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: SEPTEMBER 30, 2008
                                       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: NOVEMBER 14, 2008

                COMMON STOCK, $.01 PAR VALUE PER SHARE 19,095,713

                                       1


                                                                            Page
                                                                            ----
PART I:  FINANCIAL INFORMATION

     ITEM 1. Financial Statements

       NAPCO SECURITY SYSTEMS, INC. AND SUBSIDIARIES
       INDEX - SEPTEMBER 30, 2008

          Condensed Consolidated Balance Sheets, September 30, 2008 and
          June 30, 2008                                                       3

          Condensed Consolidated Statements of Income for the Three
          Months ended September 30, 2008 and 2007                            4

          Condensed Consolidated Statements of Cash Flows for the Three
          Months ended September 30, 2008 and 2007                            5

          Notes to Condensed Consolidated Financial Statements                6


     ITEM 2. Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                       13

     ITEM 3. Quantitative and Qualitative Disclosures About Market Risk      18

     ITEM 4. Controls and Procedures                                         18


PART II: OTHER INFORMATION                                                   19


SIGNATURE PAGE                                                               20

                                       2


PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements

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

                                                     September 30,     June 30,
                        ASSETS                     2008 (unaudited)      2008
                        ------                     ----------------   ----------
                                                       (in thousands, except
                                                             share data)
Current Assets:
   Cash and cash equivalents                       $         4,276    $   2,765
   Accounts receivable, net of reserves                     26,479       25,823
   Inventories                                              26,890       19,548
   Prepaid expenses and other current assets                 1,576        1,121
   Deferred income taxes                                       790          769
                                                   ----------------   ----------

      Total Current Assets                                  60,011       50,026

Inventories - non-current, net                               8,440        7,724
Property, plant and equipment, net                           9,601        8,989
Intangible assets, net                                      16,039           --
Goodwill, net                                               10,584        9,686
Other assets                                                   793          298
                                                   ----------------   ----------

      Total Assets                                 $       105,468    $  76,723
                                                   ================   ==========

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

Current Liabilities:
   Current portion of long-term debt               $         3,572    $      --
   Accounts payable                                          5,917        4,857
   Accrued expenses                                          1,980        1,333
   Accrued salaries and wages                                2,392        2,543
                                                   ----------------   ----------

      Total Current Liabilities                             13,861        8,733

Long-term debt                                              35,528       12,400
Accrued income taxes                                           299          294
Deferred income taxes                                        1,646        1,607
Minority interest in subsidiary                                147          147
                                                   ----------------   ----------

      Total Liabilities                                     51,481       23,181
                                                   ----------------   ----------
Commitments and Contingencies
Stockholders' Equity:
      Common stock, par value $.01 per share;
      40,000,000 shares authorized, 20,095,713 and
      20,092,473 shares issued and 19,095,713 and
      19,092,473 shares outstanding, respectively              201          201
      Additional paid-in capital                            13,548       13,424
   Retained earnings                                        45,853       45,532
                                                   ----------------   ----------
                                                            59,602       59,157
   Less: Treasury Stock, at cost (1,000,000 shares)         (5,615)      (5,615)
                                                   ----------------   ----------

      Total stockholders' equity                            53,987       53,542
                                                   ----------------   ----------

      Total Liabilities and Stockholders' Equity   $       105,468    $  76,723
                                                   ================   ==========

                See accompanying notes to condensed consolidated
                             financial statements.

                                       3


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

                                                         Three Months Ended
                                                            September 30,
                                                   -----------------------------

                                                        2008            2007
                                                   -------------   -------------
                                                    (in thousands, except share
                                                         and per share data)


Net sales                                          $     17,483    $     13,876
Cost of sales                                            11,877           8,652
                                                   -------------   -------------

    Gross Profit                                          5,606           5,224
Selling, general and administrative expenses              4,776           4,421
                                                   -------------   -------------

    Operating Income                                        830             803
                                                   -------------   -------------

Other expense:
    Interest expense, net                                   315             195
    Other expenses, net                                      79               7
                                                   -------------   -------------

    Total Other expenses                                    394             202
                                                   -------------   -------------

    Income Before Minority Interest and Provision
     for Income Taxes                                       436             601

Minority interest in loss of subsidiary                      42              38
                                                   -------------   -------------

    Income Before Provision for Income Taxes                478             639

Provision for income taxes                                  156             265
                                                   -------------   -------------

    Net Income                                     $        322    $        374
                                                   =============   =============


Earnings per share:
    Basic                                          $       0.02    $       0.02
                                                   =============   =============

    Diluted                                        $       0.02    $       0.02
                                                   =============   =============

Weighted average number of shares outstanding:
    Basic                                            19,095,361      19,567,689
                                                   =============   =============

    Diluted                                          19,479,269      20,157,065
                                                   =============   =============

                See accompanying notes to condensed consolidated
                             financial statements.

