SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended December 31, 2006
OR
o 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)
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A DELAWARE CORPORATION |
39-1168275 |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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4129 North Port Washington Avenue, Milwaukee, Wisconsin |
53212 |
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(Address of principal executive offices) |
(Zip Code) |
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Registrant’s telephone number, including area code: (414) 964-5000 |
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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.
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YES x |
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NO o |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.).
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YES o |
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NO x |
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At February 5, 2007, there were 3,713,222 shares outstanding of the registrant’s common stock, $0.005 par value per share.
KOSS CORPORATION AND SUBSIDIARIES
FORM 10-Q
December 31, 2006
INDEX
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8-10 |
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10 |
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10-11 |
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11 |
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11-12 |
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12 |
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2
KOSS CORPORATION AND SUBSIDIARIES
CONDENCED CONSOLIDATED BALANCE SHEETS
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(Unaudited) |
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December 31, 2006 |
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June 30, 2006 |
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ASSETS |
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Current Assets: |
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Cash |
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$ 4,342,041 |
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$ 6,146,580 |
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Accounts Receivable |
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6,773,652 |
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6,819,852 |
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Inventories |
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9,990,187 |
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10,522,605 |
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Other current assets |
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2,349,355 |
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1,784,365 |
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Total current assets |
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23,455,235 |
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25,273,402 |
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Property and equipment, net |
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2,674,260 |
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3,037,548 |
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Deferred income taxes |
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672,823 |
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672,823 |
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Other assets |
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2,269,178 |
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2,457,840 |
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$ 29,071,496 |
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$ 31,441,613 |
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LIABILITIES AND STOCKHOLDERS’ INVESTMENT |
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Current liabilities: |
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Accounts payable |
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$ 1,324,865 |
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$ 1,870,256 |
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Accrued liabilities |
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2,742,228 |
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2,149,102 |
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Income taxes |
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863,136 |
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927,528 |
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Dividends payable |
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482,719 |
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4,202,591 |
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Total current liabilities |
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5,412,948 |
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9,149,477 |
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Deferred compensation |
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1,052,831 |
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992,830 |
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Derivative liability |
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125,000 |
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125,000 |
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Stockholders’ investment |
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22,480,717 |
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21,174,306 |
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$ 29,071,496 |
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$ 31,441,613 |
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See accompanying notes to the condensed consolidated financial statements.
3
KOSS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months |
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Six Months |
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Period Ended December 31 |
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2006 |
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2005 |
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2006 |
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2005 |
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Net Sales |
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$ 12,222,584 |
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$ 15,435,597 |
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$ 25,547,683 |
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$ 27,385,438 |
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Cost of goods sold |
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7,812,019 |
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9,397,027 |
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15,541,574 |
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16,671,989 |
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Gross Profit |
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4,410,565 |
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6,038,570 |
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10,006,109 |
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10,713,449 |
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Selling general and administrative expense |
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2,421,909 |
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2,849,784 |
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5,354,710 |
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5,297,401 |
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Income from operations |
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1,988,656 |
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3,188,786 |
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4,651,399 |
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5,416,048 |
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Other income (expense) |
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Royalty income |
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81,249 |
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100,307 |
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162,498 |
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201,918 |
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Interest income |
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34,611 |
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40,825 |
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67,149 |
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75,470 |
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Interest expense |
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0 |
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0 |
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0 |
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0 |
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Income before income tax provision |
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2,104,516 |
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3,329,918 |
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4,881,046 |
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5,693,436 |
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Provision for income taxes |
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820,758 |
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1,298,672 |
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1,903,608 |
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2,220,972 |
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Net Income |
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$ 1,283,758 |
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$ 2,031,246 |
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$ 2,977,438 |
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$ 3,472,464 |
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Earnings per common share: |
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Basic |
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$ 0.35 |
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$ 0.55 |
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$ 0.80 |
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$ 0.93 |
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Diluted |
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$ 0.34 |
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$ 0.53 |
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$ 0.79 |
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$ 0.92 |
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Dividends per common share |
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$ 0.13 |
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$ 0.13 |
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$ 0.26 |
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$ 0.26 |
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See accompanying notes to the condensed consolidated financial statements.
