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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 December 31, 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 January 23, 2023, there were 9,189,795 shares outstanding of the registrant’s common stock. 

  


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

 

2


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. 

3


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. 

4


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. 

5


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.

 

 

6


KOSS CORPORATION