x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
Delaware | 39-1168275 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
4129 North Port Washington Avenue, Milwaukee, Wisconsin | 53212 | |
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock $0.005 par value per share | The Nasdaq Stock Market LLC |
NONE |
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer o | Smaller reporting company x | |
(Do not check if a smaller reporting company) |
Page | ||
PART I | ||
PART II | ||
Part III | ||
PART IV | ||
2016 | 2015 | |||||||
United States | $ | 15,496,763 | $ | 16,779,312 | ||||
Sweden | 4,322,582 | 3,677,225 | ||||||
Czech Republic | 1,231,731 | 441,754 | ||||||
Hong Kong | 1,121,609 | — | ||||||
People's Republic of China | 969,848 | 193,374 | ||||||
Malaysia | 669,782 | 262,600 | ||||||
Canada | 400,672 | 498,026 | ||||||
All other countries | 1,788,359 | 2,377,765 | ||||||
Net sales | $ | 26,001,346 | $ | 24,230,056 |
Quarter Ended | High | Low | ||||||
September 30, 2014 | $ | 3.45 | $ | 1.85 | ||||
December 31, 2014 | $ | 2.15 | $ | 1.26 | ||||
March 31, 2015 | $ | 2.90 | $ | 1.80 | ||||
June 30, 2015 | $ | 3.50 | $ | 2.21 | ||||
September 30, 2015 | $ | 2.61 | $ | 2.14 | ||||
December 31, 2015 | $ | 2.96 | $ | 1.91 | ||||
March 31, 2016 | $ | 2.35 | $ | 1.51 | ||||
June 30, 2016 | $ | 2.45 | $ | 1.93 |
Period (2016) | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan (1) | Approximate Dollar Value of Shares Available under Repurchase Plan | ||||||||||
April 1-April 30 | — | $ | — | — | $ | 2,139,753 | ||||||||
May 1-May 31 | — | $ | — | — | $ | 2,139,753 | ||||||||
June 1-June 30 | — | $ | — | — | $ | 2,139,753 |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
• | Net sales increased 7.3% to $26,001,346 on volume gains with distributors in Asia, Scandinavia, and the Czech Republic as well as a new distributor in Africa. There was also a new original equipment manufacturer ("OEM") customer that had significant sales in fiscal 2016. |
• | Gross profit as a percent of sales decreased 0.5% to 34.4%. This change was primarily due to mix of sales by product and by channel. |
• | Selling, general and administrative spending was higher as a result of higher costs for deferred compensation, profit-based compensation, 401(k) match and travel costs. These higher costs were largely offset by lower stock-based compensation, reduced compensation for the former Chairman's retirement, lower commissions and reduced legal fees. |
• | Unauthorized transaction related recoveries increased due to settling the lawsuit with American Express. |
Consolidated Performance Summary | 2016 | 2015 | ||||
Net sales | $26,001,346 | $24,230,056 | ||||
Net sales increase % | 7.3 | % | 1.6 | % | ||
Gross profit | $8,942,572 | $8,448,567 | ||||
Gross profit as % of net sales | 34.4 | % | 34.9 | % | ||
Selling, general and administrative expenses | $7,959,460 | $7,904,739 | ||||
Selling, general and administrative expenses as % of net sales | 30.6 | % | 32.6 | % | ||
Unauthorized transaction related (recoveries) costs, net | $(1,286,001) | $31,027 | ||||
Interest expense | $6,075 | $12,813 | ||||
Income before income tax provision | $2,263,038 | $499,988 | ||||
Income before income tax provision as % of net sales | 8.7 | % | 2.1 | % | ||
Income tax provision | $874,038 | $17,375 | ||||
Income tax provision as % of income before taxes | 38.6 | % | 3.5 | % |
2016 | 2015 | |||||||
Total cash provided by (used in): | ||||||||
Operating activities | $ | 314,625 | $ | (340,590 | ) | |||
Investing activities | (579,498 | ) | (558,555 | ) | ||||
Financing activities | — | — | ||||||
Net (decrease) in cash and cash equivalents | $ | (264,873 | ) | $ | (899,145 | ) |
Years Ended June 30, | 2016 | 2015 | ||||||
Net sales | $ | 26,001,346 | $ | 24,230,056 | ||||
Cost of goods sold | 17,058,774 | 15,781,489 | ||||||
Gross profit | 8,942,572 | 8,448,567 | ||||||
Selling, general and administrative expenses | 7,959,460 | 7,904,739 | ||||||
Unauthorized transaction related (recoveries) costs, net | (1,286,001 | ) | 31,027 | |||||
Interest expense | 6,075 | 12,813 | ||||||
Income before income tax provision | 2,263,038 | 499,988 | ||||||
Income tax provision | 874,038 | 17,375 | ||||||
Net income | $ | 1,389,000 | $ | 482,613 | ||||
Income per common share: | ||||||||
Basic | $ | 0.19 | $ | 0.07 | ||||
Diluted | $ | 0.19 | $ | 0.07 |
As of June 30, | 2016 | 2015 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 735,393 | $ | 1,000,266 | ||||
Accounts receivable, less allowance for doubtful accounts of $55,175 and $26,052, respectively | 3,530,854 | 2,823,980 | ||||||
Inventories | 8,595,485 | 7,182,440 | ||||||