                                       4



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

                                                                     Three Months Ended
                                                                         September 30,
                                                                ---------------------------

                                                                   2008            2007
                                                                -----------     -----------
                                                                      (in thousands)
Cash Flows from Operating Activities:
   Net income                                                   $       322     $       374
   Adjustments to reconcile net income to net cash
     and cash equivalents provided by (used in)
     operating activities:
        Depreciation and amortization                                   378             277
        Provision for (Recovery of) doubtful accounts                    42             (40)
        Change to inventory obsolescence reserve                         --
        Deferred income taxes                                            18            (254)
        Non-cash stock based compensation expense                       118              59
   Changes in operating assets and liabilities, net of
     acquisition effects:
        Accounts receivable                                           1,138           3,513
        Inventories                                                  (1,317)         (2,491)
        Prepaid expenses and other current assets                      (354)             16
        Other assets                                                     --             (71)
        Accounts payable, accrued expenses, accrued salaries
         and wages, and accrued income taxes                            291             500
                                                                -----------     -----------

Net Cash Provided by Operating Activities                               636           1,883
                                                                -----------     -----------

Cash Flows Used in Investing Activities:
        Cash used in business acquisition, net of cash acquired
         of $520                                                    (24,555)             --
        Purchases of property, plant and equipment                     (115)           (344)
                                                                -----------     -----------

Net Cash Used in Operating Activities                               (24,670)           (344)
                                                                -----------     -----------


Cash Flows from Financing Activities:
        Proceeds from exercise of employee stock options                  6              --
        Proceeds from acquisition financing                          25,000              --
        Proceeds from long-term debt borrowings                       2,200              --
        Principal payments on long-term debt                         (1,500)             --
        Cash paid for deferred financing costs                         (161)             --
        Cash paid for purchase of treasury stock                         --          (1,371)
                                                                -----------     -----------

Net Cash Provided by (Used in) Financing Activities                  25,545          (1,371)
                                                                -----------     -----------
Net increase in Cash and Cash Equivalents                             1,511             168

Cash and Cash Equivalents, Beginning of Period                        2,765           1,748
                                                                -----------     -----------
Cash and Cash Equivalents, End of Period                        $     4,276     $     1,916
                                                                ===========     ===========
Cash Paid During the Period for:
--------------------------------
        Interest                                                $       159     $       186
                                                                ===========     ===========

        Income taxes                                            $       125     $        --
                                                                ===========     ===========

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

        Adjustment to Retained earnings relating to
         adoption of FIN 48                                     $        --     $       485
                                                                ===========     ===========

        Accrued Business Acquisition costs                      $       295              --
        Debt assumed in the acquisition                         $     1,000              --
                                                                ===========     ===========

     See accompanying notes to condensed consolidated financial statements.

                                       5

                  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  September  30,  2008 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, 2008. The accounting  policies used in preparing  these  unaudited
     Condensed  Consolidated  Financial  Statements  are  consistent  with those
     described in the June 30, 2008 Consolidated Financial Statements.  However,
     for interim financial statements,  inventories are calculated using a gross
     profit percentage.  In addition,  the Condensed  Consolidated Balance Sheet
     was derived from the audited financial  statements but does not include all
     disclosures required by Generally Accepted Accounting Principles ("GAAP").

     The  consolidated  financial  statements  include  the  accounts  of  Napco
     Security Systems, Inc. and all of its wholly-owned subsidiaries,  including
     those of Marks USA, a newly formed subsidiary which acquired  substantially
     all of the assets  and  certain  liabilities  of G.  Marks  Hardware,  Inc.
     ("Marks") acquired on August 18, 2008 . 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 September 30, 2008 and 2007 was $301,000 and $522,000, 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 September 30,
     2008 and 2007 was $1,312,000 and $1,332,000, 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  30% and 34% of the Company's  accounts  receivable at September
     30,  2008 and June  30,  2008,  respectively.  Sales  to  neither  of these
     customers  exceeded 10% of net sales in any of the past three fiscal years.


                                       6

     Allowance for Doubtful Accounts

     In the ordinary  course of business,  the Company has established a reserve
     for doubtful accounts and customer deductions in the amount of $408,000 and
     $405,000 as of  September  30, 2008 and June 30,  2008,  respectively.  The
     Company's 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  months  ended  September  30,  2008 the  Company  granted
     100,000 stock options under its 2002 Employee  Incentive Stock Option Plan.
     These grants have an exercise price of $4.25, a fair value of approximately
     $198,000 and vest over a two-year period from the date of grant. There were
     no options granted under its 2000 Non-employee Incentive Stock Option Plan.
     There were 3,240 options exercised,  with proceeds of approximately $6,000,
     under the 2002 Employee  Incentive Stock Option Plan and no exercises under
     the 2000  Non-employee  Incentive Stock Option Plan during the three months
     ended September 30, 2008.

     Intangible Assets

     Under the Statement of Accounting Standards ("SFAS") No.142,  "Goodwill and
     Other  Intangible  Assets",  all  goodwill  and certain  intangible  assets
     determined  to have  indefinite  lives  will not be  amortized  but will be
     tested for  impairment  at least  annually.  Intangible  assets  other than
     goodwill  will be  amortized  over  their  useful  lives and  reviewed  for
     impairment at least  annually or more often whenever there is an indication
     that the carrying amount may not be recovered.

     The Company's  acquisition of  substantially  all of the assets and certain
     liabilities  of  Marks  included  intangible  assets  with a fair  value of
     $16,100,000 on the date of acquisition. In accordance with the requirements
     of  SFAS  No.  141,  "Business  Combinations",  the  Company  recorded  the
     estimated  value  of  $9,800,000  related  to the  customer  relationships,
     $340,000 related to a non-compete  agreement and $6,300,000  related to the
     Marks trade name within  intangible  assets.  The  remaining  excess of the
     purchase price of $897,000 was assigned to Goodwill. In accordance with the
     provisions of SFAS No. 142,  "Goodwill and Other  Intangible  Assets",  the
     intangible  assets will be amortized over their  estimated  useful lives of
     twenty  years  (customer   relationships)   and  seven  years  (non-compete
     agreement). The Marks USA trade name was deemed to have an indefinite life.
     The goodwill  recorded as a result of the  acquisition  is  deductible  for
     Federal and New York State income tax purposes over a period of 15 years.

