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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 for the quarterly period ended September 30, 2022

 

OR

 

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 Commission File Number 0-3295

 

KOSS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

DELAWARE

 

39-1168275

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

4129 North Port Washington Avenue, Milwaukee, Wisconsin

 

53212

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (414) 964-5000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.005 per share

KOSS

Nasdaq Capital Market

 

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 Exchange Act of 1934 during the preceding 12 months (or for such 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   No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

 

Large accelerated filer 

 

Accelerated filer 

 

 

 

Non-accelerated filer 

 

Smaller reporting company 

 

 

 

 

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.).  Yes No

 

At October 24, 2022, there were 9,179,795 shares outstanding of the registrant’s common stock. 

  


KOSS CORPORATION

FORM 10-Q

September 30, 2022

 

INDEX

 

 

 

 

Page

 

 

 

PART I

FINANCIAL INFORMATION

3

 

Item 1.

Financial Statements (Unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of September 30, 2022 and June 30, 2022

3

 

 

Condensed Consolidated Statements of Operations for the Three months Ended September 30, 2022 and 2021

4

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2022 and 2021

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three months Ended September 30, 2022 and 2021

6

 

 

Notes to Condensed Consolidated Financial Statements

7

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

13

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

 

Item 4.

Controls and Procedures

19

PART II

OTHER INFORMATION

19

 

Item 1.

Legal Proceedings

19

Item 1A.

Risk Factors

19

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

19

 

Item 6.

Exhibits

21

 

2


PART I

FINANCIAL INFORMATION

Item 1.    Financial Statements

 

KOSS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

 

September 30, 2022

June 30, 2022

ASSETS

Current assets:

Cash and cash equivalents

$

20,870,957

$

9,208,170

Accounts receivable, less allowance for doubtful accounts of $9,496 and $2,027, respectively

1,773,132

1,846,620

Inventories, net

7,898,496

8,631,362

Prepaid expenses and other current assets

398,467

188,478

Total current assets

30,941,052

19,874,630

Equipment and leasehold improvements, net

1,032,180

1,088,017

Other assets:

Operating lease right-of-use asset

3,190,862

3,247,725

Cash surrender value of life insurance

5,973,016

5,744,724

Total other assets

9,163,878

8,992,449

Total assets

$

41,137,110

$

29,955,096

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

521,417

$

796,163

Accrued liabilities

1,514,699

560,356

Deferred revenue

393,252

543,891

Operating lease liability

227,124

223,530

Income taxes payable

600,974

3,033

Total current liabilities

3,257,466

2,126,973

Long-term liabilities:

Deferred compensation

1,979,530

1,937,229

Deferred revenue

133,113

169,210

Operating lease liability

2,966,294

3,024,195

Total long-term liabilities

5,078,937

5,130,634

Total liabilities

8,336,403

7,257,607

Stockholders' equity:

Common stock, $0.005 par value, authorized 20,000,000 shares; issued and outstanding 9,179,795 and 9,147,795, respectively

45,899

45,739

Paid in capital

12,811,717

12,653,402

Retained earnings

19,943,091

9,998,348

Total stockholders' equity

32,800,707

22,697,489

Total liabilities and stockholders' equity

$

41,137,110

$

29,955,096

 

 The accompanying notes are an integral part of these condensed consolidated financial statements. 

3


KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

Three Months Ended

September 30

2022

2021

Net sales

$

3,354,529

$

4,365,067

Cost of goods sold

2,168,305

2,783,230

Gross profit

1,186,224

1,581,837

Selling, general and administrative expenses

23,670,596

1,780,798

(Loss) from operations

(22,484,372)

(198,961)

Other income

33,000,000

100,000

Interest income

27,056

633

Income (loss) before income tax provision

10,542,684

(98,328)

Income tax provision

597,941

1,031

Net income (loss)

$

9,944,743

$

(99,359)

Income (loss) per common share:

Basic

$

1.09

$

(0.01)

Diluted

$

1.01

$

(0.01)

Weighted-average number of shares:

Basic

9,157,284

8,843,946

Diluted

9,849,043

8,843,946

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements. 

