SFAS No. 157 provides guidance for using fair value to measure assets and
     liabilities. In addition, this statement defines fair value, establishes a
     framework for measuring fair value, and expands disclosures about fair
     value measurements. Where applicable, this statement simplifies and
     codifies related guidance within generally accepted accounting principles.
     This statement is effective for financial statements issued for fiscal
     years beginning after November 15, 2007, and interim periods within those
     fiscal years. The Company's adoption of SFAS No. 157 is not expected to
     have a material effect on its condensed consolidated financial statements.

     In September 2006, the SEC issued Staff Accounting Bulletin ("SAB") No.
     108, "Considering the Effects of Prior Year Misstatements when Quantifying
     Misstatements in Current Year Financial Statements" ("SAB No. 108") to
     provide guidance on the consideration of the effects of prior year
     misstatements in quantifying current year misstatements for the purpose of
     a materiality assessment. Under SAB No. 108, companies should evaluate a
     misstatement based on its impact on the current year income statement, as
     well as the cumulative effect of correcting such misstatements that existed
     in prior years existing in the current year's ending balance sheet. The
     Company's adoption of SAB No. 108 did not have a material impact on its
     condensed consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
     Financial Assets and Financial Liabilities". SFAS No. 159 permits entities
     to choose to measure many financial instruments and certain other items at
     fair value. The objective is to improve financial reporting by providing
     entities with the opportunity to mitigate volatility in reported earnings
     caused by measuring related assets and liabilities differently without
     having to apply complex hedge accounting provisions. Most of the provisions
     of this Statement apply only to entities that elect the fair value option.
     However, the amendment to SFAS No. 115, "Accounting for Certain Investments
     in Debt and Equity Securities", applies to all entities with
     available-for-sale and trading securities. Some requirements apply
     differently to entities that do not report net income. SFAS No. 159 will
     become effective for the Company in its fiscal year ending June 30, 2009.
     The Company's adoption of SFAS No. 159 is not expected to have a material
     effect on its condensed consolidated financial statements.

     The FASB ratified the consensuses reached in EITF Issue No. 06-3, "How
     Taxes Collected from Customers and Remitted to Governmental Authorities
     Should Be Presented in the Income Statement (That is, Gross versus Net
     Presentation)" ("EITF 06-3"). The EITF reached a consensus that the scope
     of the Issue includes any tax assessed by a governmental authority that is
     both imposed on and concurrent with a specific revenue-producing
     transaction between a seller and a customer, and may include, but is not


                                       8


     limited to, sales, use, value-added, and some excise taxes. The
     presentation of taxes within the scope of this Issue on either a gross or a
     net basis is an accounting policy decision that should be disclosed.
     Furthermore, for taxes reported on a gross basis, a company should disclose
     the aggregate amount of those taxes in interim and annual financial
     statements for each period for which an income statement is presented if
     that amount is significant. The disclosures required under this consensus
     should be applied retrospectively to interim and annual financial
     statements for all periods presented, if those amounts are significant. The
     Company adopted EITF 06-3 on January 1, 2006. The adoption of EITF 06-3 did
     not have a significant impact on the Company's consolidated financial
     statements. The Company currently records its sales net of any value added
     or sales tax.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
     Combinations" ("SFAS No. 141(R)"). SFAS No. 141(R) replaces SFAS No. 141,
     "Business Combinations," however, it retains the fundamental requirements
     of the former Statement that the acquisition method of accounting
     (previously referred to as the purchase method) be used for all business
     combinations and for an acquirer to be identified for each business. SFAS
     No. 141(R) defines the acquirer as the entity that obtains control of one
     or more businesses in the business combination and establishes the
     acquisition date as the date that the acquirer achieves control. Among
     other requirements, SFAS No. 141(R) requires the acquiring entity in a
     business combination to recognize the identifiable assets acquired,
     liabilities assumed and any noncontrolling interest in the acquiree at
     their acquisition-date fair values, with limited exceptions;
     acquisition-related costs generally will be expensed as incurred. SFAS No.
     141(R) requires certain financial statement disclosures to enable users to
     evaluate and understand the nature and financial effects of the business
     combination. SFAS No. 141(R) must be applied prospectively to business
     combinations that are consummated beginning in the Company's fiscal 2010.
     The Company's adoption of SFAS No. 141(R) is not expected to have a
     material effect on its condensed consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
     in Consolidated Financial Statements, an Amendment of ARB No. 51" ("SFAS
     No. 160") to establish accounting and reporting standards for the
     noncontrolling interest in a subsidiary and for the deconsolidation of a
     subsidiary. Among other requirements, SFAS No. 160 clarifies that a
     noncontrolling interest in a subsidiary, which is sometimes referred to as
     minority interest, is to be reported as a separate component of equity in
     the consolidated financial statements. SFAS No. 160 also requires
     consolidated net income to include the amounts attributable to both the
     parent and the noncontrolling interest and to disclose those amounts on the
     face of the consolidated statement of income. SFAS No. 160 must be applied
     prospectively for fiscal years, and interim periods within those fiscal
     years, beginning in the Company's fiscal 2010, except for the presentation
     and disclosure requirements, which will be applied retrospectively for all
     periods. The Company's adoption of SFAS No. 160 is not expected to have a
     material effect on its condensed consolidated financial statements.