     Recent Accounting Pronouncements

     In March 2008, the Financial  Accounting  Standards  Board ("FASB")  issued
     SFAS  No.  161,  "Disclosures  about  Derivative  Instruments  and  Hedging
     Activities - an amendment of FASB Statement No. 133. This statement changes
     the  disclosure   requirements  for  derivative   instruments  and  hedging
     activities. Entities are required to provide enhanced disclosures about (a)
     how and why an  entity  uses  derivative  instruments,  (b) how  derivative
     instruments  and related hedged items are accounted for under Statement 133
     and its related  interpretations,  and (c) how derivative  instruments  and
     related  hedged  items  affect an entity's  financial  position,  financial
     performance, and cash flows. SFAS No. 161 is effective for fiscal years and
     interim periods  beginning after November 15, 2008. The Company's  adoption
     of SFAS No. 161 is not expected to have a material  effect on its condensed
     consolidated financial statements.

     In  February  2008,  the FASB issued  FASB Staff  Position  ("FSP") No. FAS
     157-1,  "Application of FASB Statement No. 157 to FASB Statement No. 13 and
     Other Accounting  Pronouncements  That Address Fair Value  Measurements for
     Purposes of Lease  Classification  or Measurement under Statement 13." This
     FSP amends SFAS No. 157 to exclude certain leasing  transactions  accounted
     for under previously  existing  accounting  guidance.  However,  this scope
     exception does not apply to assets  acquired and  liabilities  assumed in a
     business  combination,  regardless of whether those assets and  liabilities
     are related to leases.

     In February  2008,  the FASB issued FSP No. FAS 157-2,  "Effective  Date of
     FASB  Statement No. 157".  This FSP delays the  effective  date of SFAS No.
     157, "Fair Value Measurements",  for non-financial assets and non-financial
     liabilities,  except for items that are  recognized  or  disclosed  at fair
     value in the financial statements on a recurring basis (at least annually).
     This  FSP  defers  the  effective  date of SFAS  No.  157 to  fiscal  years
     beginning  after November 15, 2008, and interim periods within those fiscal
     years for items within the scope of this FSP.

     In October 2008, the FASB issued FSP No. FAS 157-3,  "Determining  the Fair
     Value of a  Financial  Asset When the Market for That Asset Is Not  Active"
     ("FSP 157-3").  FSP 157-3  classified the application of SFAS No. 157 in an
     inactive market. It demonstrated how the fair value of a financial asset is
     determined when the market for that financial asset is inactive.  FSP 157-3
     was effective upon issuance,  including  prior periods for which  financial
     statements  had not been issued.  The  implementation  of FSP 157-3 did not
     have a material effect on the Company's  condensed  consolidated  financial
     statements.

                                       7


     In  April  2008,   the  FASB  issued  FASB  Staff   Position   SFAS  142-3,
     "Determination of the Useful Life of Intangible Assets" ("FSP SFAS 142-3").
     FSP SFAS 142-3 amends the factors that should be  considered  in developing
     renewal or extension  assumptions  used to  determine  the useful life of a
     recognized  intangible  asset under FASB  Statement  No. 142,  Goodwill and
     Other  Intangible  Assets.  The  objective  of this FSP is to  improve  the
     consistency between the useful life of a recognized  intangible asset under
     Statement  142 and the period of  expected  cash flows used to measure  the
     fair value of the asset under SFAS 141R, Business  Combinations,  and other
     U.S.  GAAP  principles.  FSP  SFAS  142-3 is  effective  for  fiscal  years
     beginning  after  December  31,  2008.  The  adoption  of FSP SFAS 142-3 is
     effective July 1, 2009 and is not expected to have a material effect on the
     Company's condensed consolidated financial statements.

     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  non-controlling  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, "Non-controlling  Interests
     in Consolidated  Financial  Statements,  an Amendment of ARB No. 51" ("SFAS
     No.  160")  to  establish   accounting  and  reporting  standards  for  the
     non-controlling  interest in a subsidiary and for the  deconsolidation of a
     subsidiary.  Among  other  requirements,  SFAS  No.  160  clarifies  that a
     non-controlling 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  non-controlling  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.

     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 became
     effective  for the Company in its fiscal year  ending  June 30,  2009.  The
     Company's  adoption  of SFAS No. 159 did not have a material  effect on its
     condensed consolidated financial statements.

     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.
     SFAS No. 157 became  effective  for the  Company in its fiscal  year ending
     June 30,  2009.  The  Company's  adoption  of SFAS  No.  159 did not have a
     material effect on its condensed consolidated financial statements.

                                       8


     Reclassification.

     Certain expenses in Cost of sales for fiscal 2008 have been reclassified to
     Selling,  general and  administrative  expenses to conform with the current
     years presentation.