4
KOSS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended December 31, |
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2006 |
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2005 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ 2,977,438 |
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$ 3,472,464 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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566,164 |
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503,061 |
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Net changes in operating assets and liabilities |
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(1,922,696 |
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(1,459,645 |
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Net cash provided by operating activities |
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1,620,906 |
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2,515,880 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Acquisition of equipment |
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(164,214 |
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(697,675 |
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Net cash used in investing activities |
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(164,214 |
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(697,675 |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Dividends declared |
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(482,719 |
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(479,385 |
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Dividends paid |
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(481,479 |
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(486,788 |
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Purchase of common stock |
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(1,490,322 |
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(1,231,427 |
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Exercise of stock options |
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500,566 |
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— |
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Net cash used in financing activities |
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(1,953,954 |
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(2,197,600 |
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Net decrease in cash |
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(497,262 |
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(379,395 |
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Cash at beginning of period |
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4,839,303 |
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5,218,698 |
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Cash at end of period |
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$ 4,342,041 |
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$ 4,839,303 |
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See accompanying notes to the condensed consolidated financial statements.
5
KOSS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The financial statements presented herein are based on interim amounts. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows at December 31, 2006 and for all periods presented have been made. All significant intercompany transactions have been eliminated. The income from operations for the quarter and six months ended December 31, 2006 is not necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Registrant’s June 30, 2006 Annual Report on Form 10-K.
2. EARNINGS PER COMMON SHARE
Basic earnings per common share are computed based on the weighted average number of common shares outstanding. The weighted average number of common shares outstanding for the quarters ending December 31, 2006 and 2005 were 3,690,760 and 3,696,796, respectively. For the six months ended December 31, 2006 and 2005, weighted average number of common shares outstanding were 3,700,348 and 3,716,337, respectively. When dilutive, stock options are included as share equivalents using the treasury stock method. Common stock equivalents of 78,172 and 124,450 related to stock option grants were included in the computation of the average number of shares outstanding for diluted earnings per common share for the quarters ended December 31, 2006 and 2005, respectively. Common stock equivalents of 71,332 and 72,180 related to stock option grants were included in the computation of the average number of shares outstanding for diluted earnings per common share for the six months ended December 31, 2006 and 2005, respectively.
3. INVENTORIES
The classification of inventories is as follows:
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December 31, 2006 |
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June 30, 2006 |
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Raw materials and work in process |
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$ |
3,397,494 |
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$ |
4,388,680 |
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Finished goods |
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7,967,936 |
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7,509,168 |
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11,365,430 |
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11,897,848 |
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LIFO reserve |
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(1,375,243 |
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(1,375,243 |
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$ |
9,990,187 |
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$ |
10,522,605 |
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4. STOCK PURCHASE AGREEMENT
The Company has an agreement with its Chairman, John C. Koss, to, at the request of the executor of the estate, repurchase Company common stock from his estate in the event of his death. The Company does not have the right to require the estate to sell stock to the Company.
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As such, this arrangement is accounted for as a written put option with the fair value of the put option recorded as a derivative liability. The fair value of the option at December 31, 2006 was $125,000. The repurchase price is 95% of the fair market value of the common stock on the date that notice, if the estate elects, to repurchase is provided to the Company. Under the agreement, the total number of shares to be repurchased will be sufficient to provide proceeds which are the lesser of $2,500,000 or the amount of estate taxes and administrative expenses incurred by the Chairman’s estate. The Company may elect to pay the purchase price in cash or may elect to pay cash equal to 25% of the total amount due and to execute a promissory note for the balance, payable over four years, at the prime rate of interest. The Company maintains a $1,150,000 life insurance policy to fund a substantial portion of this obligation. At December 31, 2006 and June 30, 2006, $125,000 has been classified as a derivative liability on the Company’s financial statements.
5. DIVIDENDS DECLARED
On December 14, 2006, the Company declared a quarterly cash dividend of $0.13 per share for stockholders of record on December 29, 2006 to be paid January 15, 2007. Such dividend payable has been recorded at December 31, 2006.
6. STOCK-BASED COMPENSATION
In 1990, pursuant to the recommendation of the Board of Directors, the stockholders ratified the creation of the Company’s 1990 Flexible Incentive Plan (the “1990 Plan”). The 1990 Plan is administered by a committee of the Board of Directors and provides for the granting of various stock-based awards including stock options to eligible participants, primarily officers and certain key employees. A total of 225,000 shares of common stock were available in the first year of the Plan’s existence. Each year thereafter additional shares equal to 25% of the shares outstanding as of the first day of the applicable fiscal year were reserved for issuance pursuant to the 1990 Plan. On July 22, 1992, the Board of Directors authorized the reservation of an additional 250,000 shares for the 1990 Plan, which was approved by the stockholders. In 1993, the Board of Directors authorized the reservation of an additional 300,000 shares for the 1990 Plan, which was approved by the stockholders. In 1997, the Board of Directors authorized the reservation of an additional 300,000 shares for the 1990 Plan, which was approved by the stockholders. In 2001, the Board of Directors authorized the reservation of an additional 300,000 shares for the 1990 Plan, which was also approved by the stockholders. Options generally vest over four or five years, with a maximum term of five to ten years.