2.)  Stock-based Compensation
     ------------------------

     The Company has established two share incentive programs as discussed in
     more detail in the Consolidated Financial Statements and related notes
     contained in the Company's annual report on Form 10-K for the year ended
     June 30, 2007. Prior to fiscal 2006, the Company applied the intrinsic
     value method as outlined in Accounting Principles Board Opinion No. 25,
     "Accounting for Stock Issued to Employees," ("APB No. 25") and related
     interpretations in accounting for stock options and share units granted
     under these programs. Under the intrinsic value method, no compensation
     expense was recognized if the exercise price of the Company's stock options
     equaled the market price of the underlying stock on the date of the grant.
     Stock-based compensation costs of $93,000 and $144,000 were recognized in
     three months ended December 31, 2007 and 2006, respectively. Stock-based
     compensation costs of $151,000 and $228,000 were recognized in six months
     ended December 31, 2007 and 2006, respectively. Unearned stock-based
     compensation cost was $571,000 as of December 31, 2007.


3.)  Inventories
     -----------

     For interim financial statements, inventories are calculated using a gross
     profit percentage. The Company regularly reviews parts and finished goods
     inventories on hand and, when necessary, records a provision for excess or
     obsolete inventories. As of December 31, 2007 and June 30, 2007, balances
     in these reserves amounted to $1,200,000. 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.


                                       9


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

                                                  December 31,       June 30,
                                                      2007             2007
                                                 --------------   --------------

                               Component parts   $      17,516    $      15,139
                               Work-in-process           3,632            3,139
                               Finished product         11,506            9,945
                                                 --------------   --------------

                                                 $      32,654    $      28,223
                                                 ==============   ==============

     Classification of inventories, net of reserves:

                               Current           $      24,504    $      21,342
                               Non-current               8,150            6,881
                                                 --------------   --------------

                                                 $      32,654    $      28,223
                                                 ==============   ==============

4.)  Earnings Per Common Share
     -------------------------

     The Company follows the provisions of SFAS No. 128, "Earnings Per Share".
     In accordance with SFAS No. 128, earnings per common share amounts ("Basic
     EPS") were computed by dividing earnings by the weighted average number of
     common shares outstanding for the period. Earnings per common share
     amounts, assuming dilution ("Diluted EPS"), were computed by reflecting the
     potential dilution from the exercise of stock options. SFAS No. 128
     requires the presentation of both Basic EPS and Diluted EPS on the face of
     the condensed consolidated statements of income.

     A reconciliation between the numerators and denominators of the Basic and
     Diluted EPS computations for earnings is as follows (in thousands except
     per share data):

                                         Three months ended December 31, 2007
                                     -------------------------------------------
                                       Net Income      Shares        Per Share
                                      (numerator)   (denominator)     Amounts
                                     -------------  -------------  -------------
     Basic EPS
     ---------
     Net income, as reported         $      1,172         19,298   $       0.06
     Effect of dilutive securities
     -----------------------------
     Employee Stock Options          $          -            523   $          -
                                     -------------  -------------  -------------
     Diluted EPS
     -----------
     Net income, as reported and
      assumed option exercises       $      1,172         19,821   $       0.06
                                     =============  =============  =============


     194,000 options to purchase shares of common stock in the three months
     ended December 31, 2007 were excluded in the computation of Diluted EPS
     because the exercise prices were in excess of the average market price for
     this period and their inclusion would be anti-dilutive.


                                         Three months ended December 31, 2006
                                     -------------------------------------------
                                       Net Income      Shares        Per Share
                                      (numerator)   (denominator)     Amounts
                                     -------------  -------------  -------------
     Basic EPS
     ---------
     Net income, as reported         $      1,144         20,035   $       0.06
     Effect of dilutive securities
     -----------------------------
     Employee Stock Options          $          -            594   $          -
                                     -------------  -------------  -------------
     Diluted EPS
     -----------
     Net income, as reported and
      assumed option exercises       $      1,144         20,629   $       0.06
                                     =============  =============  =============


     55,000 options to purchase shares of common stock in the three months ended
     December 31, 2006 were excluded in the computation of Diluted EPS because
     the exercise prices were in excess of the average market price for this
     period and their inclusion would be anti-dilutive.


                                       10


                                          Six months ended December 31, 2007
                                     -------------------------------------------
                                       Net Income      Shares        Per Share
                                      (numerator)   (denominator)     Amounts
                                     -------------  -------------  -------------
     Basic EPS
     ---------
     Net income, as reported         $      1,547         19,432   $       0.08
     Effect of dilutive securities
     -----------------------------
     Employee Stock Options          $          -            553   $          -
                                     -------------  -------------  -------------
     Diluted EPS
     -----------
     Net income, as reported and
      assumed option exercises       $      1,547         19,985   $       0.08
                                     =============  =============  =============


     115,000 options to purchase shares of common stock in the six months ended
     December 31, 2007 were excluded in the computation of Diluted EPS because
     the exercise prices were in excess of the average market price for this
     period.