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, 2008.  The Company  accounts for its stock options and share units
     granted in accordance  with SFAS No. 123(R),  "Share-Based  Payment" ("SFAS
     No.  123(R)")  which  requires that all  stock-based  compensation  must be
     recognized  as an  expense  in the  financial  statements  and that cost be
     measured  at the fair  market  value of the  award.  SFAS No.  123(R)  also
     requires  that excess tax  benefits  related to stock  option  exercises be
     reflected as  financing  cash inflows  instead of operating  cash  inflows.
     Stock-based  compensation  costs of $118,000 and $59,000 were recognized in
     three  months ended  September  30, 2008 and 2007,  respectively.  Unearned
     stock-based compensation cost was $532,000 as of September 30, 2008.

     The fair values of stock  options  granted  during the three  months  ended
     September  30,  2008  were  estimated  on  the  date  of  grant  using  the
     Black-Scholes option pricing model that used the following weighted average
     assumptions:

             Expected life in years         5
             Risk-free interest rates       3.07%
             Volatility                     49.86%
             Dividend yield                 0%

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 reserve for excess or
     obsolete  inventories.  As of  September  30, 2008 and June 30,  2008,  the
     balance  in  this   reserve   amounted  to   $1,432,000   and   $1,200,000,
     respectively.  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.

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

                                                September 30,      June 30,
                                                   2008              2008

                        Component parts         $ 19,230          $ 12,924
                        Work-in-process            4,804             4,114
                        Finished product          11,296            10,234
                                                --------          --------

                                                $ 35,330          $ 27,272
                                                ========          ========

     Classification of inventories,
        net of reserves:
                        Current                 $ 26,890          $ 19,548
                        Non-current                8,440             7,724
                                                --------          --------

                                                $ 35,330          $ 27,272
                                                ========          ========

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 September 30, 2008
                                           -------------------------------------
                                           Net Income      Shares      Per Share
                                           (numerator)   (denominator)  Amounts
                                           -----------   ------------  ---------
     Basic EPS
     Net income, as reported               $       322         19,095  $    0.02
     Effect of dilutive securities
     Employee Stock Options                $         -            384  $       -
                                           -----------   ------------  ---------
     Diluted EPS
     Net income, as reported and
         assumed option exercises          $       322         19,479  $    0.02
                                           ===========   ============  =========

                                       9


     397,000  options to  purchase  shares of common  stock in the three  months
     ended  September 30, 2008 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 September 30, 2007
                                           -------------------------------------
                                           Net Income      Shares      Per Share
                                           (numerator)   (denominator)  Amounts
                                           -----------   ------------  ---------
     Basic EPS
     ---------
     Net income, as reported               $       374         19,568  $    0.02
     Effect of dilutive securities
     -----------------------------
     Employee Stock Options                $         -            589  $       -
                                           -----------   ------------  ---------

     Diluted EPS
     -----------
     Net income, as reported and
         assumed option exercises          $       374         20,157  $    0.02
                                           ===========   ============  =========

     62,000 options to purchase shares of common stock in the three months ended
     September 30, 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.

     Option  activity  during  the three  months  ended  September  30,  2008 is
     summarized as follows:

                                                               Weighted Average
                                                 Options        Exercise Price
                                                ---------      ----------------

        Outstanding at July 1, 2008             1,323,480         $   2.89
        Granted                                   100,000             4.25
        Cancelled                                      --               --
        Exercised                                  (3,240)           (1.90)
                                                ---------

        Outstanding at September 30, 2008       1,420,240             2.99
                                                =========

        Exercisable at September 30, 2008       1,199,281
                                                =========

5.)  Acquisition of Business
     -----------------------

     On August 18, 2008, the Company  acquired  substantially  all of the assets
     and business of G. Marks Hardware,  Inc.  ("Marks") for $25.2 million,  the
     repayment  of $1  million  of bank  debt  and  the  assumption  of  current
     liabilities  as described more fully in the Asset  Purchase  Agreement.  As
     such, the operations of Marks have been included in the Company's Statement
     of Income for the period August 18, 2008 to September  30, 2008.  The Marks
     business  involves  the  manufacturing  and  distribution  of  door-locking
     devices. The Company completed this acquisition at a price in excess of the
     value  of  the  net  identifiable  assets  because  it  believes  that  the
     combination of the two companies offers the potential for manufacturing and
     operational  synergies  as the Company  combines the Marks  operations  and
     production into its own door-locking  operations and production  structure.
     The  Company  funded the  acquisition  with a term loan from its lenders as
     described in Note 6.

     The  acquisition  described  above was  accounted for as a purchase and was
     valued  based on  management's  estimate  of the fair  value of the  assets
     acquired  and  liabilities   assumed.  The  estimates  of  fair  value  are
     preliminary  and subject to adjustment  for a period of up to one year from
     the date of acquisition.  Based on the Company's evaluation, the allocation
     of the purchase price for the acquisition was as follows (in thousands):

     Assets Acquired:
         Cash                                            $      520
         Accounts receivable                                  1,836
         Inventory                                            6,740
         Prepaid expenses and other current assets              112
         Property and equipment                                 801
         Other assets                                           340
         Goodwill                                               897
         Intangible assets                                   16,100
                                                         ----------

                                                             27,346
                                                         ----------

     Less: Liabilities Assumed:
         Line of credit borrowings outstanding                1,000
         Accounts payable                                       637
         Accrued expenses                                       339
                                                         ----------

                                                              1,976
                                                         ----------

     Total consideration (including acquisition
         Costs of $197)                                  $   25,370
                                                         ==========