Prepaid expenses and other current assets | 281,099 | 348,044 | ||||||
Income taxes receivable | 583,507 | 205,531 | ||||||
Total current assets | 13,726,338 | 11,560,261 | ||||||
Equipment and leasehold improvements, net | 1,514,472 | 1,592,520 | ||||||
Other assets: | ||||||||
Deferred income taxes | 3,212,556 | 3,914,569 | ||||||
Cash surrender value of life insurance | 5,667,105 | 5,359,663 | ||||||
Total other assets | 8,879,661 | 9,274,232 | ||||||
Total assets | $ | 24,120,471 | $ | 22,427,013 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,966,656 | $ | 2,172,254 | ||||
Accrued liabilities | 1,601,652 | 1,575,027 | ||||||
Total current liabilities | 3,568,308 | 3,747,281 | ||||||
Long-term liabilities: | ||||||||
Deferred compensation | 2,187,714 | 2,107,486 | ||||||
Other liabilities | 178,255 | 219,227 | ||||||
Total long-term liabilities | 2,365,969 | 2,326,713 | ||||||
Total liabilities | 5,934,277 | 6,073,994 | ||||||
Stockholders' equity: | ||||||||
Common stock, $0.005 par value, authorized 20,000,000 shares; issued and outstanding 7,382,706 shares | 36,914 | 36,914 | ||||||
Paid in capital | 5,070,956 | 4,626,781 | ||||||
Retained earnings | 13,078,324 | 11,689,324 | ||||||
Total stockholders' equity | 18,186,194 | 16,353,019 | ||||||
Total liabilities and stockholders' equity | $ | 24,120,471 | $ | 22,427,013 |
Years Ended June 30, | 2016 | 2015 | ||||||
Operating activities: | ||||||||
Net income | $ | 1,389,000 | $ | 482,613 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Provision for doubtful accounts | 28,514 | 25,725 | ||||||
Loss on disposal of equipment and leasehold improvements | 40,710 | 14,953 | ||||||
Depreciation of equipment and leasehold improvements | 487,134 | 559,631 | ||||||
Stock-based compensation expense | 444,175 | 630,539 | ||||||
Deferred income taxes | 702,013 | 284,783 | ||||||
Change in cash surrender value of life insurance | (177,740 | ) | (150,312 | ) | ||||
Change in deferred compensation accrual | 230,228 | (12,605 | ) | |||||
Deferred compensation paid | (150,000 | ) | (50,000 | ) | ||||
Net changes in operating assets and liabilities (see note 14) | (2,679,409 | ) | (2,125,917 | ) | ||||
Cash provided by (used in) operating activities | 314,625 | (340,590 | ) | |||||
Investing activities: | ||||||||
Life insurance premiums paid | (129,702 | ) | (231,942 | ) | ||||
Purchase of equipment and leasehold improvements | (449,796 | ) | (326,613 | ) | ||||
Cash (used in) investing activities | (579,498 | ) | (558,555 | ) | ||||
Net (decrease) in cash and cash equivalents | (264,873 | ) | (899,145 | ) | ||||
Cash and cash equivalents at beginning of year | 1,000,266 | 1,899,411 | ||||||
Cash and cash equivalents at end of year | $ | 735,393 | $ | 1,000,266 |
Common Stock | Paid in | Retained | |||||||||||||||||
Shares | Amount | Capital | Earnings | Total | |||||||||||||||
Balance, June 30, 2014 | 7,382,706 | $ | 36,914 | $ | 3,996,242 | $ | 11,206,711 | $ | 15,239,867 | ||||||||||
Net income | — | — | — | 482,613 | 482,613 | ||||||||||||||
Stock-based compensation expense | — | — | 630,539 | — | 630,539 | ||||||||||||||
Balance, June 30, 2015 | 7,382,706 | 36,914 | 4,626,781 | 11,689,324 | 16,353,019 | ||||||||||||||
Net income | — | — | — | 1,389,000 | 1,389,000 | ||||||||||||||
Stock-based compensation expense | — | — | 444,175 | — | 444,175 | ||||||||||||||
Balance, June 30, 2016 | 7,382,706 | $ | 36,914 | $ | 5,070,956 | $ | 13,078,324 | $ | 18,186,194 |
2016 | 2015 | |||||||
Legal fees incurred | $ | 1,714,074 | $ | 152,492 | ||||
Gross proceeds from the settlement of the third party lawsuit | (3,000,000 | ) | — | |||||
Proceeds from asset forfeitures | (75 | ) | (121,465 | ) | ||||
Unauthorized transaction related (recoveries) costs, net | $ | (1,286,001 | ) | $ | 31,027 |
Fiscal Year Ended June 30, | Balance, beginning of year | Provision charged to expense | Amounts written-off | Recoveries of previously written-off | Balance, end of year | ||||||||||||
2016 | $ | 26,052 | 28,514 | (447 | ) | 1,056 | $ | 55,175 | |||||||||
2015 | $ | 20,501 | 25,725 | (20,174 | ) | — | $ | 26,052 |
2016 | 2015 | |||||||
Raw materials | $ | 3,466,907 | $ | 5,374,333 | ||||
Finished goods | 7,570,026 | 6,246,072 | ||||||
11,036,933 | 11,620,405 | |||||||
Reserve for obsolete inventory | (2,441,448 | ) | (4,437,965 | ) | ||||
Total inventories | $ | 8,595,485 | $ | 7,182,440 |
Estimated useful lives | 2016 | 2015 | ||||||||
Machinery and equipment | 5-10 years | $ | 592,189 | $ | 642,200 | |||||
Furniture and office equipment | 5-10 years | 373,716 | 374,616 | |||||||
Tooling | 5 years | 4,299,776 | 4,126,850 | |||||||
Display booths | 5 years | 253,680 | 287,180 | |||||||
