0000056701-23-000007 | 10-Q | XBRL Viewer

Document Information Statement - shares	6 Months Ended
Document Information Statement - shares	Dec. 31, 2022	Jan. 23, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 31, 2022
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--06-30
Document Transition Report	false
Entity File Number	0-3295
Entity Registrant Name	KOSS CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	4129 North Port Washington Avenue
Entity Address, City or Town	Milwaukee
Entity Address, State or Province	WI
Entity Tax Identification Number	39-1168275
Entity Address, Postal Zip Code	53212
City Area Code	414
Local Phone Number	964-5000
Title of 12(b) Security	Common Stock, par value $0.005 per share
Trading Symbol	KOSS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		9,189,795
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000056701
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($)	Dec. 31, 2022	Jun. 30, 2022
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 assets	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
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

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($)	Dec. 31, 2022	Jun. 30, 2022
Condensed Consolidated Balance Sheets [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 10,500	$ 2,027
Common stock, par value (in dollars per share)	$ 0.005	$ 0.005
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	9,189,795	9,147,795
Common stock, shares outstanding (in shares)	9,189,795	9,147,795

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Condensed Consolidated Statements of Operations [Abstract]
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 (in dollars per share)	$ (0.12)	$ 0.06	$ 0.96	$ 0.05
Diluted (in dollars per share)	$ (0.12)	$ 0.06	$ 0.90	$ 0.05
Weighted-average number of shares:
Basic (in shares)	9,186,208	9,144,099	9,171,746	8,994,023
Diluted (in shares)	9,186,208	10,064,713	9,817,398	10,062,915

Condensed Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Dec. 31, 2022	Dec. 31, 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

Condensed Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock [Member]	Paid in Capital [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Jun. 30, 2021	8,608,706
Balance at Jun. 30, 2021	$ 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 (in shares)	539,089
Stock option exercises	$ 2,695	1,387,651		1,390,346
Balance at Dec. 31, 2021	$ 45,739	12,452,554	9,209,549	21,707,842
Balance (in shares) at Dec. 31, 2021	9,147,795
Balance (in shares) at Sep. 30, 2021	9,137,795
Balance at Sep. 30, 2021	$ 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 (in shares)	10,000
Stock option exercises	$ 50	26,250		26,300
Balance at Dec. 31, 2021	$ 45,739	12,452,554	9,209,549	$ 21,707,842
Balance (in shares) at Dec. 31, 2021	9,147,795
Balance (in shares) at Jun. 30, 2022	9,147,795			9,147,795
Balance at Jun. 30, 2022	$ 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 (in shares)	42,000
Stock option exercises	$ 210	88,730		88,940
Balance at Dec. 31, 2022	$ 45,949	12,908,840	18,796,212	$ 31,751,001
Balance (in shares) at Dec. 31, 2022	9,189,795			9,189,795
Balance (in shares) at Sep. 30, 2022	9,179,795
Balance at Sep. 30, 2022	$ 45,899	12,811,717	19,943,091	$ 32,800,707
Net income			(1,146,879)	(1,146,879)
Stock-based compensation expense		78,673		78,673
Stock option exercises (in shares)	10,000
Stock option exercises	$ 50	18,450		18,500
Balance at Dec. 31, 2022	$ 45,949	$ 12,908,840	$ 18,796,212	$ 31,751,001
Balance (in shares) at Dec. 31, 2022	9,189,795			9,189,795

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

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Summary Of Significant Accounting Policies

6 Months Ended

Dec. 31, 2022

Significant Accounting Policies [Abstract]

Significant Accounting Policies

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.

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) INVESTMENTS

Debt securities are classified as held-to-maturity as the Company has the positive intent and ability to hold them to maturity. The securities are carried at amortized cost as current or noncurrent based upon maturity date and unrealized gains and losses are recognized when realized. The amortized cost of debt securities is adjusted for amortization of discounts to maturity. Such amortization is included in interest income, along with other interest on cash and cash equivalents.