                                          Six months ended December 31, 2006
                                     -------------------------------------------
                                       Net Income      Shares        Per Share
                                      (numerator)   (denominator)     Amounts
                                     -------------  -------------  -------------
     Basic EPS
     ---------
     Net income, as reported         $      2,096         19,993   $       0.10
     Effect of dilutive securities
     -----------------------------
     Employee Stock Options          $          -            723   $          -
                                     -------------  -------------  -------------
     Diluted EPS
     -----------
     Net income, as reported and
      assumed option exercises       $      2,096         20,716   $       0.10
                                     =============  =============  =============


     46,000 options to purchase shares of common stock in the six months ended
     December 31, 2006 were excluded in the computation of Diluted EPS because
     the exercise prices were in excess of the average market price for this
     period and their inclusion would be anti-dilutive.


5.)  Long Term Debt
     --------------

     Long-term debt consists of a revolving credit and term loan facility with
     outstanding borrowings of $12,400,000 at December 31, 2007 and $10,900,000
     at June 30, 2007. In September 2007, the Company amended its secured
     revolving credit agreement with its primary bank. The Company's borrowing
     capacity under the amended agreement was increased to $25,000,000 from
     $18,000,000. The amended revolving credit agreement is secured by all the
     accounts receivable, inventory, the Company's headquarters in Amityville,
     New York and certain other assets of Napco Security Systems, Inc. and the
     common stock of three of the Company's subsidiaries. The revolving credit
     agreement bears interest at either the Prime Rate less 1/4% or an alternate
     rate based on LIBOR as described in the agreement. As of December 31, 2007
     the interest rate on the outstanding portion of this facility was 6.4%. The
     September 2007 amendment also extended the revolving credit agreement to
     September 2011. Any outstanding borrowings are to be repaid or refinanced
     on or before that time. The agreement contains various restrictions and
     covenants including, among others, restrictions on payment of dividends,
     restrictions on borrowings, restrictions on capital expenditures, the
     maintenance of minimum amounts of tangible net worth, and compliance with
     other certain financial ratios, as defined in the agreement.


6.)  Geographical Data
     -----------------

     The Company is engaged in one major line of business: the development,
     manufacture, and distribution of security alarm products and door security
     devices 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, Europe, and South
     America.

     The Company observes the provisions of SFAS No. 131. The following
     represents selected consolidated geographical data for the three and six
     months ended December 31, 2007 and 2006 (in thousands):


                                       11




                                        Three Months ended December 31,      Six Months ended December 31,
                                      --------------------------------------------------------------------
                                            2007               2006              2007              2006
                                      --------------------------------------------------------------------
     Sales to external customers(1):
     -------------------------------
                                                                                 
        Domestic                      $     13,394       $     14,374      $     24,967      $     25,809
        Foreign                              2,772              1,703             5,075             4,297
                                      -------------      -------------     -------------     -------------
           Total Net Sales            $     16,166       $     16,077      $     30,042      $     30,106
                                      =============      =============     =============     =============
                                                    As of
                                      --------------------------------
                                       December 31,         June 30,
                                           2007               2007
                                      -------------      -------------
     Identifiable assets:
     --------------------
        United States                 $     45,398       $     47,636
        Dominican Republic (2)              23,564             21,246
        Other foreign countries              7,420              7,903
                                      -------------      -------------
           Total Identifiable
     Assets                           $     76,382       $     76,785
                                      =============      =============


     (1) All of the Company's sales occur in the United States and are shipped
     primarily from the Company's facilities in the United States and United
     Kingdom. There were no sales into any one foreign country in excess of 10%
     of Net Sales.
     (2) Consists primarily of inventories ($18,575,000 and $16,088,000) and
     fixed assets ($4,928,000 and $5,007,000) located at the Company's principal
     manufacturing facility in the Dominican Republic as of December 31, 2007
     and June 30, 2007, respectively.


7.)  Commitments and Contingencies
     -----------------------------

     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.


8.)  Income Taxes
     ------------

     In March 2003, Napco Security Systems, Inc. timely filed its income tax
     return for the fiscal year ended June 30, 2002. This return included an
     election to treat one of the Company's foreign subsidiaries as if it were a
     domestic corporation beginning July 1, 2001. This election was based on a
     then recently enacted Internal Revenue Code ("Code") provision. As a result
     of this election, this subsidiary is treated, for Federal income tax
     purposes, as transferring all of its assets to a domestic corporation in
     connection with an exchange. Although this type of transfer usually results
     in the recognition of taxable income to the extent of any untaxed earnings
     and profits, the Code provision provides an exemption for applicable
     corporations. The Company qualifies as an applicable corporation pursuant
     to this Code section, and based on this Code exemption, the Company treated
     the transfer of approximately $27,000,000 of this subsidiary's untaxed
     earnings and profits as nontaxable.