Computer equipment | 3-5 years | 768,620 | 1,414,517 | |||||||
Leasehold improvements | 3-15 years | 2,387,626 | 2,308,246 | |||||||
Assets in progress | N/A | 210,189 | 60,600 | |||||||
8,885,796 | 9,214,209 | |||||||||
Less: accumulated depreciation and amortization | 7,371,324 | 7,621,689 | ||||||||
Equipment and leasehold improvements, net | $ | 1,514,472 | $ | 1,592,520 |
Year Ended June 30, | 2016 | 2015 | ||||||
Current: | ||||||||
Federal | $ | 169,350 | $ | (100,126 | ) | |||
State | 2,675 | (167,282 | ) | |||||
Deferred | 702,013 | 284,783 | ||||||
Total income tax provision | $ | 874,038 | $ | 17,375 |
Year Ended June 30, | 2016 | 2015 | ||||||
Federal income tax expense at statutory rate | $ | 769,433 | $ | 169,996 | ||||
State income tax expense (benefit), net of federal income tax benefit | 91,660 | (21,442 | ) | |||||
Decrease in valuation allowance | (370,000 | ) | — | |||||
Stock-based compensation | 447,180 | 53,596 | ||||||
Adjustments for unrecognized tax benefits | — | (175,000 | ) | |||||
Other | (64,235 | ) | (9,775 | ) | ||||
Total income tax provision | $ | 874,038 | $ | 17,375 |
2016 | 2015 | |||||||
Deferred income tax assets: | ||||||||
Deferred compensation | $ | 864,954 | $ | 835,270 | ||||
Stock-based compensation | 603,159 | 889,325 | ||||||
Accrued expenses and reserves | 1,390,910 | 2,075,601 | ||||||
Federal and state net operating loss carryforwards | 418,296 | 463,237 | ||||||
Valuation allowance | (409 | ) | (370,409 | ) | ||||
Equipment and leasehold improvements | — | 11,566 | ||||||
Other | 5,979 | 14,650 | ||||||
Total deferred income tax assets | 3,282,889 | 3,919,240 | ||||||
Deferred income tax liabilities: | ||||||||
Equipment and leasehold improvements | (67,390 | ) | — | |||||
Other | (2,943 | ) | (4,671 | ) | ||||
Net deferred income tax assets | $ | 3,212,556 | $ | 3,914,569 |
2016 | 2015 | |||||||
Unrecognized tax benefits at beginning of year | $ | — | $ | 175,000 | ||||
Reductions based on settlements with taxing authorities | — | (175,000 | ) | |||||
Unrecognized tax benefits at end of year | $ | — | $ | — |
Year Ended June 30, | Balance, beginning of year | Increase in valuation allowance | Release of valuation allowance | Balance, end of year | ||||||||||
2016 | $ | (370,409 | ) | — | 370,000 | $ | (409 | ) | ||||||
2015 | $ | (370,409 | ) | — | — | $ | (370,409 | ) |
2016 | 2015 | |||||||
Cooperative advertising and promotion allowances | $ | 479,645 | $ | 400,114 | ||||
Product warranty obligations | 305,275 | 312,664 | ||||||
Customer credit balances | 47,753 | 261,977 | ||||||
Current deferred compensation | 150,000 | 150,000 | ||||||
Accrued returns | 140,918 | 97,026 | ||||||
Employee benefits | 83,113 | 93,568 | ||||||
Legal and professional fees | 127,329 | 70,000 | ||||||
Management bonuses and profit-sharing | 147,450 | 71,381 | ||||||
Sales commissions and bonuses | 70,050 | 68,890 | ||||||
Other | 50,119 | 49,407 | ||||||
$ | 1,601,652 | $ | 1,575,027 |
Year Ended June 30, | Balance, beginning of year | Provision charged to expense | Warranty expenses incurred | Balance, end of year | ||||||||||
2016 | $ | 531,891 | 214,827 | (263,188 | ) | $ | 483,530 | |||||||
2015 | $ | 722,624 | 103,925 | (294,658 | ) | $ | 531,891 |
2016 | 2015 | |||||
Expected stock price volatility | 50 | % | 43 | % | ||
Risk free interest rate | 1.48 | % | 1.52 | % | ||
Expected dividend yield | 4.00 | % | 4.00 | % | ||
Expected forfeitures | 5.60 | % | 1.50 | % | ||
Expected life of options | 4.5 years | 4.6 years |
Number of Shares | Stock Options Price Range | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life - Years | Aggregate Intrinsic Value of In-The- Money Options | |||||||||||
Shares under option at June 30, 2014 | 2,066,000 | $3.90 - $13.09 | $ | 5.97 | 4.13 | $ | — | ||||||||
Granted | 470,000 | $2.24 - $3.30 | $ | 3.14 | |||||||||||
Exercised | — | — | $ | — | |||||||||||
Expired | (201,000 | ) | $4.97 - $13.09 | $ | 7.06 | ||||||||||
Forfeited | (90,000 | ) | $3.00 - $6.00 | $ | 4.69 | ||||||||||
Shares under option at June 30, 2015 | 2,245,000 | $2.24 - $13.09 | $ | 5.33 | 3.69 | $ | 1,676 | ||||||||
Granted | 410,000 | $2.05 - $2.83 | $ | 2.72 | |||||||||||
Exercised | — | — | $ | — | |||||||||||
Expired | (458,000 | ) | $3.00 - $13.09 | $ | 6.25 | ||||||||||
Forfeited | (57,000 | ) | $3.00 - $6.00 | $ | 4.34 | ||||||||||
Shares under option at June 30, 2016 | 2,140,000 | $2.05 - $9.74 | $ | 4.66 | 3.51 | $ | — | ||||||||
Exercisable as of June 30, 2015 | 1,134,500 | $3.90 - $13.09 | $ | 6.01 | 2.18 | $ | — | ||||||||
Exercisable as of June 30, 2016 | 1,084,000 | $2.24 - $9.74 | $ | 5.57 | 2.47 | $ | — |
2016 | 2015 | |||||||