We account for stock options and restricted stock issued under the plan in accordance with Statement of Accounting Standards (‘SFAS’) No. 123 (R), “Share Based Payments”. The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. The fair value of each restricted stock grant was based on the market price of the underlying common stock as of the date of grant. The resulting compensation cost is amortized on a straight-line basis over the vesting period.
A summary of stock option activity under the plan for the sixmonths ended December 31, 2006 is as follows:
7
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Number of Shares |
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Range of |
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Average |
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(in thousands) |
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Per Share |
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Exercise Price |
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Balance, June 30, 2006 |
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591,594 |
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$ |
5.38-$28.80 |
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$ |
20.60 |
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Granted |
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— |
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— |
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— |
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Exercised |
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(30,932 |
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$ |
5.42-$16.80 |
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$ |
16.18 |
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Expired |
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— |
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— |
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— |
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Forfeited |
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— |
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— |
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— |
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Balance, December 31, 2006 |
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560,662 |
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$ |
5.38-$28.80 |
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$ |
20.84 |
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Number of Options |
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Weighted Average Exercise |
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Weighted Average |
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$5.38-$6.73 |
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17,500 / 17,500 |
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$ |
6.15 / $6.15 |
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2.9 |
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$15.75-$19.12 |
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261,162 / 181,412 |
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$ |
17.60 / $17.56 |
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2.8 |
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$22.01-$28.80 |
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282,000 / 89,000 |
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$ |
24.76 / $23.62 |
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4.5 |
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560,662 / 287,912 |
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$ |
20.84 / $18.74 |
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As of December 31, 2006, there was 1,253,896 of total unrecognized compensation cost related to stock options granted under the plan. This cost is expected to be recognized over a weighted average period of 1.89 years. Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Financial Condition, Liquidity and Capital Resources
Cash provided by operating activities during the six months ended December 31, 2006 amounted to $1,620,906 This was a result of net income for the period adjusted for changes in operating assets and current liabilities, which arose primarily out of increases in other current assets, accrued liabilities, and a decrease in accounts payable.
Capital expenditures for new equipment (including production tooling) were $164,214 for the six months ended December 31, 2006. Capital expenditures for fiscal year 2007 are expected to be approximately $1.9 million. The Company expects to generate sufficient funds through operations to fund these expenditures.
Stockholders’ investment increased to $22,480,717 at December 31, 2006, from $21,174,306 at June 30, 2006. The increase reflects net income and exercise of stock options offset by the effect of the purchase and retirement of common stock and dividends declared.
The Company amended its existing credit facility in November 2006, extending the maturity date of the unsecured line of credit to November 1, 2007. This credit facility provides for borrowings up to a maximum of $10,000,000. The Company can use this credit facility for working capital purposes or for the purchase of its own common stock pursuant to the Company’s common stock repurchase program.
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Borrowings under this credit facility bear interest at the bank’s prime rate, or LIBOR plus 1.75%. This credit facility includes financial covenants that require the Company to maintain a minimum tangible net worth and specified current, interest coverage and leverage ratios. The Company uses its credit facility from time to time, although there was no utilization of this credit facility at December 31, 2006 or June 30, 2006. The Company did not utilize the credit facility during the quarter or six months ended December 31, 2006.
In April of 1995, the Board of Directors approved a stock repurchase program authorizing the Company to purchase from time to time up to $2,000,000 of its common stock for its own account. Subsequently, the Board of directors periodically has approved increases in the stock repurchase program. The most recent increase was for an additional $2,000,000 in October 2006, for a maximum of $45,500,000. The Company intends to effectuate all stock purchases either on the open market or through privately negotiated transactions, and intends to finance all stock purchases through its own cash flow or by borrowing for such purchases.
For the quarter ended December 31, 2006, the Company purchased 50,799 shares of its common stock at an average net price of $23.27 per share, for a total net purchase price of $1,182,179. For the six months ended December 31, 2006, the Company purchased 66,089 shares of its common stock at an average net price of $22.55 per share, for a total net purchase price of $1,490,322.
From the commencement of the Company’s stock repurchase program through December 31, 2006, the Company has purchased a total of 5,389,030 shares for a total gross purchase price of $51,094,508, (representing an average gross purchase price of $9.48 per share) and a total net purchase price of $40,270,765 (representing an average net purchase price of $7.47 per share). The difference between the total gross purchase price and the total net purchase price is the result of the Company receiving from employees cash acquired from such employees pursuant to the Company’s stock option program. In determining the dollar amount available for additional purchases under the stock repurchase program, the Company uses the total net purchase price by the Company for all stock purchases, as authorized by the Board of Directors.