     The Internal Revenue Service has issued a Revenue Procedure which is
     inconsistent with the Code exemption described above. The Code is the
     actual law; a Revenue Procedure is the IRS's interpretation of the law. The
     Code has a higher level of authority than a Revenue Procedure. Management
     believes that it has appropriately relied on the guidance in the Code when
     filing its income tax return. If challenged, the Company believes that the
     potential liability would have ranged from $0 to $9,450,000. However, the
     Company also believes there were other mitigating factors that would limit
     the amount of the potential liability, and as a result, management accrued
     a liability of $2,243,000 as of June 30, 2002. As a result of the lapse in
     the applicable statute of limitations, the Company reversed $407,000 of
     this accrued liability during fiscal 2007, resulting in a long-term accrued
     income tax liability of $1,836,000 as of June 30, 2007.


                                       12


     As a result of the implementation of FIN48 as of July 1, 2007, the Company
     increased its accrued income tax liability by $715,000, from $1,836,000 to
     $2,551,000, to provide for additional reserves for uncertain income tax
     positions, relating to the fiscal years 2004 through 2007, the only periods
     subject to examination by the taxing authorities. The increase in the
     accrued income tax liability of $715,000 was offset in part by a $230,000
     increase in a related deferred income tax asset, resulting in a net
     reduction to retained earnings of $485,000 (representing the cumulative
     effect of adopting FIN 48).

     During the six months ended December 30, 2007, the Company increased its
     reserve for uncertain income tax positions by $102,000, excluding the
     related deferred tax benefit (representing interest on unrecognized income
     tax positions), resulting in a long-term accrued income tax liability of
     $2,653,000. The Company's practice is to recognize interest and/or
     penalties related to income tax matters in income tax expense and accrued
     income taxes. As of December 31, 2007, the Company had accrued interest
     totaling $517,000, excluding the related deferred tax asset. As of December
     31, 2007, the Company had, approximately $2,358,000 of unrecognized net tax
     benefits (including the related accrued interest and net of the related
     deferred income tax benefit of $297,000) that, if recognized, would
     favorably affect the effective income tax rate in any future periods. The
     total accrued liability related to the election described above as of
     December 31, 2007 (including related accrued interest) totaled $2,404,000.
     The statute of limitations on the remainder of this accrued liability has
     lapsed subsequent to December 31, 2007, which will result in a net benefit
     to income tax expense of $2,231,000 ($2,404,000 less the related $173,000
     deferred income tax benefit) in the quarter ended March 31, 2008. During
     the second quarter ended December 31, 2007 the Company completed a
     corporate restructuring for which new offshore companies were formed (Napco
     DR, S.A. and Napco Americas). These newly formed wholly-owned subsidiaries
     are included in the Company's condensed consolidated financial statements.
     The existing US-based companies ("Napco US") and these newly formed
     offshore companies entered into technology licenses and research and
     development cost sharing agreements. Also, Napco DR, S.A. purchased the
     majority of the operating assets previously held by the existing Dominican
     subsidiary. Napco DR, S.A. is doing business in a Free Zone Park in the
     Dominican Republic and as such is not subject to Dominican corporate income
     taxes. Napco US plans to permanently reinvest a substantial portion of its
     foreign earnings and as such has not provided US corporate taxes on the
     permanently reinvested earnings. Due to the restructuring, the Company's
     effective tax rate is lower in the second quarter and is projected to be
     lower than the US statutory rates in the third and fourth quarters as well.

     The difference between the statutory U.S. Federal income tax rate and the
     Company's effective tax rate as reflected in the consolidated statements of
     income for the six months ended December 31, 2007 is as follows (dollars in
     thousands):

                                                                          % of
                                                                         Pre-tax
                                                                Amount   Income
                                                                ------   ------

     Tax at Federal statutory rate                              $ 581     34.0%
     Increases (decreases) in taxes resulting from:
         U.S. benefit on foreign source income                   (490)   (28.7)
         Reserve for uncertain income tax positions                65      3.8
         Other, net                                                 7       .4
                                                                ------   ------

     Provision for income taxes                                 $ 163      9.5%
                                                                ------   ------


9.)  Treasury Stock
     --------------

     On March 16, 2007, the Company announced that its Board of Directors
     authorized the repurchase of up to one million (1,000,000) shares of its
     common stock. As of December 31, 2007, the Company has repurchased 982,329
     shares at a weighted average price of $5.61 per share. Subsequent to
     December 31, 2007, the Company has repurchased an additional 17,671 shares
     at a weighted average price of $5.98 per share.


                                       13



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

Napco Security Systems, Inc.
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 continue growing 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, adverse tax
consequences of offshore operations, distribution problems, unforeseen
environmental liabilities and the uncertain military, political and economic
conditions in the world.

Overview

The Company is a diversified manufacturer of security products, encompassing
intrusion and fire alarms, building access control systems and electronic
locking devices. 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 17% and 14% of our
revenues for the six months ended December 31, 2007 and 2006, 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 customer demand or utilization of
our manufacturing capacity. As product demand rises and factory utilization
increases, the fixed costs are spread over increased output, which should
improve profit margins. Conversely, when sales decline our fixed costs are
spread over reduced levels, thereby decreasing margins.