4


KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

Three Months Ended

September 30

2022

2021

Operating activities:

Net income (loss)

$

9,944,743

$

(99,359)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Provision for doubtful accounts of accounts receivable

7,469

480

Depreciation of equipment and leasehold improvements

67,610

80,438

Noncash operating lease expense

2,556

Stock-based compensation expense

88,035

138,876

Change in cash surrender value of life insurance

(140,298)

(167,084)

Provision for deferred compensation

42,301

88,810

Deferred compensation paid

(37,500)

Net changes in operating assets and liabilities:

Accounts receivable

66,019

120,587

Inventories

732,866

(1,390,691)

Prepaid expenses and other current assets

(209,989)

(194,087)

Income taxes payable

597,941

1,031

Accounts payable

(274,746)

624,512

Accrued liabilities

954,343

(11,661)

Deferred revenue

(186,736)

(82,445)

Net cash provided by (used in) operating activities

11,692,114

(928,093)

Investing activities:

Purchase of equipment and leasehold improvements

(11,773)

(57,194)

Life insurance premiums paid

(87,994)

(95,726)

Net cash (used in) investing activities

(99,767)

(152,920)

Financing activities:

Proceeds from exercise of stock options

70,440

1,364,046

Net cash provided by financing activities

70,440

1,364,046

Net increase in cash and cash equivalents

11,662,787

283,033

Cash and cash equivalents at beginning of period

9,208,170

6,950,215

Cash and cash equivalents at end of period

$

20,870,957

$

7,233,248

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements. 

5


KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

 

Three Months Ended September 30, 2022

Common Stock

Paid in

Retained

Shares

Amount

Capital

Earnings

Total

Balance, June 30, 2022

9,147,795

$

45,739

$

12,653,402

$

9,998,348

$

22,697,489

Net income

9,944,743

9,944,743

Stock-based compensation expense

88,035

88,035

Stock option exercises

32,000

160

70,280

70,440

Balance, September 30, 2022

9,179,795

$

45,899

$

12,811,717

$

19,943,091

$

32,800,707

Three Months Ended September 30, 2021

Common Stock

Paid in

Retained

Shares

Amount

Capital

Earnings

Total

Balance, June 30, 2021

8,608,706

$

43,044

$

10,802,118

$

8,729,939

$

19,575,101

Net (loss)

(99,359)

(99,359)

Stock-based compensation expense

138,876

138,876

Stock option exercises

529,089

2,645

1,361,401

1,364,046

Balance, September 30, 2021

9,137,795

$

45,689

$

12,302,395

$

8,630,580

$

20,978,664

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

6


KOSS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

(Unaudited)

 

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A)    BASIS OF PRESENTATION

 

The condensed consolidated balance sheets as of September 30, 2022 and June 30, 2022, the condensed consolidated statements of operations for the three months ended September 30, 2022 and 2021, the condensed consolidated statements of cash flows for the three months ended September 30, 2022 and 2021, and the condensed consolidated statements of stockholders' equity for the three months ended September 30, 2022 and 2021, have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and have not been audited.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made.  The operating results for any interim period are not necessarily indicative of the operating results that may be experienced for the full fiscal year.

 

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

 

The preparation of financial statements in conformity with U.S. GAAP requires the company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses. Significant estimates and assumptions are used for, but are not limited to, allowances for doubtful accounts, reserves for excess and obsolete inventories, long-lived and intangible assets, income tax valuation allowance, stock-based compensation and deferred compensation. Actual results could differ from the Company's estimates.

  

B)    INCOME TAXES

 

We estimate a provision for income taxes based on the effective tax rate expected to be applicable for the fiscal year. If the actual results are different from these estimates, adjustments to the effective tax rate may be required in the period such determination is made. Additionally, discrete items are treated separately from the effective rate analysis and are recorded separately as an income tax provision or benefit at the time they are recognized.

During the quarter ended September 30, 2022, additional income generated by licensing fees that were offset by related legal fees and expenses, resulted in taxable income for the period. The utilization of net operating loss carryforwards significantly reduced the taxable income, resulting in a state tax provision of $148,838 and federal income tax provision of $449,103. During the three months ended September 30, 2021, a state tax provision of $1,031 was recorded. There was no federal tax provision recorded for the three months ended September 30, 2021.