C) 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 December 31, 2022, a federal tax benefit of $74,389 and a state tax benefit of $28,713 were recorded based on a taxable loss. While declining sales contributed to the taxable loss, the main drivers were a payment made to the Company’s external patent litigation counsel and legal expenses paid related to the Company’s program focused on the enforcement of its intellectual property. For the six months ended December 31, 2022, as a result of additional income generated by licensing fees, offset by related legal fees and expenses, taxable income for the period was generated. On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted which changed the rules for deducting net operating losses (NOLs). Before 2017, NOLs were fully deductible and could be carried back two years and carried forward 20 years. For NOLs arising in tax years beginning after December 31, 2017, the TCJA limits the NOL deduction to 80 percent of taxable income. As such, the utilization of the Company’s net operating loss carryforwards from fiscal years after 2018 were limited to 80 percent of the resulting taxable income. The Company’s NOL carryforwards from fiscal 2017 and 2018 could be utilized to offset taxable income at 100 percent. The utilization of net operating loss carryforwards significantly reduced the taxable income, resulting in federal and state tax provisions of $374,714 and $120,125, respectively. For the three and six months ended December 31, 2021, a state tax provision of $1,031 and $2,062, respectively, was recorded. The federal income tax expense was zero for the three and six months ended December 31, 2021.

‎

The effective tax rate was 5.3% in the six months ended December 31, 2022 and less than 1% in the six months ended December 31, 2021. It is anticipated that the effective rate in the current year and future years will be reduced by utilization of a portion or all of the federal net operating loss carryforwards that existed as of June 30, 2022. The Company's remaining tax loss carryforward will be approximately $32,500,000. Given the taxable loss generated during the quarter ended December 31, 2022, the expected utilization of the estimated tax loss carryforward decreased, which increased the deferred tax asset to approximately $9,600,000 as of December 31, 2022, and the future realization of this continues to be uncertain. The valuation allowance also increased to fully offset the deferred tax asset as there is sufficient negative evidence to support a full valuation allowance.

Temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2022 and June 30, 2022 include:


	December 31, 2022		June 30, 2022
Deferred income tax assets:
Deferred compensation	$	474,734	$	479,340
Stock-based compensation		112,858		107,499
Accrued expenses and reserves		612,678		551,562
Deferred revenue		156,269		176,447
Federal and state net operating loss carryforwards		7,861,442		9,942,511
Credit carryforwards		309,623		292,155
Equipment and leasehold improvements		116,184		122,764
Lease liability		775,285		803,603
Valuation allowance		(9,643,452)		(11,671,606)
Total deferred income tax assets		775,621		804,275

Deferred income tax liabilities:
ROU asset		(775,285)		(803,603)
Other		(336)		(672)
Net deferred income tax assets	$	-	$	-

D) 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 other income when the amounts are determinable, and the collection is certain. Related contingent legal fees and expenses are recorded in selling, general and administrative expense at that time.

E) OTHER INCOME

In the six months ending December 31, 2022 and 2021, the Company received licensing proceeds of $33,000,000 and $100,000, respectively, which were recorded as other income. In December 2021, the Company also recognized approximately $256,000 of other income related to the proceeds from company-owned life insurance policies on its founder, who passed away on December 21, 2021.

Other income is shown as a separate line on the condensed consolidated statements of operations.

F) 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 December 31, 2022 and June 30, 2022 is $1,891,154 and $1,937,229, respectively. The decrease in the deferred compensation liability for the current officer during the six months ended December 31, 2022 resulted in a reduction of compensation expense under this arrangement of $46,075. In December 2021, the Company’s founder and former officer passed away. The Company had a total deferred compensation liability of $472,883 recorded at June 30, 2021 related to the former officer, which at his death was relieved. Deferred compensation income of $472,883 was recognized in selling, general and administrative expenses as a result. Payments of $71,250 made under this arrangement during the six months ended December 31, 2021 were expensed as paid.

‎

G) 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, or are not expected by management to have a material impact on the Company’s present or future consolidated financial statements.

Investment

6 Months Ended

Dec. 31, 2022

Investment

Investment

2. INVESTMENTS

The following table summarizes the unrealized positions for the held-to-maturity debt securities as of December 31, 2022:


	Amortized cost basis		Gross unrealized gains		Gross unrealized losses		Fair Value
US treasury securities	$	14,901,161	$	—	$	38,950	$	14,862,211
Total	$	14,901,161	$	—	$	38,950	$	14,862,211

The following table summarizes the fair value and amortized cost basis of the held-to-maturity debt securities by contractual maturity as of December 31, 2022:


	Amortized Cost Basis		Fair value
Due within one year	$	5,010,628	$	5,003,216
Due after one year through five years		9,890,533		9,858,995
Total	$	14,901,161	$	14,862,211