                                       10


     In  accordance   with  the   requirements   of  SFAS  No.  141,   "Business
     Combinations",  the Company  recorded  the  estimated  value of  $9,800,000
     related to the customer  relationships,  $340,000  related to a non-compete
     agreement and $6,300,000  related to the Marks trade name within intangible
     assets  and the  excess of the  purchase  price  over the fair value of the
     acquired  assets of $897,000 was assigned to Goodwill.  In accordance  with
     the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets", the
     intangible  assets will be amortized over their  estimated  useful lives of
     twenty  years  (customer   relationships)   and  seven  years  (non-compete
     agreement).  The weighted  average  amortization  period of these assets is
     19.6 years. The Marks trade name was deemed to have an indefinite life. The
     goodwill  recorded as a result of the acquisition is deductible for Federal
     and New York State income tax purposes over a period of 15 years.

     Unaudited pro-forma  consolidated  financial information is presented below
     as if the  acquisition  had  occurred  as of the first day of the  earliest
     period  presented.  Results  have been  adjusted  to account  for:  (1) the
     initial  $25,000,000  cash borrowing and related interest expense under the
     term  loan,  (2) cash  used to repay  $1,000,000  in  assumed  bank debt at
     closing of the  purchase  transaction,  (3)  deferred  financing  costs and
     related  amortization  associated with the term loan, (4) additional salary
     and employee stock option expense for employees not previously  included in
     salary expense, and (5) amortization expense of acquired intangible assets.
     The pro-forma  information presented below does not purport to present what
     actual  results  would have been if the  acquisition  had  occurred  at the
     beginning of such periods, nor does the information project results for any
     future period. The unaudited pro-forma  consolidated  financial information
     should be read in  conjunction  with the historical  financial  information
     included  in other  reports  and  documents  filed with the  United  Stated
     Securities and Exchange Commission.

     The unaudited pro-forma  consolidated  financial  information for the three
     months ended September 30, 2008 and 2007 is as follows:


                                             Three months ended September 30,
                                               2008                  2007
                                             ---------             ----------
                                           (in thousands, except per share data)

     Pro-forma:
        Net sales                            $  20,002             $   20,277
        Net income                           $     416             $      566

        Net income (loss) per share:
                Basic                        $    0.02             $     0.03
                Diluted                      $    0.02             $     0.03

        Weighted average number of shares:
                Basic                       19,095,361             19,567,689
                Diluted                     19,479,269             20,157,055


6.)  Long Term Debt
     --------------

     On August 18,  2008,  the Company and its banks  amended and  restated  the
     existing  $25,000,000  revolving credit agreement.  The amended facility is
     $50,000,000 and provides for a $25,000,000 revolving credit line as well as
     a $25,000,000 term portion of which the entire  $25,000,000 was utilized to
     finance the asset  purchase  agreement  as described in Note 5. The amended
     revolving  credit  agreement  and term loan 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 agreements bear interest
     at either the Prime Rate or an  alternate  rate based on LIBOR as described
     in the  agreement.  The August  amendment  extended  the  revolving  credit
     agreement to August 2012.  Any  outstanding  borrowings are to be repaid or
     refinanced  on or before  that time.  As of  September  30,  2008 there was
     $14,100,000  outstanding  under  the  revolving  credit  facility  with  an
     interest rate of 4.6% and $25,000,000  outstanding under the term loan with
     an  interest  rate of 5.0%.  The term loan is to be repaid in 19  quarterly
     installments  of $893,000  each  commencing  in  December  2008 and a final
     payment of $8,033,000 due in August 2013. The  agreements  contain  various
     restrictions and covenants including, among others, restrictions on payment
     of  dividends,  restrictions  on  borrowings  and  compliance  with certain
     financial ratios, as defined in the agreement. As of September 30, 2008 the
     Company was in violation of the certain  financial  covenants  for which it
     has  received  the  appropriate  waiver from its banks.  In  addition,  the
     Company's   revolving   credit  line  was  amended  to   $20,000,000   from
     $25,000,000.

                                       11


7.)  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 months
     ended September 30, 2008 and 2007 (in thousands):


                                     Three Months ended September 30,
                                     --------------------------------
                                         2008               2007
                                     --------------------------------

     Sales to external customers(1):
     -------------------------------
        Domestic                     $      15,427      $      11,573
        Foreign                              2,056              2,303
                                     -------------      -------------
          Total Net Sales            $      17,483      $      13,876
                                     =============      =============

                                                   As of
                                     --------------------------------
                                     September 30,
                                          2008          June 30, 2008
                                     -------------      -------------
     Identifiable assets:
     --------------------
        United States                $      77,792      $      50,056
        Dominican Republic (2)              21,237             19,841
        Other foreign countries              6,439              6,826
                                     -------------      -------------
          Total Identifiable Assets  $     105,468      $      76,723
                                     =============      =============

     (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  ($16,291,000  and  $14,754,000) and
     fixed assets ($4,873,000 and $4,970,000) located at the Company's principal
     manufacturing  facility in the Dominican  Republic as of September 30, 2008
     and June 30, 2008, respectively.