In February 2004 the Company entered into a joint venture with an unrelated
company to sell security-related products, including those manufactured by the
Company, in the Middle East. The Company owns 51% of the newly formed company,
an LLC organized in New York, which has its main operations in the United Arab
Emirates. Revenues generated by this joint venture were approximately 4% of our
revenues for the six months ended December 31, 2007.

The security products market is characterized by constant incremental innovation
in product design and manufacturing technologies. Generally, the Company devotes
7-8% of revenues to research and development (R&D) on an annual basis. Products
resulting from our R&D investments in the three months ended December 31, 2007
did not contribute materially to revenue during this period, but should benefit
the Company over future periods. 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

The post-September 11 era has generally been characterized by increased demand
for electronic security products and services. The Company believes the security
equipment market is likely to continue to exhibit healthy growth, particularly
in industrial sectors, due to ongoing concerns over the adequacy of security
safeguards. The Company's business is also affected by the housing markets.
Demand for the Company's intrusion products, which accounted for approximately
50% of Net sales in Fiscal 2007, has a direct correlation to demand in the
housing market.

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 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. To a lesser degree,
sales in Europe are also adversely impacted in the Company's first fiscal
quarter because of European vacation patterns, i.e., many distributors and
installers are closed for the month of August. In addition, demand is affected
by the housing and construction markets.


                                       14


Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in conformity with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses reported in those financial statements. These
judgments can be subjective and complex, and consequently actual results could
differ from those estimates. Our most critical accounting policies relate to
revenue recognition; concentration of credit risk; inventory; goodwill; and
income taxes.

Revenue Recognition

Revenues from merchandise sales are recorded at the time the product is shipped
or delivered to the customer pursuant to the terms of sale. We report our sales
levels on a net sales basis, which is computed by deducting from gross sales the
amount of actual sales returns and allowances and an amount established for
anticipated sales returns and allowances.

Our accrual for sales returns and allowances is a subjective critical estimate
that has a direct impact on reported net sales and income. This accrual is
calculated based on a history of gross sales and actual sales returns and
allowances, as well as management's estimate of anticipated sales returns and
allowances. As a percentage of gross sales, sales returns, rebates and other
allowances were 8% and 7% for the three months ended December 31, 2007 and 2006,
respectively and 6% and 8% for the six months ended December 31, 2007 and 2006,
respectively.

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 two customers with accounts receivable balances that aggregated
46% and 38% of the Company's accounts receivable at December 31, 2007 and June
30, 2007, respectively. Sales to neither of these customers exceeded 10% of net
sales in any of the past three fiscal years.

In the ordinary course of business, we have established a reserve for doubtful
accounts and customer deductions in the amount of $330,000 and $365,000 as of
December 31, 2007 and June 30, 2007, 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 trends.

Inventories

For interim financial statements, inventories are calculated using a gross
profit percentage. This valuation method is based, in part, on subjective
estimates and approximations 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.


                                       15


Goodwill

Effective July 1, 2001, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 141, Business Combinations and SFAS No. 142, Goodwill and
Other Intangible Assets. These statements established accounting and reporting
standards for acquired goodwill and other intangible assets. Specifically, the
standards address how acquired intangible assets should be accounted for both at
the time of acquisition and after they have been recognized in the financial
statements. In accordance with SFAS No. 142, intangible assets, including
purchased goodwill, must be evaluated for 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
impairment by comparing the fair value of a reporting unit with its carrying
value, and (ii) if there is an impairment, the Company measures the amount of
impairment loss by comparing the implied fair value of goodwill with the
carrying amount of that goodwill. At the close of Fiscal 2007, the Company
performed its annual impairment evaluation required by this standard and
determined that its goodwill is not impaired.

Income Taxes

In March 2003, Napco Security Systems, Inc. timely filed its income tax return
for the fiscal year ended June 30, 2002. This return included an election to
treat one of the Company's foreign subsidiaries as if it were a domestic
corporation beginning July 1, 2001. This election was based on a then recently
enacted Internal Revenue Code ("Code") provision. As a result of this election,
this subsidiary is treated, for Federal income tax purposes, as transferring all
of its assets to a domestic corporation in connection with an exchange. Although
this type of transfer usually results in the recognition of taxable income to
the extent of any untaxed earnings and profits, the Code provision provides an
exemption for applicable corporations. The Company qualifies as an applicable
corporation pursuant to this Code section, and based on this Code exemption, the
Company treated the transfer of approximately $27,000,000 of this subsidiary's
untaxed earnings and profits as nontaxable.