The Company also has an Employee Stock Ownership Plan and Trust (“ESOP”) pursuant to which shares of the Company’s common stock are purchased by the ESOP for allocation to the accounts of ESOP participants. There were no ESOP purchases of the Company’s common stock for the six months ended December 31, 2006
Results of Operations
Net sales for the second quarter ended December 31, 2006 fell 21% to $12,222,584 from $15,435,597 for the same period in 2005. Net sales for the six months ended December 31, 2006 were $25,547,683 down 7% compared with $27,385,438 during the same six months one year ago. The decrease was primarily due to a slow down in domestic mass market sales, a decline in sales to superstores and a slow down in the automotive industry this year which reduced demand for the Company’s rear seat entertainment products.
Gross profit as a percent of net sales was 36% for the quarter ended December 31, 2006 down 3% from the same period in the prior year. For the six month periods ended December 31, 2006 and 2005, the gross profit percentage was 39%. The decrease in gross profit for the quarter ended December 31, 2006 was primarily due to a less profitable model mix sold in the month of December.
Selling, general and administrative expenses for the quarter ended December 31, 2006 were $2,421,909 or 20% of net sales, compared to $2,849,784 or 18% of net sales for the same period in 2005. For the six month period ended December 2006, these expenses were $5,354,710 or 21% of net sales, compared to $5,297,401 or 19% of net sales, for the same period in 2005.
9
For the second quarter ended December 31, 2006, income from operations was $1,988,656 versus $3,188,786 for the same period in the prior year, a 38% decrease. Income from operations for the six months ended December 31, 200 was $4,651,399 as compared to $5,416,048 for the same period in 2005, a 14% decrease. Income from operations decreased primarily as a result of decreased net sales for the quarter and six months ended December 31, 2006.
Net income decreased 37%, from $2,031,246 to $ 1,283,758 for the same period in 2005. Net income for the six months decreased 14% from $3,472,464 to $2,977,438 for the same six months ending December 31, 2005. Net income decreased primarily as a result of decreased net sales for the quarter and six months ended December 31, 2006.
Royalty income for the quarter ended December 31, 2006 was $81,249 compared to $100,307 for the quarter ended December 31, 2006. For the six month period ended December 31, 2006 royalty income was $162,498 compared to $201,918 for the period ending December 31, 2005. The decrease in royalty income was primarily a result of lower sales from the Company’s primary licensee.
Interest income for the quarter was $34,611 as compared to $40,825 for the same quarter in 2005. For the six month period interest income was $67,149 compared to $75,470. Interest income fluctuates in relation to cash balances on hand throughout the year and fluctuations in interest rates earned.
The provision for income taxes for the quarter ended December 31, 2006, was $820,758 compared with $1,298,672 for the same period last year. For the six months ended December 31, 2006, the provision for income taxes was $1,903,608 compared with $2,220,972 for the same period last year. The effective tax rate was 39% for each of the quarters.
Recently Issued Financial Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” This interpretation prescribes a recognition threshold and measurement attribute of tax positions taken or expected to be taken on a tax return. This Interpretation is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact FIN 48 will have on our financial position or results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
In management’s opinion, the Company does not engage in any material risk sensitive activities and does not have any market risk sensitive instruments, other than the Company’s commercial credit facility used for working capital purposes and stock repurchases as disclosed in the “Financial Condition, Liquidity and Capital Resources” section of the “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” above.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Company maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are
10
met. The Company, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer/Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report, has concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
(b) Changes in Internal Controls. The Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. However, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
PART II
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in our Annual Report on Form 10-K for the year ended June 30, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risk and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to purchases of common stock of the Company made during the three months ended December 31, 2006, by the Company.
11
COMPANY REPURCHASES OF EQUITY SECURITIES
|
Period (2006) |
|
Total # of |
|
Average |
|
Total Number of |
|
Approximate Dollar Value of |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
October 1 — October 31 |
|
19,579 |
|
$ |
22.99 |
|
19,579 |
|
$ |
2,735,889 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
November 1 — November 30 |
|
17,852 |
|
$ |
22.57 |
|
17,852 |
|
$ |
2,636,485 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
December 1 — December 31 |
|
13,368 |
|
$ |
24.63 |
|
13,368 |
|
$ |
2,413,715 |
|
(1) In April of 1995, the Board of Directors approved a stock repurchase program authorizing the Company to purchase from time to time up to $2,000,000 of its common stock for its own account. Subsequently, the Board of Directors periodically has approved increases in the stock repurchase program, the most recent increase was for an additional $2,000,000 in October 2006, for a maximum of $45,500,000.