8.)  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.  In
     August 2008, the Company  entered into a lease for the building where Marks
     has maintained its  operations.  The lease provides for an annual base rent
     of $288,750 plus maintenance and real estate taxes,  expires in August 2009
     and  provides for two annual  extensions  thereafter  at similar  terms and
     conditions.  The  Company  intends  to move the Marks  operations  into its
     facilities after  constructing  extensions of  approximately  35,000 square
     feet.  To date,  the Company does not have  estimates  for the cost of this
     move  or  the  related  construction.   The  Marks  business  involves  the
     manufacturing and distribution of door-locking devices.

9.)  Income Taxes
     ------------

     The provision for income taxes represents Federal,  foreign,  and state and
     local income taxes.  The effective rate differs from statutory rates due to
     the  effect  of  state  and  local  income  taxes,  tax  rates  in  foreign
     jurisdictions and certain  nondeductible  expenses.  Our effective tax rate
     will change from quarter to quarter  based on recurring  and  non-recurring
     factors  including,  but not limited to, the  geographical mix of earnings,
     enacted tax  legislation,  and state and local income  taxes.  In addition,
     changes in judgment from the evaluation of new information resulting in the
     recognition,  de-recognition or re-measurement of a tax position taken in a
     prior annual period are recognized separately in the quarter of the change.

     The  Company  does not  expect  that our  unrecognized  tax  benefits  will
     significantly  change within the next twelve months. We file a consolidated
     U.S.  income  tax return  and tax  returns  in certain  state and local and
     foreign  jurisdictions.  There are no current tax examinations in progress.
     Accordingly,  as of September 30, 2008, we remain subject to examination in
     all tax jurisdictions for all relevant jurisdictional statutes.

     The  Company  adopted  the  provisions  of FIN 48 as of July 1,  2007.  The
     Company has  identified  its U.S.  Federal  income tax return and its State
     return in New York as its major tax jurisdictions.  During the three months
     ending  September 30, 2008 the Company  increased its reserve for uncertain
     income tax positions by $5,000.  As a result,  as of September 30, 2008 the
     Company has a long-term accrued income tax liability of $ 299,000.


                                       12


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,  significant  fluctuations in the exchange
rate between the  Dominican  Peso and the U.S.  Dollar,  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 12% and 17% of our
revenues for the three months ended September 30, 2008 and 2007, 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 production  levels or utilization of
our manufacturing  capacity.  As production levels rise and factory  utilization
increases,  the fixed  costs are spread  over  increased  output,  which  should
improve profit margins.  Conversely,  when  production  levels decline our fixed
costs are spread over reduced levels, thereby decreasing margins.

On August 18, 2008,  the Company  acquired  substantially  all of the assets and
business of G. Marks Hardware,  Inc. ("Marks") for $25.2 million,  the repayment
of $1 million of bank debt and the  assumption of certain  current  liabilities.
The  Company  also  entered  into a  lease  for the  building  where  Marks  has
maintained  its  operations.  The  lease  provides  for an  annual  base rent of
$288,750  plus  maintenance  and real estate  taxes,  expires in August 2009 and
provides for two annual extensions  thereafter.  The Company intends to move the
Marks   operations  into  its  facilities  after   constructing   extensions  of
approximately  35,000 square feet. To date,  the Company does not have estimates
for the  cost of this  move or the  related  construction.  The  Marks  business
involves the manufacturing and distribution of door-locking devices.

                                       13


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 fiscal 2008 did not contribute  materially
to revenue  during this fiscal year,  but should benefit the Company over future
years.  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  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.

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.  Critical  Accounting  Policies  and
Estimates

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;  inventories;  intangible
assets; 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  returns  received and an amount  established  for  anticipated
returns and other allowances.

Our sales return  accrual 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,  as well as  management's
estimate of anticipated returns and allowances.  As a percentage of gross sales,
sales returns,  rebates and allowances were 7% and 4% for the three months ended
September 30, 2008 and 2007, 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.

                                       14


The Company had two customers with accounts receivable balances that aggregated
30% and 34% of the Company's accounts receivable at September 30, 2008 and June
30, 2008, 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 $408,000 and $405,000 as of
September  30, 2008 and June 30,  2008,  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

Inventories  are  valued at the lower of cost or fair  market  value,  with cost
being  determined on the first-in,  first-out  (FIFO)  method.  The reported net
value of inventory includes finished saleable products,  work-in-process and raw
materials that will be sold or used in future  periods.  Inventory costs include
raw materials,  direct labor and overhead.  The Company's  overhead expenses are
applied based,  in part, upon estimates of the proportion of those expenses that
are  related  to  procuring  and  storing  raw  materials  as  compared  to  the
manufacture and assembly of finished products. These proportions,  the method of
their application,  and the resulting overhead included in ending inventory, are
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.  The balance in this
reserve was  $1,432,000  and  $1,200,000  as of September  30, 2008 and June 30,
2008,  respectively.  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.

Goodwill and Other Intangible Assets

The Company  accounts for  Goodwill in  accordance  with  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.  The  Company  has  performed  its  annual
impairment evaluation required by this standard and determined that its goodwill
is not impaired.

The  Company's  acquisition  of  substantially  all of the  assets  and  certain
liabilities of Marks included intangible assets with a fair value of $16,100,000
on the date of acquisition. In accordance with the requirements of SFAS No. 141,
"Business Combinations",  the Company recorded the estimated value of $9,800,000
related  to  the  customer  relationships,  $340,000  related  to a  non-compete
agreement  and  $6,300,000  related to the Marks  trade name  within  intangible
assets and Goodwill of $897,000  subject to further  adjustment.  In  accordance
with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets", the
intangible  assets will be amortized over their estimated useful lives of twenty
years (customer  relationships)  and seven years  (non-compete  agreement).  The
Marks USA  trade  name was  deemed  to have an  indefinite  life.  The  goodwill
recorded as a result of the  acquisition  is deductible for Federal and New York
State income tax purposes over a period of 15 years.