The Internal Revenue Service has issued a Revenue Procedure which is
inconsistent with the Code exemption described above. The Code is the actual
law; a Revenue Procedure is the IRS's interpretation of the law. The Code has a
higher level of authority than a Revenue Procedure. Management believes that it
has appropriately relied on the guidance in the Code when filing its income tax
return. If challenged, the Company believes that the potential liability would
have ranged from $0 to $9,450,000. However, the Company also believes there were
other mitigating factors that would limit the amount of the potential liability,
and as a result, management accrued a liability of $2,243,000 as of June 30,
2002. As a result of the lapse in the applicable statute of limitations, the
Company reversed $407,000 of this accrued liability during fiscal 2007,
resulting in a long-term accrued income tax liability of $1,836,000 as of June
30, 2007.

As a result of the implementation of FIN48 as of July 1, 2007, the Company
increased its accrued income tax liability by $715,000, from $1,836,000 to
$2,551,000, to provide for additional reserves for uncertain income tax
positions, relating to the fiscal years 2004 through 2007, the only periods
subject to examination by the taxing authorities. The increase in the accrued
income tax liability of $715,000 was offset in part by a $230,000 increase in a
related deferred income tax asset, resulting in a net reduction to retained
earnings of $485,000 (representing the cumulative effect of adopting FIN 48).

During the six months ended December 30, 2007, the Company increased its reserve
for uncertain income tax positions by $102,000, excluding the related deferred
tax benefit (representing interest on unrecognized income tax positions),
resulting in a long-term accrued income tax liability of $2,653,000.

The Company's practice is to recognize interest and/or penalties related to
income tax matters in income tax expense and accrued income taxes. As of
December 31, 2007, the Company had accrued interest totaling $517,000, excluding
the related deferred tax asset.

As of December 31, 2007, the Company had, approximately $2,358,000 of
unrecognized net tax benefits (including the related accrued interest and net of
the related deferred income tax benefit of $297,000) that, if recognized, would
favorably affect the effective income tax rate in any future periods.

The total accrued liability related to the election described above as of
December 31, 2007 (including related accrued interest) totaled $2,404,000. The
statute of limitations on the remainder of this accrued liability has lapsed
subsequent to December 31, 2007, which will result in a net benefit to income
tax expense of $2,231,000 ($2,404,000 less the related $173,000 deferred income
tax benefit) in the quarter ended March 31, 2008.


                                       16


During the second quarter ended December 31, 2007 the Company completed a
corporate restructuring for which new offshore companies were formed (Napco DR,
S.A. and Napco Americas). These newly formed wholly-owned subsidiaries are
included in the Company's condensed consolidated financial statements. The
existing US-based companies ("Napco US") and these newly formed offshore
companies entered into technology licenses and research and development cost
sharing agreements. Also, Napco DR, S.A. purchased the majority of the operating
assets previously held by the existing Dominican subsidiary. Napco DR, S.A. is
doing business in a Free Zone Park in the Dominican Republic and as such is not
subject to Dominican corporate income taxes. Napco US plans to permanently
reinvest a substantial portion of its foreign earnings and as such has not
provided US corporate taxes on the permanently reinvested earnings. Due to the
restructuring, the Company's effective tax rate is lower in the second quarter
and is projected to be lower than the US statutory rates in the third and fourth
quarters as well.




Results of Operations
---------------------

                                    ------------------------------------------    ------------------------------------------
                                          Three months ended December 31,                 Six months ended December 31,
                                             (dollars in thousands)                          (dollars in thousands)
                                    ------------------------------------------    ------------------------------------------
                                                                 % Increase/                                    % Increase/
                                       2007          2006          decrease)         2007          2006           decrease)
                                    ------------------------------------------    ------------------------------------------
                                                                                                  
Net sales                           $   16,166    $   16,077          0.6%        $   30,042    $   30,106          (0.2)%

Gross profit                             5,256         5,825         (9.8)%           10,385        11,384          (8.8)%

Gross profit as a % of net sales          32.5%         36.2%        (3.7)%             34.6%         37.8%         (3.2)%

Selling, general and administrative      3,971         3,981         (0.3)%            8,297         7,979           4.0%
Selling, general and administrative
 as a percentage of net sales             24.6%         24.8%        (0.2)%             27.6%         26.5%          1.1%

Operating income                         1,285         1,844        (30.3)%            2,088         3,405         (38.7)%

Interest expense, net                      224           119         88.2%               419           209         100.5%
Other expense                               11             5        120.0%                18             9         100.0%
Minority interest in net loss of
 subsidiary, net                            20            41        (51.2)%               59            54           9.3%
(Benefit) Provision for income
 taxes                                    (102)          617       (116.5)%              163         1,145         (85.8)%

Net income                               1,172         1,144          2.4%             1,547         2,096         (26.2)%
                                    ------------------------------------------    ------------------------------------------


Sales for the three months ended December 31, 2007 increased by approximately 1%
to $16,166,000 as compared to $16,077,000 for the same period a year ago. Sales
for the six months ended December 31, 2007 remained relatively constant at
$30,042,000 as compared to $30,106,000 for the same period a year ago. The
decrease in sales for the six months was due to lower sales in the Company's
Access Control and Locking products as partially offset by increases in the
Company's intrusion-related sales.

