SEC Filing | Koss Corporation

View:

Download DOC

Download PDF

Download XLS

Download XBRL

koss-20221231x10q

Table of Contents

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 December 31, 2022

☐ 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 January 23, 2023, there were 9,189,795 shares outstanding of the registrant’s common stock.

Table of Contents

KOSS CORPORATION

FORM 10-Q

December 31, 2022

INDEX


			Page

PART I	FINANCIAL INFORMATION		3
	Item 1.	Financial Statements (Unaudited)	3
		Condensed Consolidated Balance Sheets as of December 31, 2022 and June 30, 2022	3
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2022 and 2021	4
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2022 and 2021	5
		Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended December 31, 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	14
	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

‎

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

KOSS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)



	December 31, 2022		June 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	4,812,277	$	9,208,170
Short term investments, net of unamortized discounts		5,010,628		—
Accounts receivable, less allowance for doubtful accounts of $10,500 and $2,027, respectively		1,280,089		1,846,620
Inventories, net		7,829,596		8,631,362
Prepaid expenses and other current assets		341,646		188,478
Interest receivable		128,030		—
Total current assets		19,402,266		19,874,630

Equipment and leasehold improvements, net		1,002,594		1,088,017

Other assets:
Long term investments, net of unamortized discounts		9,890,533		—
Operating lease right-of-use asset		3,133,274		3,247,725
Cash surrender value of life insurance		5,976,410		5,744,724
Total other assets		19,000,217		8,992,449

Total assets	$	39,405,077	$	29,955,096

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	285,482	$	796,163
Accrued liabilities		1,287,181		560,356
Deferred revenue		419,043		543,891
Operating lease liability		230,121		223,530
Income taxes payable		497,872		3,033
Total current liabilities		2,719,699		2,126,973

Long-term liabilities:
Deferred compensation		1,891,154		1,937,229
Deferred revenue		135,594		169,210
Operating lease liability		2,907,629		3,024,195
Total long-term liabilities		4,934,377		5,130,634

Total liabilities		7,654,076		7,257,607

Stockholders' equity:
Common stock, $0.005 par value, authorized 20,000,000 shares; issued and outstanding 9,189,795 and 9,147,795, respectively		45,949		45,739
Paid in capital		12,908,840		12,653,402
Retained earnings		18,796,212		9,998,348
Total stockholders' equity		31,751,001		22,697,489

Total liabilities and stockholders' equity	$	39,405,077	$	29,955,096

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

Table of Contents

KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



	Three Months Ended				Six Months Ended
	December 31				December 31
	2022		2021		2022		2021
Net sales	$	3,271,931	$	4,415,886	$	6,626,460	$	8,780,953
Cost of goods sold		2,145,769		2,866,193		4,314,074		5,649,423
Gross profit		1,126,162		1,549,693		2,312,386		3,131,530

Selling, general and administrative expenses		2,473,975		1,229,294		26,144,571		3,010,091

(Loss) income from operations		(1,347,813)		320,399		(23,832,185)		121,439

Other income		—		255,975		33,000,000		355,975
Interest income		97,832		3,626		124,888		4,258

(Loss) income before income tax provision		(1,249,981)		580,000		9,292,703		481,672

Income tax (benefit) provision		(103,102)		1,031		494,839		2,062

Net (loss) income	$	(1,146,879)	$	578,969	$	8,797,864	$	479,610

(Loss) income per common share:
Basic	$	(0.12)	$	0.06	$	0.96	$	0.05
Diluted	$	(0.12)	$	0.06	$	0.90	$	0.05

Weighted-average number of shares:
Basic		9,186,208		9,144,099		9,171,746		8,994,023
Diluted		9,186,208		10,064,713		9,817,398		10,062,915