The Company expects to utilize a portion of its tax loss carryforwards for the year ended June 30, 2023 and the Company's remaining tax loss carryforward will be approximately $30,500,000. The expected utilization of the estimated tax loss carryforward decreased the deferred tax asset to approximately $9,300,000 as of September 30, 2022, and the future realization of this continues to be uncertain. The valuation allowance also decreased to fully offset the deferred tax asset as there is sufficient negative evidence to support a full valuation allowance.


7


Temporary differences which give rise to deferred income tax assets and liabilities at September 30, 2022 and June 30, 2022 include:

September 30, 2022

June 30, 2022

Deferred income tax assets:

Deferred compensation

$

489,409

$

479,340

Stock-based compensation

110,179

107,499

Accrued expenses and reserves

575,687

551,562

Deferred revenue

166,358

176,447

Federal and state net operating loss carryforwards

7,498,610

9,942,511

Credit carryforwards

300,889

292,155

Equipment and leasehold improvements

110,659

122,764

Lease liability

789,533

803,603

Valuation allowance

(9,251,287)

(11,671,606)

Total deferred income tax assets

790,037

804,275

Deferred income tax liabilities:

ROU asset

(789,533)

(803,603)

Other

(504)

(672)

Net deferred income tax assets

$

-

$

-

C) LEGAL COSTS

All legal costs related to litigation, for which the Company is liable, are charged to operations as incurred, except settlements, which are expensed when a claim is probable and can be reasonably estimated. Recoveries of legal costs are recorded when the amount and items to be paid are confirmed by the third party. Proceeds from the settlement of legal disputes are recorded in income when the amounts are determinable, and the collection is certain. Related legal fees and expenses are recorded in selling, general and administrative expense at that time.

D) OTHER INCOME

In the period ending September 30, 2022, the Company received licensing proceeds of $33,000,000, which were recorded as other income. Other income is shown as a separate line on the condensed consolidated statements of operations.

In the period ending September 30 2021, the Company received licensing proceeds of $100,000, which were also recorded as other income. Other income is shown as a separate line on the condensed consolidated statements of operations.

E) DEFERRED COMPENSATION

The Company’s deferred compensation liability is for a current officer and is calculated based on various assumptions which include compensation, years of service, expected retirement date, discount rates, and mortality tables. The related expense is calculated using the net present value of the expected payments and is included in selling, general and administrative expenses in the condensed consolidated statements of operations. The deferred compensation liability recorded at September 30, 2022 and June 30, 2022, is $1,979,530 and $1,937,229, respectively. Deferred compensation expense of $42,301 and $88,810 was recognized under this arrangement in the three months ended September 30, 2022 and September 30, 2021, respectively.


8


F) RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets, including accounts and notes receivables. The new guidance represents significant changes to accounting for credit losses. The current incurred loss impairment model that recognizes losses when a probable threshold is met will be replaced with the expected credit loss impairment method without recognition threshold. The expected credit losses estimate will be based upon historical information, current conditions, and reasonable and supportable forecasts. On November 15, 2019, the FASB delayed the effective date of FASB ASC Topic 326 for certain smaller public companies and other private companies. As amended, the effective date of ASC Topic 326 was delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition. As such, ASC Topic 326 will be effective for the Company for the fiscal year ending June 30, 2024. Management is currently assessing the impact of the adoption of this standard on the Company’s financial statements.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not are or not believed by management to have a

 

2.    INVENTORIES

 

The components of inventories were as follows:

 

September 30, 2022

June 30, 2022

Raw materials

$

2,228,870

$

2,217,621

Finished goods

7,523,432

8,302,546

Inventories, gross

9,752,302

10,520,167

Reserve for obsolete inventory

(1,853,806)

(1,888,805)

Inventories, net

$

7,898,496

$

8,631,362

3.    CREDIT FACILITY

 