The Company's gross profit for the three months ended December 31, 2007
decreased by $569,000 to $5,256,000 or 32.5% of sales as compared to $5,825,000
or 36.2% of sales for the same period a year ago. The Company's gross profit for
the six months ended December 31, 2007 decreased by $999,000 to $10,385,000 or
34.6% of sales as compared to $11,384,000 or 37.8% of sales for the same period
a year ago. The decrease in gross profit for the three and six months was due
primarily to lower production levels and an associated decrease in overhead
absorption rates in the first six months of fiscal 2008 as compared to the same
period in fiscal 2007 as well as a reduction in the first quarter of fiscal 2007
in the Company's inventory reserves of approximately $150,000.

Selling, general and administrative expenses for the three months ended December
31, 2007 remained relatively constant at $3,971,000, or 24.6% of sales, as
compared to $3,981,000, or 24.8% of sales a year ago. Selling, general and
administrative expenses for the six months ended December 31, 2007 increased by
$318,000 to $8,297,000, or 27.6% of sales, as compared to $7,979,000, or 26.5%
of sales a year ago. The increase in dollars and as a percentage of sales for
the three and six months ended December 31, 2007 was due primarily to increases
in various marketing expenses relating to the Company's access control products
as well as tradeshow expenses.

Interest expense, net for the three months ended December 31, 2007 increased by
$105,000 to $224,000 as compared to $119,000 for the same period a year ago.
Interest expense, net for the six months ended December 31, 2007 increased by
$210,000 to $419,000 as compared to $209,000 for the same period a year ago. The
increase in interest expense for the three and six months resulted primarily
from the increase in the Company's average outstanding debt which was due
primarily to the Company's increase in inventory and its Treasury stock
repurchases as discussed below.


                                       17


The Company's provision for income taxes for the three months ended December 31,
2007 decreased by $719,000 to a benefit of $102,000 as compared to a provision
of $617,000 for the same period a year ago. The Company's provision for income
taxes for the six months ended December 31, 2007 decreased by $982,000 to
$163,000 as compared to $1,145,000 for the same period a year ago. The decrease
in provision for income taxes for the three and six months resulted primarily
from the decrease in the Company's effective income tax rate and, in the case of
the six month period, from the decrease in Income before income tax. The tax
provision for the three and six months ended December 31, 2007 is calculated
using an estimated annual effective tax rate of 17%. During the second quarter
ended December 31, 2007 Napco completed a corporate restructuring for which new
offshore companies were formed. The Company's effective rate for the three and
six months ended December 31, 2007 was (9.5)% and 9.5%, respectively, which
reflected this restructuring as well as an additional provision of $65,000
resulting from the Company's adoption of FIN48, both as described in Note 8
above.

Net income increased by $28,000 to $1,172,000 or $0.06 per diluted share for the
three months ended December 31, 2007 as compared to $1,144,000 or $0.06 per
diluted share for the same period a year ago. Net income decreased by $549,000
to $1,547,000 or $0.08 per diluted share for the six months ended December 31,
2007 as compared to $2,096,000 or $0.10 per diluted share for the same period a
year ago. The increase for the three months ended December 31, 2007 was
primarily due to the tax benefit relating to the Company's Dominican Republic
operation. The decrease for the six months was primarily due to the
aforementioned decreases in gross profit and increases in selling, general and
administrative and interest expenses, as partially offset by the income tax
benefit described above.

Liquidity and Capital Resources
-------------------------------

During the six months ended December 31, 2007 the Company utilized all of its
cash from operations to purchase property, plant and equipment ($447,000) and
treasury stock ($3,120,000). One of the key factors in the use of operating cash
was our investment in additional inventory ($4,431,000) as discussed below. The
Company's management believes that current working capital, cash flows from
operations and its revolving credit agreement will be sufficient to fund the
Company's operations through at least the next twelve months.

Accounts Receivable at December 31, 2007 decreased $4,328,000 to $21,251,000 as
compared to $25,579,000 at June 30, 2007. This decrease is primarily the result
of the higher sales volume during the quarter ended June 30, 2007 as compared to
the quarter ended December 31, 2007 as partially offset by extended terms
granted to certain of the Company's customers during the quarter ended June 30,
2007. Certain of these terms extended beyond December 31, 2007.

Inventories at December 31, 2007 increased by $4,431,000 to $32,654,000 as
compared to $28,223,000 at June 30, 2007. This increase was primarily the result
of the Company level-loading its production schedule in anticipation of its
historical sales cycle where a larger portion of the Company's sales occur in
the latter fiscal quarters as compared to the earlier quarters as well as to
support a projection of higher sales in fiscal 2007.