                                       15


Income Taxes

The provision for income taxes represents Federal,  foreign, and state and local
income taxes.  The effective rate differs from statutory rates due to the effect
of state and local income taxes, tax rates in foreign  jurisdictions and certain
nondeductible  expenses.  Our  effective  tax rate will change  from  quarter to
quarter based on recurring and non-recurring factors including,  but not limited
to, the  geographical mix of earnings,  enacted tax  legislation,  and state and
local income taxes. In addition,  changes in judgment from the evaluation of new
information resulting in the recognition,  de-recognition or re-measurement of a
tax position  taken in a prior annual  period are  recognized  separately in the
quarter of the change.

We do not expect that our  unrecognized tax benefits will  significantly  change
within the next twelve months. We file a consolidated U.S. income tax return and
tax returns in certain state and local and foreign  jurisdictions.  There are no
current tax examinations in progress.  Accordingly, as of September 30, 2008, we
remain  subject  to  examination  in all  tax  jurisdictions  for  all  relevant
jurisdictional statutes.


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

                                     -------------------------------------------
                                          Three months ended September 30,
                                               (dollars in thousands)
                                     -------------------------------------------
                                        2008           2007        % Increase/
                                                                   (decrease)
                                     -------------------------------------------

Net sales                            $   17,483     $   13,876           26.0%
Gross profit                              5,606          5,224            7.3%
Gross profit as a % of net sales           32.1%          37.6%          (5.5)%
Selling, general and administrative       4,776          4,421            8.0%
Selling, general and administrative
as a percentage of net sales               27.3%          31.9%          (4.6)%
Operating income                            830            803            3.4%
Interest expense, net                       315            195           61.5%
Other expense
                                             79              7        1,028.6%
Minority interest in net loss of
subsidiary, net                              42             38           10.5%
Provision for income taxes                  156            265          (41.1)%
Net income                                  322            374          (13.9)%
                                     -------------------------------------------

Sales for the three months ended  September 30, 2008 increased by  approximately
26% to $17,483,000  as compared to  $13,876,000  for the same period a year ago.
The  increase  in sales  for the  three  months  ended  September  30,  2008 was
primarily  the  result  of the six  weeks of net  sales  added  from  the  Marks
acquisition as well as a 2% increase in the Company's other product lines.  This
2% increase was  primarily  due to increases in the  Company's  door locking and
access  control  products as partially  offset by  decreased  sales of intrusion
products.

The  Company's  gross  profit for the three  months  ended  September  30,  2008
increased to  $5,606,000 or 32.1% of sales as compared to $5,224,000 or 37.6% of
sales for the same period a year ago.  The  increase in Gross  profit in dollars
for the three  months was  primarily  due to the addition of the Gross profit of
Marks  ($1,057,000)  resulting  from  the  acquisition  on  August  18,  2008 as
partially offset by a decrease in Gross profit in the Company's other products.

Selling,  general  and  administrative  expenses  for  the  three  months  ended
September 30, 2008  increased by $355,000 to $4,776,000,  or 27.3% of sales,  as
compared to  $4,421,000,  or 31.9% of sales a year ago.  The increase in dollars
for  the  three  months  ended  September  30,  2008  was due  primarily  to the
additional  expenses  relating  to Marks  ($454,000)  as  partially  offset by a
decrease in  tradeshow  expenses due to a major  tradeshow  occurring in October
2008  ($199,000).  This  tradeshow  occurred in September 2007 and was therefore
included in Selling, general and administrative expense for the first quarter of
fiscal 2008. The decrease in Selling,  general and administrative  expenses as a
percentage of net sales was due to the timing of this tradeshow as well as Marks
having lower  Selling,  general and  administrative  expenses as a percentage of
sales as compared to rest of the Company.

                                       16


Interest expense, net for the three months ended September 30, 2008 increased by
$120,000 to $315,000 as compared to $195,000 for the same period a year ago. The
increase in interest  expense for the three months  resulted  primarily from the
increase  in the  Company's  average  outstanding  debt,  which  was  due to the
$25,000,000 of bank financing utilized for the Marks acquisition.

The Company's  provision  for income taxes for the three months ended  September
30, 2008  decreased by $109,000 to $156,000 as compared to $265,000 for the same
period a year ago.  The  decrease in  provision  for income  taxes for the three
months resulted primarily from the Company's corporate  restructuring during the
quarter ended December 31, 2007. As a result,  the Company's  effective rate for
for income tax was 32.6% for the three months ended  September  30, 2008,  which
reflected the effect of this  restructuring and 41.5% for the three months ended
September 30, 2007, which did not.

Net income  decreased by $52,000 to $322,000 or $0.02 per diluted  share for the
three  months  ended  September  30,  2008 as  compared to $374,000 or $0.02 per
diluted  share for the same period a year ago. The decrease for the three months
ended  September 30, 2008 was primarily due to the decrease in gross profit as a
percentage of sales as discussed above as partially offset by the additional net
income  generated  from  the  Marks  acquisition  ($240)  as well  as the  lower
effective tax rate relating to the Company's corporate  restructuring  described
above.