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

Table of Contents

KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



	Six Months Ended
	December 31
	2022		2021
Operating activities:
Net income	$	8,797,864	$	479,610
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for (recovery of) doubtful accounts of accounts receivable		8,473		(35,764)
Depreciation of equipment and leasehold improvements		135,915		161,095
Amortization of discount on treasury securities		(16,232)		—
Noncash operating lease expense		4,476		—
Stock-based compensation expense		166,708		262,785
Change in cash surrender value of life insurance		(143,691)		(168,756)
(Benefit) provision for deferred compensation		(46,075)		167,560
Deferred compensation paid		—		(71,250)
Deferred compensation relieved		—		(472,883)
Other income - Net gain from life insurance benefits		—		(255,975)
Net changes in operating assets and liabilities:
Accounts receivable		558,058		818,483
Inventories		801,766		(1,844,937)
Prepaid expenses and other current assets		(153,168)		(14,557)
Interest receivable		(128,030)		—
Income taxes payable		494,839		2,062
Accounts payable		(510,681)		467,762
Accrued liabilities		726,825		236,076
Deferred revenue		(158,464)		(112,025)
Net cash provided by (used in) operating activities		10,538,583		(380,714)

Investing activities:
Purchase of equipment and leasehold improvements		(50,492)		(75,155)
Life insurance premiums paid		(87,995)		(95,888)
Purchases of investments		(14,884,929)		—
Net cash (used in) investing activities		(15,023,416)		(171,043)

Financing activities:
Proceeds from exercise of stock options		88,940		1,390,346
Net cash provided by financing activities		88,940		1,390,346

Net (decrease) increase in cash and cash equivalents		(4,395,893)		838,589
Cash and cash equivalents at beginning of period		9,208,170		6,950,215
Cash and cash equivalents at end of period	$	4,812,277	$	7,788,804

Non-cash financing and investing activity:
Reclassification of cash surrender value of life insurance to life insurance receivable	$	—	$	1,751,794

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

Table of Contents

KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)



	Six Months Ended December 31, 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	—		—		—		8,797,864		8,797,864
Stock-based compensation expense	—		—		166,708		—		166,708
Stock option exercises	42,000		210		88,730		—		88,940
Balance, December 31, 2022	9,189,795	$	45,949	$	12,908,840	$	18,796,212	$	31,751,001


	Six Months Ended December 31, 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 income	—		—		—		479,610		479,610
Stock-based compensation expense	—		—		262,785		—		262,785
Stock option exercises	539,089		2,695		1,387,651		—		1,390,346
Balance, December 31, 2021	9,147,795	$	45,739	$	12,452,554	$	9,209,549	$	21,707,842


	Three Months Ended December 31, 2022
	Common Stock			Paid in		Retained
	Shares	Amount		Capital		Earnings		Total
Balance, September 30, 2022	9,179,795	$	45,899	$	12,811,717	$	19,943,091	$	32,800,707
Net (loss)	—		—		—		(1,146,879)		(1,146,879)
Stock-based compensation expense	—		—		78,673		—		78,673
Stock option exercises	10,000		50		18,450		—		18,500
Balance, December 31, 2022	9,189,795	$	45,949	$	12,908,840	$	18,796,212	$	31,751,001


	Three Months Ended December 31, 2021
	Common Stock			Paid in		Retained
	Shares	Amount		Capital		Earnings		Total
Balance, September 30, 2021	9,137,795	$	45,689	$	12,302,395	$	8,630,580	$	20,978,664
Net income	—		—		—		578,969		578,969
Stock-based compensation expense	—		—		123,909		—		123,909
Stock option exercises	10,000		50		26,250		—		26,300
Balance, December 31, 2021	9,147,795	$	45,739	$	12,452,554	$	9,209,549	$	21,707,842

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

‎

Table of Contents

KOSS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) BASIS OF PRESENTATION

The condensed consolidated balance sheets as of December 31, 2022 and June 30, 2022, the condensed consolidated statements of operations for the three and six months ended December 31, 2022 and 2021, the condensed consolidated statements of cash flows for the six months ended December 31, 2022 and 2021, and the condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 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.