Long-term debt consists of a revolving credit and term loan facility with
outstanding borrowings of $12,400,000 at December 31, 2007 and $10,900,000 at
June 30, 2007. In September 2007, the Company amended its secured revolving
credit agreement with its primary bank. The Company's borrowing capacity under
the amended agreement was increased to $25,000,000 from $18,000,000. The amended
revolving credit agreement is secured by all the accounts receivable, inventory,
the Company's headquarters in Amityville, New York and certain other assets of
Napco Security Systems, Inc. and the common stock of three of the Company's
subsidiaries. The revolving credit agreement bears interest at either the Prime
Rate less 1/4% or an alternate rate based on LIBOR as described in the
agreement. As of December 31, 2007 the interest rate on the outstanding portion
of this facility was 6.4%. The September 2007 amendment also extended the
revolving credit agreement to September 2011. Any outstanding borrowings are to
be repaid or refinanced on or before that time. The agreement contains various
restrictions and covenants including, among others, restrictions on payment of
dividends, restrictions on borrowings, restrictions on capital expenditures, the
maintenance of minimum amounts of tangible net worth, and compliance with other
certain financial ratios, as defined in the agreement.

As of December 31, 2007 the Company had no material commitments for capital
expenditures or inventory purchases other than purchase orders issued in the
normal course of business.


                                       18


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) that provides for interest at a spread below the
prime rate. The Company is affected by market risk exposure primarily through
the effect of changes in interest rates on amounts payable by the Company under
this credit facility. At December 31, 2007, an aggregate principal amount of
approximately $12,400,000 was outstanding under the Company's credit facility
with a weighted average interest rate of approximately 6.4%. If principal
amounts outstanding under the Company's credit facility remained at this
year-end level for an entire year and the prime rate increased or decreased,
respectively, by 1% the Company would pay or save, respectively, an additional
$124,000 in interest that year.

A significant number of foreign sales transactions by the Company are
denominated in U.S. dollars. As such, the Company has shifted foreign currency
exposure onto many of 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. In addition, the
Company transacts certain sales in Europe in British Pounds Sterling, therefore
exposing itself to a certain amount of foreign currency risk. Management
believes that the amount of this exposure is immaterial. We are also exposed to
foreign currency risk relative to expenses incurred in Dominican Pesos ("RD$"),
the local currency of the Company's production facility in the Dominican
Republic. The result of a 10% strengthening in the U.S. dollar to our RD$
expenses would result in an annual decrease in income from operations of
approximately $415,000.


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 December 31, 2007, 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 in alerting them in a timely manner to information relating to the
Company required to be disclosed in this report except as follows:

Management's review over it's internal controls at the conclusion of fiscal 2007
identified conditions which they deemed to be material weaknesses, (as defined
by standards established by the SEC and the Public Company Accounting Oversight
Board) with respect to certain of our inventory valuation estimation methods and
the classification of inventory in accordance with Accounting Research Bulletin
43 ("ARB No. 43"). Management has informed it's independent auditors and the
Audit Committee that it has corrected its method of classifying its inventory so
as to be in compliance with ARB No. 43, has initiated a review of the ways in
which we can accumulate information to provide better substantiation of our
overhead estimates, including implementation of an additional time-tracking
system, and established an additional review of our obsolescence estimates. We
will also conduct a review of our inventory turnover and utilize this review to
support classification on the balance sheet to prevent reoccurrences of these
material weaknesses and will continue to monitor the effectiveness of these
actions and will make any other changes or take such additional actions as
management determines to be appropriate. Management expects to complete these
actions during fiscal 2008.

During the second quarter of fiscal 2008, there were no changes in the Company's
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting except for the procedure described above which has corrected
the weakness relating to inventory classification on the balance sheet.




                                       19



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, 2007.
         There have been no material changes in the risk factors previously
         disclosed in the Company's Form 10-K for the year ended June 30, 2007
         during the three months ended December 31, 2007.


Item 2.  Unregistered Sales of Equity Securities and Uses of Proceeds
         ------------------------------------------------------------



         --------------------------------------------------------------------------------------------------------------------
                                                                                       Total Number of       Maximum Number
                                                                                     Shares Purchased as   of Shares that May
                                                      Total Number of    Average      Part of Publically    Yet Be Purchased
                                                          Shares        Price Paid    Announced Plans or     Under Plans or
                        Period                          Purchased       per Share          Programs             Programs
         --------------------------------------------------------------------------------------------------------------------
                                                                                                     
         October 1, 2007 - October 31, 2007               37,274          $5.47              37,274              306,890

         November 1, 2007 - November 30, 2007            171,119          $5.27             171,119              135,771

         December 1, 2007 - December 31, 2007            118,100          $5.36             118,100               17,671
         --------------------------------------------------------------------------------------------------------------------
         Total for the quarter ended December 31,
         2007                                            326,493          $5.32             326,493               17,671
                                                         =======                            =======

         --------------------------------------------------------------------------------------------------------------------


         On March 16, 2007, the Company announced that its Board of Directors
         authorized the repurchase of up to one million (1,000,000) shares of
         its common stock.


Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

         (a)   The annual meeting of stockholders ("the Annual Meeting") was
               held on December 4, 2007.


                                       20



         (b)   At the Annual Meeting, two directors were re-elected as directors
               through 2010:
                   Richard L. Soloway - 17,842,594 votes "for", 296,753 votes
                    "withheld", and
                   Kevin S. Buchel - 17,842,594 votes "for", 296,753 votes
                    "withheld"

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




                                       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.


February 14, 2008


                           NAPCO SECURITY SYSTEMS, 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