On May 14, 2019, the Company entered into a secured credit facility “Credit Agreement”) with Town Bank (“Lender”). The Credit Agreement provides for a $5,000,000 revolving secured credit facility for letters of credit for the benefit of the Company of up to a sublimit of $1,000,000. There are no unused line fees in the credit facility. On January 28, 2021, the Credit Agreement was amended to extend the expiration to October 31, 2022, and to change the interest rate to Wall Street Journal Prime less 1.50%. A Third Amendment to the Credit Agreement effective October 30, 2022 extends the maturity date to October 31, 2024. The Company and the Lender also entered into a General Business Security Agreement dated May 14, 2019 under which the Company granted the Lender a security interest in substantially all of the Company’s assets in connection with the Company’s obligations under the Credit Agreement. The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type. The negative covenants include restrictions on other indebtedness, liens, fundamental changes, certain investments, disposition of assets, mergers and liquidations, among other restrictions. As of September 30, 2022, the Company was in compliance with all covenants related to the Credit Agreement. As of September 30, 2022, and June 30, 2022, there were no outstanding borrowings on the facility. 


9


4.    REVENUE RECOGNITION

 

The Company disaggregates its net sales by geographical location as it believes it best depicts how the nature, timing and uncertainty of net sales and cash flows are affected by economic factors. The following table summarizes net sales by geographical location:

 

Three Months Ended

September 30,

2022

2021

United States

$

2,712,751

$

2,787,519

Export

641,778

1,577,548

Net Sales

$

3,354,529

$

4,365,067

Deferred revenue relates primarily to consumer and customer warranties. These constitute future performance obligations, and the Company defers revenue related to these future performance obligations. Effective July 1, 2022, the Company decreased its deferral rates from 3% to 2.4% for domestic sales and from 14% to 10% for export sales to reflect recent warranty experience. In the three months ended September 30, 2022 and 2021, the Company recognized revenue, which was included in the deferred revenue liability at the beginning of the periods, of $167,939 and $153,221 respectively, for performance obligations related to consumer and customer warranties.  The deferred revenue liability was $883,564 as of June 30, 2021. The Company estimates that the deferred revenue performance obligations are satisfied within one year to three years and therefore uses that same time frame for recognition of the deferred revenue.

  

5.    INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE

 

Basic income (loss) per share is computed based on the weighted-average number of common shares outstanding.  Diluted income (loss) per common share is calculated assuming the exercise of stock options except where the result would be anti-dilutive.  The following table reconciles the numerator and denominator used to calculate basic and diluted income (loss) per share:

Three Months Ended September 30,

2022

2021

Numerator

Net income (loss)

$

9,944,743

$

(99,359)

Denominator

Weighted average shares, basic

9,157,284

8,843,946

Dilutive effect of stock compensation awards (1)

691,759

Diluted shares

9,849,043

8,843,946

Net income (loss) attributable to common shareholders per share:

Basic

$

1.09

$

(0.01)

Diluted

$

1.01

$

(0.01)

 

(1) Excludes approximately 1,500,528 weighted average stock options during the three months ended September 30, 2021, as the impact of such awards was anti-dilutive. For the three months ended September 30, 2022, no stock options were anti-dilutive.

  

6.    RELATED PARTY TRANSACTIONS

The Company leases its facility in Milwaukee, Wisconsin from Koss Holdings, LLC, which is controlled by five equal ownership interests in trusts held by the 5 beneficiaries of a former Chairman’s revocable trust. On May 24, 2022, the lease was renewed for a period of five years, ending June 30, 2028, and is being accounted for as an operating lease. The lease extension maintained the rent at a fixed rate of $380,000 per year and included an option to renew at an increased rate of $397,000 for an additional five years ending June 30, 2033. The negotiated increase in rent slated for 2028 will be the first increase in rent since 1996. The Company is responsible for all property maintenance, insurance, taxes and other normal expenses related to ownership.

During the three months ended September 30, 2022, the Company made a charitable contribution of $79,000 to the Koss Foundation (the “Foundation”), a 501(c)(3) charitable organization for which Michael J. Koss and John C. Koss Jr., executive officers of the Company, serve as officers.  Neither officer receives fees or compensation from the Foundation for holding these positions.  There were no charitable contributions made to the Foundation during the three months ended September 30, 2021.