Inventories

6 Months Ended

Dec. 31, 2022

Inventories [Abstract]

Inventories

3. INVENTORIES

The components of inventories were as follows:



	December 31, 2022		June 30, 2022
Raw materials	$	2,171,305	$	2,217,621
Finished goods		7,566,200		8,302,546
Inventories, gross		9,737,505		10,520,167
Reserve for obsolete inventory		(1,907,909)		(1,888,805)
Inventories, net	$	7,829,596	$	8,631,362

Credit Facility

6 Months Ended

Dec. 31, 2022

Credit Facility and SBA Loan [Abstract]

Credit Facility and SBA Loan

4. 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 December 31, 2022, the Company was in compliance with all covenants related to the Credit Agreement. As of December 31, 2022, and June 30, 2022, there were no outstanding borrowings on the facility.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
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-Name Accounting Standards Codification
-Topic 470
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+ Details

Revenue Recognition

6 Months Ended

Dec. 31, 2022

Revenue Recognition [Abstract]

Revenue Recognition

5. 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				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
United States	$	2,146,474	$	3,191,867	$	4,873,307	$	6,003,559
Export		1,125,457		1,224,019		1,753,153		2,777,394
Net Sales	$	3,271,931	$	4,415,886	$	6,626,460	$	8,780,953

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 six months ended December 31, 2022 and 2021, the Company recognized revenue which was included in the deferred revenue liability at the beginning of the periods of $210,236 and $335,578 respectively, for performance obligations related to consumer and customer warranties. The deferred revenue liability was $713,101 and $883,564, respectively, as of June 30, 2022 and 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.

‎

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

(Loss) Income Per Common and Common Stock Equivalent Share

6 Months Ended

Dec. 31, 2022

(Loss) Income Per Common and Common Stock Equivalent Share [Abstract]

(Loss) Income Per Common and Common Stock Equivalent Share

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

Basic (loss) income per share is computed based on the weighted-average number of common shares outstanding. Diluted (loss) income 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 (loss) income per share:



	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Numerator
Net (loss) income	$	(1,146,879)	$	578,969	$	8,797,864	$	479,610

Denominator
Weighted average shares, basic		9,186,208		9,144,099		9,171,746		8,994,023
Dilutive effect of stock compensation awards (1)		—		920,614		645,652		1,068,892
Diluted shares		9,186,208		10,064,713		9,817,398		10,062,915

Net (loss) income attributable to common shareholders per share:
Basic	$	(0.12)	$	0.06	$	0.96	$	0.05
Diluted	$	(0.12)	$	0.06	$	0.90	$	0.05

(1) Excludes approximately 590,046 weighted average stock options during the three months ended December 31, 2022, as the impact of such awards was anti-dilutive. For the three months ended December 31, 2021, as well as the six months ended December 31, 2022 and 2021, no stock options were anti-dilutive.

Related Party Transactions

6 Months Ended

Dec. 31, 2022

Related Party Transactions

7. 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 five 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 six months ended December 31, 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 December 31, 2022 nor the three and six months ended December 31, 2021.

Accounts Receivable Concentrations

6 Months Ended

Dec. 31, 2022

Concentrations [Abstract]

Concentrations

8. ACCOUNTS RECEIVABLE CONCENTRATIONS

As of December 31, 2022, the Company’s top four accounts receivable customers represented approximately 20%, 14%, 13%, and 12% of trade accounts receivables. These same customers represented approximately 0%, 19%, 18%, and 3% of trade accounts receivable at June 30, 2022.

‎

Legal Matters

6 Months Ended

Dec. 31, 2022

Legal Matters [Abstract]

Legal Matters

9. LEGAL MATTERS

As of December 31, 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 or settle its claims, enter into licensing arrangements or reach some other outcome. During the quarter ended December 31, 2022, the Company made a payment of $950,000 to its external patent litigation team and incurred an additional $175,000 of related legal expense. The amounts became estimable during the second quarter, thus the expense was recorded in the second quarter as a change in estimate. Total legal fees and related expenses of $1,139,568 and $22,196,428, respectively, were recorded as selling, general and administrative expense during the three and six months ended December 31, 2022 in connection with its program focused on enforcing its intellectual property. During the three and six-month periods ended December 31, 2021, $30,583 and $56,950, respectively, of legal fees and related expenses were recorded.