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

During the three months ended September 30, 2008 the Company utilized all of its
cash from operations and additional borrowings to complete the Marks acquisition
($26,173,000,  which  includes  payment  of the  $1,000,000  of  assumed  debt),
purchase inventory  ($1,317,000) and property,  plant and equipment  ($115,000).
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 September 30, 2008 increased  $656,000 to $26,479,000 as
compared to $25,823,000 at June 30, 2008.  This increase is primarily the result
of Marks acquisition  ($2,540,000) as partially offset by the lower sales volume
during the quarter  ended  September  30, 2008 as compared to the quarter  ended
June 30, 2008, which is typically the Company's highest.

Inventories  at September 30, 2008  increased by $8,058,000  to  $35,330,000  as
compared to $27,272,000 at June 30, 2008. This increase was primarily the result
of the Marks acquisition  ($5,774,000) as well as 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.  The Company initiated several steps in order to reduce
inventory levels in fiscal 2008 and expects to continue them in fiscal 2009.

On August 18, 2008,  the Company and its banks amended and restated the existing
$25,000,000 revolving credit agreement.  The amended facility is $50,000,000 and
provides for a $25,000,000  revolving  credit line as well as a $25,000,000 term
portion of which the  entire  $25,000,000  was  utilized  to  finance  the asset
purchase  agreement  as  described  in Note 12.  The  amended  revolving  credit
agreement  and term loan 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  agreements  bear  interest  at either  the Prime  Rate or an
alternate  rate  based  on LIBOR  as  described  in the  agreement.  The  August
amendment   extended  the  revolving   credit  agreement  to  August  2012.  Any
outstanding borrowings are to be repaid or refinanced on or before that time. As
of September  30, 2008 there was  $14,100,000  outstanding  under the  revolving
credit facility with an interest rate of 4.6% and $25,000,000  outstanding under
the term loan with an interest rate of 5.0%. The term loan is to be repaid in 19
quarterly  installments of $893,000 each commencing in December 2008 and a final
payment  of  $8,033,000  due in August  2013.  The  agreements  contain  various
restrictions and covenants including,  among others,  restrictions on payment of
dividends,  restrictions  on borrowings  and compliance  with certain  financial
ratios, as defined in the agreement. As of September 30, 2008 the Company was in
violation  of the  covenant  relating  to the ratio of Funded Debt to EBITDA for
which it has received the appropriate  waiver from its banks.  In addition,  the
Company's  revolving  credit line was amended to $20,000,000 from $25,000,000 in
November 2008.

As of  September  30, 2008 the Company had no material  commitments  for capital
expenditures  or inventory  purchases  other than purchase  orders issued in the
normal course of business.

                                       17


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 and term loan) that provides for interest at the prime
rate or an  alternate  rate based on LIBOR as described  in the  agreement.  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 September 30, 2008, an aggregate principal amount of approximately
$39,100,000 was outstanding  under the Company's credit facility with a weighted
average interest rate of approximately  4.9%. If principal  amounts  outstanding
under the Company's  credit  facility  remained at this level for an entire year
and the prime rate increased or decreased, respectively, by 1% the Company would
pay or save, respectively, an additional $391,000 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 $314,000.

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  September  30, 2008,  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 2008
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  methods  both at
year-end and relating to the Gross profit method used to calculate  Gross profit
and Inventories  for interim  reporting  purposes.  Management has informed it's
independent auditors and the Audit Committee that it has corrected its method of
calculating its gross profit and inventory for interim  reporting by including a
more  comprehensive  review of changes  within the business and  accounting  for
those changes where appropriate.  The Company has also initiated a review of the
ways in which we can more accurately  cost its inventory for year-end  reporting
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 the actions relating to the year-end
inventory valuation during fiscal 2009.

During the first quarter of fiscal 2009,  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 interim Gross profit and inventory calculations.

                                       18


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, 2008.
         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, 2008
         during the three months ended September 30, 2008 except as follows:

         Our  Business  Could Be  Materially  Adversely  Affected as a Result of
         -----------------------------------------------------------------------
         General Economic and Market Conditions
         --------------------------------------

         We  are  subject  to  the  effects  of  general   economic  and  market
         conditions. If these conditions deteriorate,  our business,  results of
         operations  or  financial  condition  could  be  materially   adversely
         affected.  In addition,  since October 2008, the U.S. and international
         financial markets have taken a significant loss and continue to be very
         volatile.  In the event that the downturn in the U.S. or  international
         financial markets is prolonged,  our revenue levels could be materially
         adversely   affected.   If  the  current  worldwide  economic  downturn
         continues,  many of our  current  or  potential  future  customers  may
         experience  serious  cash flow  problems  and as a result may,  modify,
         delay or cancel purchases of our products. Additionally,  customers may
         not be able to pay, or may delay payment of,  accounts  receivable that
         are  owed  to  us.   Furthermore,   the  current  downturn  and  market
         instability makes it difficult for us to forecast our revenues.

         Our Business Could Be Materially  Adversely Affected by the Integration
         -----------------------------------------------------------------------
         of Marks into Our Existing Operations
         -------------------------------------

         Our business is dependent on the orderly,  effective integration of the
         acquired Marks business, technologies, product lines and employees into
         our organization. If this integration is unsuccessful, our business may
         be materially adversely affected.


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


                                       19


                                   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.


November 17, 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)


                                       20