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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 March 31, 2023

 

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 May 8, 2023, there were 9,216,795 shares outstanding of the registrant’s common stock. 

  


KOSS CORPORATION

FORM 10-Q

March 31, 2023

 

INDEX

 

 

 

 

Page

 

 

 

PART I

FINANCIAL INFORMATION

3

 

Item 1.

Financial Statements (Unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022

3

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2023 and 2022

4

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and 2022

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended March 31, 2023 and 2022

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)

 

March 31, 2023

June 30, 2022

ASSETS

Current assets:

Cash and cash equivalents

$

2,921,632

$

9,208,170

Short term investments, amortized cost basis

12,045,520

Accounts receivable, less allowance for doubtful accounts of $36,262 and $2,027, respectively

1,235,411

1,846,620

Inventories, net

7,079,259

8,631,362

Prepaid expenses and other current assets

394,188

188,478

Interest receivable

56,014

Total current assets

23,732,024

19,874,630

Equipment and leasehold improvements, net

967,828

1,088,017

Other assets:

Long term investments, amortized cost basis

4,949,470

Operating lease right-of-use asset

3,074,952

3,247,725

Cash surrender value of life insurance

5,979,730

5,744,724

Total other assets

14,004,152

8,992,449

Total assets

$

38,704,004

$

29,955,096

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

353,313

$

796,163

Accrued liabilities

870,822

560,356

Deferred revenue

379,061

543,891

Operating lease liability

233,152

223,530

Income taxes payable

250,203

3,033

Total current liabilities

2,086,551

2,126,973

Long-term liabilities:

Deferred compensation

2,000,012

1,937,229

Deferred revenue

125,732

169,210

Operating lease liability

2,848,191

3,024,195

Total long-term liabilities

4,973,935

5,130,634

Total liabilities

7,060,486

7,257,607

Stockholders' equity:

Common stock, $0.005 par value, authorized 20,000,000 shares; issued and outstanding 9,216,795 and 9,147,795, respectively

46,084

45,739

Paid in capital

13,034,075

12,653,402

Retained earnings

18,563,359

9,998,348

Total stockholders' equity

31,643,518

22,697,489

Total liabilities and stockholders' equity

$

38,704,004

$

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

Nine Months Ended

March 31

March 31

2023

2022

2023

2022

Net sales

$

3,369,160

$

4,634,552

$

9,995,620

$

13,415,506

Cost of goods sold

2,076,482

2,671,336

6,390,557

8,320,759

Gross profit

1,292,678

1,963,216

3,605,063

5,094,747

Selling, general and administrative expenses

1,746,034

1,566,430

27,890,606

4,576,521

(Loss) income from operations

(453,356)

396,786

(24,285,543)

518,226

Other income

6,415

33,000,000

362,389

Interest income

189,593

3,578

314,482

7,837

(Loss) income before income tax provision

(263,763)

406,779

9,028,939

888,452

Income tax (benefit) provision

(30,910)

3,575

463,928

5,638

Net (loss) income

$

(232,853)

$

403,204

$

8,565,011

$

882,814

(Loss) income per common share:

Basic

$

(0.03)

$

0.04

$

0.93

$

0.10

Diluted

$

(0.03)

$

0.04

$

0.87

$

0.09

Weighted-average number of shares:

Basic

9,206,135

9,147,795

9,183,042

9,044,532

Diluted

9,206,135

9,888,083

9,791,627

10,024,473

 

 

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

4


KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

Nine Months Ended

March 31

2023

2022

Operating activities:

Net income

$

8,565,011

$

882,814

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

Provision for (recovery of) doubtful accounts of accounts receivable

40,277

(35,216)

Depreciation of equipment and leasehold improvements

186,168

225,130

Amortization of discount on treasury securities

(110,632)

Noncash operating lease expense

6,391

Stock-based compensation expense

243,688

382,010

Change in cash surrender value of life insurance

(147,012)

(171,688)

Provision for deferred compensation

62,783

187,560

Deferred compensation paid

(71,250)

Deferred compensation relieved

(472,883)

Other income - Net gain from life insurance benefits

(262,391)

Loss on disposal of fixed assets

2,263

7,856

Net changes in operating assets and liabilities:

Accounts receivable

570,932

(40,328)

Inventories

1,552,103

(1,849,288)

Prepaid expenses and other current assets

(205,710)

(4,945)

Interest receivable

(56,014)

Income taxes payable

247,170

(163)

Accounts payable

(442,850)

376,050

Accrued liabilities

310,466

290,977

Deferred revenue

(208,308)

(117,140)

Net cash provided by (used in) operating activities

10,616,726

(672,895)

Investing activities:

Purchase of equipment and leasehold improvements

(68,242)

(98,028)

Life insurance premiums paid

(87,994)

(95,887)

Proceeds from life insurance policy

2,014,184

Purchases of investments

(16,884,358)

Net cash (used in) provided by investing activities

(17,040,594)

1,820,269

Financing activities:

Proceeds from exercise of stock options

137,330

1,390,346

Net cash provided by financing activities

137,330

1,390,346

Net (decrease) increase in cash and cash equivalents

(6,286,538)

2,537,720

Cash and cash equivalents at beginning of period

9,208,170

6,950,215

Cash and cash equivalents at end of period

$

2,921,632

$

9,487,935

Supplemental cash flow information:

Cash paid for income taxes

$

216,759

$

 

 

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

5


KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

 

Nine Months Ended March 31, 2023

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

8,565,011

8,565,011

Stock-based compensation expense

243,688

243,688

Stock option exercises

69,000

345

136,985

137,330

Balance, March 31, 2023

9,216,795

$

46,084

$

13,034,075

$

18,563,359

$

31,643,518

Nine Months Ended March 31, 2022

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

882,814

882,814

Stock-based compensation expense

382,010

382,010

Stock option exercises

539,089

2,695

1,387,651

1,390,346

Balance, March 31, 2022

9,147,795

$

45,739

$

12,571,779

$

9,612,753

$

22,230,271

Three Months Ended March 31, 2023

Common Stock

Paid in

Retained

Shares

Amount

Capital

Earnings

Total

Balance, December 31, 2022

9,189,795

$

45,949

$

12,908,840

$

18,796,212

$

31,751,001

Net (loss)

(232,853)

(232,853)

Stock-based compensation expense

76,980

76,980

Stock option exercises

27,000

135

48,255

48,390

Balance, March 31, 2023

9,216,795

$

46,084

$

13,034,075

$

18,563,359

$

31,643,518

Three Months Ended March 31, 2022

Common Stock

Paid in

Retained

Shares

Amount

Capital

Earnings

Total

Balance, December 31, 2021

9,147,795

$

45,739

$

12,452,554

$

9,209,549

$

21,707,842

Net income

403,204

403,204

Stock-based compensation expense

119,225

119,225

Stock option exercises

Balance, March 31, 2022

9,147,795

$

45,739

$

12,571,779

$

9,612,753

$