• In July 2019, 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, which amount was accrued as of December 31, 2022 and June 30, 2022.

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

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

Summary Of Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 2022

Significant Accounting Policies [Abstract]

Business of Presentation

A) BASIS OF PRESENTATION

Investments

B) INVESTMENTS

Income Taxes

C) INCOME TAXES

‎

Temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2022 and June 30, 2022 include:


	December 31, 2022		June 30, 2022
Deferred income tax assets:
Deferred compensation	$	474,734	$	479,340
Stock-based compensation		112,858		107,499
Accrued expenses and reserves		612,678		551,562
Deferred revenue		156,269		176,447
Federal and state net operating loss carryforwards		7,861,442		9,942,511
Credit carryforwards		309,623		292,155
Equipment and leasehold improvements		116,184		122,764
Lease liability		775,285		803,603
Valuation allowance		(9,643,452)		(11,671,606)
Total deferred income tax assets		775,621		804,275

Deferred income tax liabilities:
ROU asset		(775,285)		(803,603)
Other		(336)		(672)
Net deferred income tax assets	$	-	$	-

Legal Costs

D) LEGAL COSTS

Other Income

E) OTHER INCOME

Other income is shown as a separate line on the condensed consolidated statements of operations.

Deferred Compensation

F) DEFERRED COMPENSATION

Recent Accounting Pronouncements

G) RECENT ACCOUNTING PRONOUNCEMENTS

- Definition

Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.

+ References + Details

Summary Of Significant Accounting Policies (Tables)

6 Months Ended

Dec. 31, 2022

Change in Accounting Policy [Abstract]

Schedule of Deferred Tax Assets and Liabilities


	December 31, 2022		June 30, 2022
Deferred income tax assets:
Deferred compensation	$	474,734	$	479,340
Stock-based compensation		112,858		107,499
Accrued expenses and reserves		612,678		551,562
Deferred revenue		156,269		176,447
Federal and state net operating loss carryforwards		7,861,442		9,942,511
Credit carryforwards		309,623		292,155
Equipment and leasehold improvements		116,184		122,764
Lease liability		775,285		803,603
Valuation allowance		(9,643,452)		(11,671,606)
Total deferred income tax assets		775,621		804,275

Deferred income tax liabilities:
ROU asset		(775,285)		(803,603)
Other		(336)		(672)
Net deferred income tax assets	$	-	$	-

Investment (Tables)

6 Months Ended

Dec. 31, 2022

Investment

Summary of Unrealized Positions for Held-to-Maturity Debt Securities


	Amortized cost basis		Gross unrealized gains		Gross unrealized losses		Fair Value
US treasury securities	$	14,901,161	$	—	$	38,950	$	14,862,211
Total	$	14,901,161	$	—	$	38,950	$	14,862,211

Summary of Held-to-Maturity Debt Securities by Contractual Maturity


	Amortized Cost Basis		Fair value
Due within one year	$	5,010,628	$	5,003,216
Due after one year through five years		9,890,533		9,858,995
Total	$	14,901,161	$	14,862,211

Inventories (Tables)

6 Months Ended

Dec. 31, 2022

Inventories [Abstract]

Components of Inventories



	December 31, 2022		June 30, 2022
Raw materials	$	2,171,305	$	2,217,621
Finished goods		7,566,200		8,302,546
Inventories, gross		9,737,505		10,520,167
Reserve for obsolete inventory		(1,907,909)		(1,888,805)
Inventories, net	$	7,829,596	$	8,631,362

Revenue Recognition (Tables)

6 Months Ended

Dec. 31, 2022

Revenue Recognition [Abstract]

Disaggregation of Revenue


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
United States	$	2,146,474	$	3,191,867	$	4,873,307	$	6,003,559
Export		1,125,457		1,224,019		1,753,153		2,777,394
Net Sales	$	3,271,931	$	4,415,886	$	6,626,460	$	8,780,953

(Loss) Income Per Common and Common Stock Equivalent Share (Tables)

6 Months Ended

Dec. 31, 2022

(Loss) Income Per Common and Common Stock Equivalent Share [Abstract]

(Loss) Income Per Common and Common Stock Equivalent Share



	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Numerator
Net (loss) income	$	(1,146,879)	$	578,969	$	8,797,864	$	479,610