Total intrinsic value of stock options exercised | $ | — | $ | — | ||||
Cash received from stock option exercises | $ | — | $ | — | ||||
Total fair value of stock options vested | $ | 583,727 | $ | 696,958 |
2016 | 2015 | |||||||
Accounts receivable | $ | (735,388 | ) | $ | 311,182 | |||
Inventories | (1,413,045 | ) | (127,508 | ) | ||||
Income taxes receivable | (377,976 | ) | 903,745 | |||||
Prepaid expenses and other current assets | 66,945 | (199,844 | ) | |||||
Income taxes payable | — | (175,000 | ) | |||||
Accounts payable | (205,598 | ) | (292,501 | ) | ||||
Accrued liabilities | 26,625 | (2,428,446 | ) | |||||
Other liabilities | (40,972 | ) | (117,545 | ) | ||||
Net change | $ | (2,679,409 | ) | $ | (2,125,917 | ) | ||
Net cash paid (refunded) during the year for: | ||||||||
Income taxes | $ | 558,202 | $ | (985,585 | ) | |||
Interest | $ | 6,075 | $ | 12,813 |
2016 | 2015 | |||||||
United States | $ | 15,496,763 | $ | 16,779,312 | ||||
Sweden | 4,322,582 | 3,677,225 | ||||||
Czech Republic | 1,231,731 | 441,754 | ||||||
Hong Kong | 1,121,609 | — | ||||||
People's Republic of China | 969,848 | 193,374 | ||||||
Malaysia | 669,782 | 262,600 | ||||||
Canada | 400,672 | 498,026 | ||||||
All other countries | 1,788,359 | 2,377,765 | ||||||
Net sales | $ | 26,001,346 | $ | 24,230,056 |
• | On December 17, 2010, the Company filed an action against Park Bank in Circuit Court of Milwaukee County, Wisconsin alleging a claim of breach of the Uniform Fiduciaries Act relating to the unauthorized transactions, as previously reported. In 2015, Park Bank filed third party claims based on contribution and subrogation against Grant Thornton LLP and Michael Koss. The Court granted motions to dismiss the contribution claims against Grant Thornton LLP and Michael Koss, but determined that it was premature to decide the subrogation claims at this stage of the proceedings. On or around March 11, 2016, the Court entered an order granting Park Bank's motion for summary judgment that dismissed the case. On March 22, 2016, the Company filed a Notice of Appeal that appeals the order granting Park Bank's motion for summary judgment and the Court's denial of the motion to dismiss the subrogation claims. |
KOSS CORPORATION | |||
By: | /s/ Michael J. Koss | August 25, 2016 | |
Michael J. Koss | |||
Chairman | |||
Chief Executive Officer | |||
By: | /s/ David D. Smith | August 25, 2016 | |
David D. Smith | |||
Executive Vice President | |||
Chief Financial Officer | |||
Principal Accounting Officer | |||
Secretary |
/s/ Michael J. Koss | /s/ Thomas L. Doerr | |
Michael J. Koss, Director | Thomas L. Doerr, Director | |
/s/ Steven A. Leveen | /s/ Theodore H. Nixon | |
Steven A. Leveen, Director | Theodore H. Nixon, Director | |
/s/ William J. Sweasy | ||
William J. Sweasy, Director |
Exhibit No. | Exhibit Description |
3.1 | Amended and Restated Certificate of Incorporation of Koss Corporation, as in effect on November 19, 2009. Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2009 and incorporated herein by reference. |
3.2 | By-Laws of Koss Corporation. 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 | 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. * |
10.6 | 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. * |
10.7 | Credit Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. Filed as Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 and incorporated by reference herein. |
10.8 | Pledge and Security Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. Filed as Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 and incorporated by reference herein. |
10.9 | Koss Corporation 2012 Omnibus Incentive Plan (Incorporated by reference to Appendix B to Koss Corporation's Definitive Proxy Statement on Schedule 14A filed on August 27, 2012). * |
10.10 | Amendment No. 2 dated July 24, 2013 to Credit Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. Filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended June 30, 2014, and incorporated by reference herein. |
10.11 | Amendment No. 3 dated July 23, 2014 to Credit Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. Filed as Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended June 30, 2014, and incorporated by reference herein. |
10.12 | Amendment No. 4 dated July 29, 2015 to Credit Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. Filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended June 30, 2015, and incorporated by reference herein. |
10.13 | Amendment No. 5 dated May 31, 2016 to Credit Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. ** |
14 | Koss Corporation Code of Ethics. Filed as Exhibit 14 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2011 and incorporated by reference herein. |