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7.    ACCOUNTS RECEIVABLE CONCENTRATIONS

 

As of September 30, 2022, the Company’s top four accounts receivable customers represented approximately 19%, 15%, 13%, and 10% of trade accounts receivables. These same customers represented approximately 19%, 18%, 3%, and 0% of trade accounts receivable at June 30, 2022.

8.    LEGAL MATTERS

 

As of September 30, 2022, the Company is involved in the matters described below:

• The Company maintains a program focused on enforcing its intellectual property and, in particular, certain patents in its patent portfolio. As part of this program, the Company filed complaints in United States District Court against certain parties alleging infringement on the Company’s patents relating to its wireless audio technology. In the event that a monetary award or judgment is received by the Company in connection with these complaints, all or portions of such amounts will be due to third parties. The Company may incur additional fees and costs related to these lawsuits, however, timing and impact on its financial statements is uncertain. Depending on the response to and the underlying results of the enforcement program, the Company may continue to litigate its claims, enter into licensing arrangements or reach some other outcome potentially advantageous to its competitive position. During the period ended September 30, 2022 in connection with its program focused on enforcing its intellectual property, legal fees and related expenses of $21,016,408 were recorded as selling, general, and administrative expense.

The Company was notified by One-E-Way, Inc. that some of the Company's wireless products may infringe on certain One-E-Way patents. No lawsuits involving these allegations have yet been filed and served on the Company. The Company is currently investigating whether these allegations have any merit. Depending on the results of the investigation and the defense of these allegations, the ultimate resolution of this matter may have a material effect on the Company's financial statements. The Company estimates that this matter will ultimately be resolved at a cost of approximately $41,000 and has been accrued as of September 30, 2022 and June 30, 2022.

The ultimate resolution of these matters is not determinable unless otherwise noted.

We are also subject to a variety of other claims and suits that arise from time to time in the ordinary course of our business. Although management currently believes that resolving these claims against us, individually or in the aggregate, will not have a material adverse impact on our condensed consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.


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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995 (the “Act”) (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the Securities Exchange Commission, press releases, or otherwise.  Statements contained in this Form 10-Q that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Act.  Forward-looking statements may include, but are not limited to, projections of revenue, income or loss and capital expenditures, statements regarding future operations, anticipated financing needs, compliance with financial covenants in loan agreements, plans for acquisitions or sales of assets or businesses, plans relating to products or services of the Company, assessments of materiality, predictions of future events, the effects of pending and possible litigation and assumptions relating to the foregoing.  In addition, when used in this Form 10-Q, the words “aims,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “thinks,” “may,” “will,” “shall,” “should,” “could,” “would,” “forecasts,” “predicts,” “potential,” “continue” and variations thereof and similar expressions are intended to identify forward-looking statements.

 

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified based on current expectations.  Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements contained in this Form 10-Q, or in other Company filings, press releases, or otherwise.  In addition to the factors discussed in this Form 10-Q, other factors that could contribute to or cause such differences include, but are not limited to, developments in any one or more of the following areas: future fluctuations in economic conditions, the receptivity of consumers to new consumer electronics technologies, the rate and consumer acceptance of new product introductions, competition, pricing, the number and nature of customers and their product orders, production by third party vendors, foreign manufacturing, sourcing, and sales (including foreign government regulation, trade and importation concerns),  the effects of the COVID-19 pandemic on the economy, the impact of the Russian-Ukrainian conflict and the Company’s operations, borrowing costs, changes in tax rates, pending or threatened litigation and investigations, and other risk factors described in the Risk Factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022 and subsequently filed Quarterly Reports on Form 10-Q 

Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which speak only as of the date hereof.  The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect new information.

 

 

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

 

Overview

 

The Company initially developed stereo headphones in 1958 and has been recognized as a leader in the industry ever since. Koss markets a complete line of high-fidelity headphones, wireless Bluetooth® headphones, wireless Bluetooth® speakers, computer headsets, telecommunications headsets, and active noise canceling headphones. The Company operates as one business segment, as its principal business line is the design, manufacture and sale of stereo headphones and related accessories.

Financial Results

 

The following table presents selected financial data for the three months ended September 30, 2022, and 2021:

Three Months Ended