Denominator
Weighted average shares, basic		9,186,208		9,144,099		9,171,746		8,994,023
Dilutive effect of stock compensation awards (1)		—		920,614		645,652		1,068,892
Diluted shares		9,186,208		10,064,713		9,817,398		10,062,915

Net (loss) income attributable to common shareholders per share:
Basic	$	(0.12)	$	0.06	$	0.96	$	0.05
Diluted	$	(0.12)	$	0.06	$	0.90	$	0.05

Summary Of Significant Accounting Policies (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Operating Loss Carryforwards [Line Items]
Other income - Net gain from life insurance benefits	$ 256,000				$ 255,975
Income Tax Expense (Benefit)		$ (103,102)	$ 1,031	$ 494,839	2,062
Tax Credit Carryforward, Amount		32,500,000		32,500,000
Deferred Tax Assets, Gross		9,600,000		9,600,000
Other income			255,975	33,000,000	355,975
Legal fees and related expenses		175,000
(Benefit) provision for deferred compensation				$ (46,075)	167,560
Deferred Compensation Arrangement with Individual, Distribution Paid					$ 71,250
Effective tax rate				5.30%	1.00%
licensing [Member]
Operating Loss Carryforwards [Line Items]
Revenues				$ 33,000,000	$ 100,000
Current Officer's Plan [Member]
Operating Loss Carryforwards [Line Items]
Deferred Compensation Liability, Current and Noncurrent		1,891,154		1,891,154		$ 1,937,229	$ 472,883
Deferred Income							$ 472,883
(Benefit) provision for deferred compensation					71,250
Deferred Compensation Arrangement with Individual, Compensation Expense				46,075
State and Local Jurisdiction [Member]
Operating Loss Carryforwards [Line Items]
Income Tax Expense (Benefit)		28,713	1,031		2,062
Net Operating Loss, Reduction In Taxable Income, Tax Provisions				120,125
Federal [Member]
Operating Loss Carryforwards [Line Items]
Income Tax Expense (Benefit)		$ 74,389	$ 0		$ 0
Net Operating Loss, Reduction In Taxable Income, Tax Provisions				$ 374,714

Summary Of Significant Accounting Policies (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($)	Dec. 31, 2022	Jun. 30, 2022
Income Taxes [Abstract]
Deferred compensation	$ 474,734	$ 479,340
Stock-based compensation	112,858	107,499
Accrued expenses and reserves	612,678	551,562
Deferred revenue	156,269	176,447
Federal and state net operating loss carryforwards	7,861,442	9,942,511
Credit carryforwards	309,623	292,155
Equipment and leasehold improvements	116,184	122,764
Lease liability	775,285	803,603
Valuation allowance	(9,643,452)	(11,671,606)
Total deferred income tax assets	775,621	804,275
ROU asset	(775,285)	(803,603)
Other	(336)	(672)
Net deferred income tax assets

Investment (Summary of Unrealized Positions for Held-to-Maturity Debt Securities) (Details)	Dec. 31, 2022 USD ($)
Schedule of Held-to-Maturity Securities [Line Items]
Amortized cost basis	$ 14,901,161
Gross unrealized losses	38,950
Fair Value	14,862,211
US Treasury Securities [Member]
Schedule of Held-to-Maturity Securities [Line Items]
Amortized cost basis	14,901,161
Gross unrealized losses	38,950
Fair Value	$ 14,862,211

Investment (Summary of Held-to-Maturity Debt Securities by Contractual Maturity) (Details)	Dec. 31, 2022 USD ($)
Amortized cost basis
Due within one year	$ 5,010,628
Due after one year through five years	9,890,533
Amortized cost basis	14,901,161
Fair Value
Due within one year	5,003,216
Due after one year through five years	9,858,995
Fair Value	$ 14,862,211

Inventories (Details) - USD ($)	Dec. 31, 2022	Jun. 30, 2022
Inventories [Abstract]
Raw materials	$ 2,171,305	$ 2,217,621
Finished goods	7,566,200	8,302,546
Inventories, gross	9,737,505	10,520,167
Reserve for obsolete inventory	(1,907,909)	(1,888,805)
Inventories, net	$ 7,829,596	$ 8,631,362