23.1 | Consent of Baker Tilly Virchow Krause, LLP. ** |
31.1 | Rule 13a -14(a)/15d-14(a) Certification of Chief Executive Officer. ** |
31.2 | Rule 13a -14(a)/15d-14(a) Certification of Chief Financial Officer. ** |
32.1 | Section 1350 Certification of Chief Executive Officer. *** |
32.2 | Section 1350 Certification of Chief Financial Officer. *** |
101 | The following financial information from Koss Corporation's Annual Report on Form 10-K for the year ended June 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income for the years ended June 30, 2016 and 2015, (ii) Consolidated Balance Sheets as of June 30, 2016 and 2015, (iii) Consolidated Statements of Cash Flows for the years ended June 30, 2016 and 2015, (iv) Consolidated Statements of Stockholders' Equity for the years ended June 30, 2016 and 2015 and (v) the Notes to Consolidated Financial Statements. |
* | Denotes a management contract or compensatory plan or arrangement | |
** | Filed herewith | |
*** | Furnished herewith |
a. | All references to the Credit Agreement in the Credit Agreement or any of the Loan Documents shall refer to the Credit Agreement as amended hereby. |
b. | Section 1.01 (Defined Terms) shall be amended as follows: |
c. | Section 3.11 (Disclosure) shall be amended to read as follows: |
d. | Section 5.01 (Financial Covenants; Borrowing Base and Other Information) shall be amended such that clause (e) thereof shall read as follows: |
e. | Section 6.12(a) (Financial Covenants – Minimum EBITDA) shall be amended in its entirety to read as follows: |
2. | Based on my knowledge, this 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 report; |
3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this 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 report; |
4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
August 25, 2016 | |
/s/ Michael J. Koss | |
Michael J. Koss | |
Chief Executive Officer and President | |
2. | Based on my knowledge, this 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 report; |
3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this 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 report; |
4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
August 25, 2016 | |
/s/ David D. Smith | |
David D. Smith | |
Executive Vice President and | |
Chief Financial Officer |
/s/ Michael J. Koss | |
Michael J. Koss | |
Chief Executive Officer and President | |
August 25, 2016 |
/s/ David D. Smith | |
David D. Smith | |
Executive Vice President and | |
Chief Financial Officer | |
August 25, 2016 |
Document and Entity Information Document - USD ($) |
12 Months Ended | ||
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Jun. 30, 2016 |
Aug. 15, 2016 |
Dec. 31, 2015 |
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Entity Information [Line Items] | |||
Entity Registrant Name | KOSS CORP | ||
Entity Central Index Key | 0000056701 | ||
Current Fiscal Year End Date | --06-30 | ||
Entity Filer Category | Smaller Reporting Company | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2016 | ||
Document Fiscal Year Focus | 2016 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 7,382,706 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 5,218,556 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
12 Months Ended | |
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Jun. 30, 2016 |
Jun. 30, 2015 |
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Net sales | $ 26,001,346 | $ 24,230,056 |
Cost of goods sold | 17,058,774 | 15,781,489 |
Gross profit | 8,942,572 | 8,448,567 |
Operating expenses: | ||
Selling, general and administrative expenses | 7,959,460 | 7,904,739 |
Unauthorized transaction related (recoveries) costs, net | (1,286,001) | 31,027 |
Other expense (income): | ||
Interest expense | 6,075 | 12,813 |
Income before income tax provision | 2,263,038 | 499,988 |
Income tax provision | 874,038 | 17,375 |
Net income | $ 1,389,000 | $ 482,613 |
Income per common share: | ||
Basic | $ 0.19 | $ 0.07 |
Diluted | $ 0.19 | $ 0.07 |
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Allowance for doubtful accounts | $ 55,175 | $ 26,052 |
Common stock, par value | $ 0.005 | $ 0.005 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 7,382,706 | 7,382,706 |
Common stock, shares outstanding | 7,382,706 | 7,382,706 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) |
Total |
Common Stock |
Common Stock |
Paid in Capital |
Retained Earnings |
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Shares outstanding at period start (in shares) at Jun. 30, 2014 | 7,382,706 | ||||