See Exhibit Index attached hereto.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This 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 “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “forecasts” 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), borrowing costs, changes in tax rates, pending or threatened litigation and investigations, and
12
other risk factors which may be detailed from time to time in the Company’s Securities and Exchange Commission filings.
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 the occurrence of unexpected events.
13
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
KOSS CORPORATION
|
Date: February 12, 2007 |
/s/ Michael J. Koss |
|
|
Michael J. Koss |
|
|
Vice Chairman, President, |
|
|
Chief Executive Officer, |
|
|
Chief Financial Officer |
|
|
|
|
Date: February 12, 2007 |
/s/ Sue Sachdeva |
|
|
Sue Sachdeva |
|
|
Vice President—Finance, |
|
|
Secretary |
14
EXHIBIT INDEX
|
Exhibit No. |
|
Exhibit Description |
|
|
3.1 |
|
Certificate of Incorporation of Koss Corporation. Filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996 and incorporated herein by reference. |
|
|
|
|
|
|
|
3.2 |
|
By-Laws of Koss Corporation, as in effect on September 25, 1996. Filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.1 |
|
Death Benefit Agreement with John C. Koss. Filed as Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.2 |
|
Stock Purchase Agreement with John C. Koss. Filed as Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.3 |
|
Salary Continuation Resolution for John C . Koss. Filed as Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.4 |
|
1983 Incentive Stock Option Plan. Filed as Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.5 |
|
Assignment of Lease to John C. Koss. Filed as Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1988 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.6 |
|
Addendum to Lease. Filed as Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1988 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.7 |
|
Amendment to Lease. Filed as Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2000 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.8 |
|
Partial Assignment, Termination and Modification of Lease. Filed as Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2001 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.9 |
|
Restated Lease. Filed as Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2001 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.10 |
|
1990 Flexible Incentive Plan. Filed as Exhibit 25 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1990 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.11 |
|
Consent of Directors (Supplemental Executive Retirement Plan for Michael J. Koss dated March 7, 1997). Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by reference. |
|
15
|
|
|
|
|
|
10.12 |
|
Loan Agreement, effective as of February 17, 1995. Filed as Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.13 |
|
Amendment to Loan Agreement dated June 15, 1995, effective as of February 17, 1995. Filed as Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1995 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.14 |
|
Amendment to Loan Agreement dated April 29, 1999. Filed as Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1999 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.15 |
|
Amendment to Loan Agreement dated December 15, 1999. Filed as Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2000 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.16 |
|
Amendment to Loan Agreement dated October 10, 2001. Filed as Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.17 |
|
License Agreement dated June 30, 1998 between Koss Corporation and Logitech Electronics Inc. (including Addendum to License Agreement dated June 30, 1998). Filed as Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1998 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.18 |
|
Amendment and Extension Agreement between Koss Corporation and Logitech Electronics Inc. dated May 1, 2001. Filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.19 |
|
License Agreement dated June 30, 2003 between Koss Corporation and Sonigem Products, Inc. Filed as Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2005 and incorporated herein by reference. |
|
|
|
|
|
|
|
10.20 |
|
Amendment to License Agreement dated August 1, 2005, between Koss Corporation and Sonigem Products, Inc. Filed as Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2005 and incorporated herein by reference. |
|
|
|
|
|
|
|
31 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer/Chief Financial Officer * |
|
|
|
|
|
|
|
32 |
|
Section 1350 Certification of Chief Executive Officer/Chief Financial Officer ** |
|
|
|
|
|
|
|
* |
|
Filed herewith |
|
|
** |
|
Furnished herewith |
|
16
Exhibit 31.1
KOSS CORPORATION
CERTIFICATION*
I, Michael J. Koss, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Koss Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: February 12, 2007 |
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael J. Koss |
|
|
Michael J. Koss |
|
|
Chief Executive Officer, President and |
|
|
Chief Financial Officer |
|
* Since Michael J. Koss is both the principal executive officer and the principal financial officer of the registrant, only one certification is provided.
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Form 10-Q of Koss Corporation (the “Company”) for the quarter ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael J. Koss, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Michael J. Koss |
|
|
Michael J. Koss |
|
|
|
Chief Executive Officer and |
|
|
Chief Financial Officer |
|
|
Date: February 12, 2007 |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) and is not being filed as part of the Report or as a separate disclosure document.