Credit Facility (Details) - Town Bank [Member] - USD ($)	6 Months Ended
	Dec. 31, 2022	Jun. 30, 2022
Credit Agreement [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.00%
Long-term Line of Credit, Total	$ 0	$ 0
Credit Agreement [Member] \| Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	5,000,000
Credit Agreement [Member] \| Letter of Credit [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,000,000
Amended Credit Agreement [Member] \| Revolving Credit Facility [Member] \| Prime Rate [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.50%

Revenue Recognition (Disaggregation of Revenue) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Disaggregation of Revenue [Line Items]
Net Sales	$ 3,271,931	$ 4,415,886	$ 6,626,460	$ 8,780,953
United States [Member]
Disaggregation of Revenue [Line Items]
Net Sales	2,146,474	3,191,867	4,873,307	6,003,559
Export [Member]
Disaggregation of Revenue [Line Items]
Net Sales	$ 1,125,457	$ 1,224,019	$ 1,753,153	$ 2,777,394

- Definition

Amount, including tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value-added and excise.

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+ Details

Revenue Recognition (Narrative) (Details) - USD ($)	6 Months Ended
Revenue Recognition (Narrative) (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenue recognized	$ 210,236	$ 335,578
Deferred revenue liability			$ 713,101	$ 883,564
Domestic sales [Member]
Revenue, Remaining Performance Obligation, Percentage	2.40%		3.00%
Export sales [Member]
Revenue, Remaining Performance Obligation, Percentage	10.00%		14.00%
Minimum [Member]
Contract with Customer, Liability, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year)	1 year
Maximum [Member]
Contract with Customer, Liability, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year)	3 years

(Loss) Income Per Common and Common Stock Equivalent Share (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
(Loss) Income Per Common and Common Stock Equivalent Share [Abstract]
Net income	$ (1,146,879)	$ 578,969	$ 8,797,864	$ 479,610
Weighted average shares, basic (in shares)	9,186,208	9,144,099	9,171,746	8,994,023
Dilutive effect of stock compensation awards (in shares)		920,614	645,652	1,068,892
Diluted shares (in shares)	9,186,208	10,064,713	9,817,398	10,062,915
Basic (in dollars per share)	$ (0.12)	$ 0.06	$ 0.96	$ 0.05
Diluted (in dollars per share)	$ (0.12)	$ 0.06	$ 0.90	$ 0.05
Anti-dilutive shares	590,046	0	0	0

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

Related Party Transactions (Details)	6 Months Ended
Related Party Transactions (Details)	Dec. 31, 2022 USD ($)
Lessee, Lease, Description [Line Items]
Lease Extension Per Year	$ 380,000
Lessee, Operating Lease, Renewal Term (Year)	5 years
Additional Renewal [Member]
Lessee, Lease, Description [Line Items]
Lease Extension Per Year	$ 397,000
Lessee, Operating Lease, Renewal Term (Year)	5 years

Accounts Receivable Concentrations (Details)	6 Months Ended	12 Months Ended
Accounts Receivable Concentrations (Details)	Dec. 31, 2022 USD ($) customer	Jun. 30, 2022
Concentration Risk [Line Items]
Related Party Transaction, Amounts of Transaction \| $	$ 79,000
Customer Concentration Risk [Member] \| Trade Accounts Receivable [Member] \| Customer 1 [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	20.00%	0.00%
Customer Concentration Risk [Member] \| Trade Accounts Receivable [Member] \| Customer 2 [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	14.00%	19.00%
Customer Concentration Risk [Member] \| Trade Accounts Receivable [Member] \| Customer 3 [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	13.00%	18.00%
Customer Concentration Risk [Member] \| Trade Accounts Receivable [Member] \| Customer 4 [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	12.00%	3.00%
Customer Concentration Risk [Member] \| Accounts Receivable [Member]
Concentration Risk [Line Items]
Number Of Major Customers \| customer	4

Legal Matters (Details) - USD ($)	3 Months Ended		6 Months Ended
Legal Matters (Details) - USD ($)	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Loss Contingencies [Line Items]
Additional payment of external patent litigation	$ 950,000
Selling, general and administrative expenses	2,473,975	$ 1,229,294	$ 26,144,571	$ 3,010,091
Estimate of loss	41,000		41,000
Legal fees and related expenses	175,000
Intellectual Property [Member]
Loss Contingencies [Line Items]
Selling, general and administrative expenses	$ 1,139,568		$ 22,196,428
Legal fees and related expenses		$ 30,583		$ 56,950