Stockholders' equity at period start at Jun. 30, 2014 | $ 15,239,867 | $ 36,914 | $ 3,996,242 | $ 11,206,711 | |
Increase (decrease) in stockholders' equity [Roll Forward] | |||||
Net income | 482,613 | 482,613 | |||
Stock-based compensation expense | 630,539 | 630,539 | |||
Shares outstanding at period end (in shares) at Jun. 30, 2015 | 7,382,706 | ||||
Stockholders' equity at period end at Jun. 30, 2015 | 16,353,019 | 36,914 | 4,626,781 | 11,689,324 | |
Increase (decrease) in stockholders' equity [Roll Forward] | |||||
Net income | 1,389,000 | 1,389,000 | |||
Stock-based compensation expense | 444,175 | 444,175 | |||
Shares outstanding at period end (in shares) at Jun. 30, 2016 | 7,382,706 | ||||
Stockholders' equity at period end at Jun. 30, 2016 | $ 18,186,194 | $ 36,914 | $ 5,070,956 | $ 13,078,324 |
SIGNIFICANT ACCOUNTING POLICIES (Notes) |
12 Months Ended |
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Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | NATURE OF BUSINESS — Koss Corporation ("Koss"), a Delaware corporation, and its 100%-owned subsidiary (collectively the "Company"), reports its finances as a single reporting segment, as the Company’s principal business line is the design, manufacture and sale of stereo headphones and related accessories. The Company leases its plant and office in Milwaukee, Wisconsin. The domestic market is served by domestic sales representatives and independent manufacturers' representatives working directly with certain retailers, distributors, and original equipment manufacturers. International markets are served by domestic sales representatives and sales offices in the Netherlands and Russia which utilize independent distributors in several foreign countries. The Company has one subsidiary, Koss U.K. Limited ("Koss UK"), which was formed to comply with certain European Union ("EU") requirements. Koss UK is non-operating and holds no assets. BASIS OF CONSOLIDATION — The consolidated financial statements include the accounts of Koss and its subsidiary, Koss UK, which is a 100%-owned subsidiary. All significant intercompany accounts and transactions have been eliminated. REVENUE RECOGNITION — The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; shipment and delivery have occurred; the seller’s price to the buyer is fixed and determinable; and collectibility is reasonably assured. When these criteria are generally satisfied, the Company recognizes revenue. The Company also offers certain customers the right to return products that do not meet the standards agreed with the customer. The Company continuously monitors such product returns and cannot guarantee that they will continue to experience the same return rates that they have experienced in the past. The Company records a provision for estimated returns based on prior product rates of return. Any significant increase in product quality failure rates and the resulting credit returns could have a material adverse impact on the Company’s operating results for the period or periods in which such returns materialize. The Company provides for certain sales incentives. The Company records a provision for estimated incentives based upon the incentives offered to customers on product related sales in the same period as the related revenues are recorded. The provision is recorded as a reduction of sales. The Company also records a provision for estimated sales returns and allowances on product related sales in the same period as the related revenues are recorded. These estimates are based on historical sales returns, analysis of credit memo data and other known factors. If the historical data the Company uses to calculate these estimates does not properly reflect future returns, adjustments may be required in future periods. SHIPPING AND HANDLING FEES AND COSTS — Shipping and handling costs charged to customers have been included in net sales. Shipping and handling costs incurred by the Company have been included in cost of goods sold. RESEARCH AND DEVELOPMENT — Research and development activities charged to operations as a component of selling, general and administrative expenses in the accompanying Consolidated Statements of Income amounted to $91,259 in fiscal year 2016. There were no research and development activities charged to operations in fiscal year 2015. ADVERTISING COSTS — Advertising costs included within selling, general and administrative expenses in the accompanying Consolidated Statements of Income were $143,518 in 2016 and $154,505 in 2015. Such costs are expensed as incurred. INCOME TAXES — The Company operates as a C Corporation under the Internal Revenue Code of 1986, as amended (the "Code"). Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred income tax assets and liabilities are adjusted through the provision for income taxes. The differences relate principally to different methods used for depreciation and amortization for income tax purposes, net operating losses, capitalization requirements of the Code, allowances for doubtful accounts, provisions for excess and obsolete inventory, stock-based compensation, warranty reserves, and other income tax related carryforwards. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. INCOME PER COMMON AND COMMON STOCK EQUIVALENT SHARE — Income per common and common stock equivalent share is calculated under the provisions of Topic 260 in the Accounting Standards Codification ("ASC") which provides for calculation of “basic” and “diluted” income per share. Basic income per common and common stock equivalent share includes no dilution and is computed by dividing net income by the weighted average common shares outstanding for the period. Diluted income per common and common stock equivalent share reflects the potential dilution of securities that could share in the earnings of an entity. See Note 11 for additional information on income per common and common stock equivalent share. CASH AND CASH EQUIVALENTS — The Company considers depository accounts and investments with a maturity at the date of acquisition and expected usage of three months or less to be cash and cash equivalents. The Company maintains its cash on deposit at a commercial bank located in the United States of America. The Company periodically has cash balances in excess of insured amounts. The Company has not experienced and does not expect to incur any losses on these deposits. ACCOUNTS RECEIVABLE — Accounts receivable consists of unsecured trade receivables due from customers. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due item and general economic conditions. See Note 3 for additional information on accounts receivable. INVENTORIES — The Company’s inventory is valued at the lower of last-in, first-out ("LIFO") cost or market. The carrying value of inventory is reviewed for impairment on at least a quarterly basis or more frequently if warranted due to changes in market conditions. See Note 4 for additional information on inventory. EQUIPMENT AND LEASEHOLD IMPROVEMENTS — Equipment and leasehold improvements are stated at cost. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Major expenditures for property and equipment and significant renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation and amortization are removed from the accounts and any resulting gains or losses are included in operations. LIFE INSURANCE POLICIES — Life insurance policies are stated at cash surrender value or at the amount the Company would receive in the case of split-dollar arrangements. Increases in cash surrender value are included in selling, general and administrative expenses in the Consolidated Statements of Income, which is where the annual premiums are recorded. PRODUCT WARRANTY OBLIGATIONS — Estimated future warranty costs related to products are charged to cost of goods sold during the period the related revenue is recognized. The product warranty liability reflects the Company’s best estimate of probable obligations under those warranties. See Note 9 for additional information on product warranty obligations. DEFERRED COMPENSATION — The Company’s deferred compensation liabilities are for a current and former officer and are calculated based on compensation, years of service 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 Consolidated Statements of Income. See Note 10 for additional information on deferred compensation. FAIR VALUE OF FINANCIAL INSTRUMENTS — Cash equivalents, accounts receivable and accounts payable approximate fair value based on the short maturity of these instruments. IMPAIRMENT OF LONG-LIVED ASSETS — The Company evaluates the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company evaluates the recoverability of equipment and leasehold improvements annually or more frequently if events or circumstances indicate that an asset might be impaired. If an asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Management determines fair value using a undiscounted future cash flow analysis or other accepted valuation techniques. No impairments of the Company's long-lived assets were recorded in the years ended June 30, 2016 and 2015. LEGAL COSTS — All legal costs related to litigation are charged to operations as incurred, except settlements, which are expensed when a claim is probable and can be estimated. Recoveries of legal costs are recorded when the amount and items to be paid are confirmed by the insurance company. Proceeds from the settlement of legal disputes are recorded in income when the amounts are determinable and the collection is certain. STOCK-BASED COMPENSATION — The Company has a stock-based employee compensation plan, which is described more fully in Note 12. The Company accounts for stock-based compensation in accordance with ASC 718 "Compensation - Stock Compensation". Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. NEW ACCOUNTING PRONOUNCEMENTS — Accounting Standards Update ("ASU") No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, is part of the Financial Accounting Standards Board ("FASB") simplification initiative. This update requires deferred tax assets and liabilities to be classified as noncurrent in a classified statement of financial position. The Company adopted this update retrospectively during the year ended June 30, 2016 and has reflected the change on the Consolidated Balance Sheets. The adoption of this ASU had no impact on the valuation of the Company's deferred tax assets and liabilities, only the classification of the items on the Consolidated Balance Sheets. USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS — Certain amounts previously reported have been reclassified to conform to the current presentation. |
UNAUTHORIZED TRANSACTION RELATED RECOVERIES (Notes) |
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Unauthorized Transactions, Costs and Related Recoveries, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unauthorized Transaction Related Costs and Recoveries | In December 2009, the Company learned of significant unauthorized transactions as previously reported. The Company has ongoing costs and recoveries associated with the unauthorized transactions. For the fiscal years ended June 30, 2016 and 2015, the costs incurred were for legal fees related to claims initiated against third parties (see Note 18). During the year ended June 30, 2016, the Company had net recoveries as a result of settling one of its claims for a gross amount of $3,000,000. For the fiscal years ended June 30, 2016 and 2015, the costs and recoveries were as follows:
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ACCOUNTS RECEIVABLE (Notes) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts receivable includes unsecured trade receivables due from customers. The Company performs credit evaluations of its customers and does not require collateral to establish an account receivable. Accounts receivable from the Company's two largest customers represented approximately 18% and 26% of trade account receivables as of June 30, 2016 and 2015, respectively. The Company evaluates collectibility of accounts receivable based on a number of factors. Accounts receivable are considered to be past due if unpaid one day after their due date. An allowance for doubtful accounts is recorded for past due receivable balances based on a review of the past due item and general economic conditions. The Company writes off accounts receivable when they become uncollectible. Changes in the allowance for doubtful accounts were as follows:
The vast majority of international customers, outside of Canada, purchase products on a cash against documents or cash in advance basis. Approximately 28% and 5% of the Company's trade accounts receivable at June 30, 2016 and 2015, were foreign receivables denominated in U.S. dollars. |
INVENTORIES (Notes) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | As of June 30, 2016 and 2015, the Company’s inventory was valued using the lower of last-in, first-out (“LIFO”) cost or market. If the first-in, first-out (“FIFO”) method of inventory accounting had been used by the Company for inventories valued at LIFO, inventories would have been $471,174 and $753,439 higher than reported at June 30, 2016 and 2015, respectively. The components of inventories at June 30, 2016 and 2015 were as follows:
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EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Notes) |
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Property, Plant and Equipment, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equipment and Leasehold Improvements | The major categories of equipment and leasehold improvements at June 30, 2016 and 2015 are summarized as follows:
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INCOME TAXES (Notes) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | The Company utilizes the liability method of accounting for income taxes. The liability method measures the expected income tax impact of future taxable income and deductions implicit in the Consolidated Balance Sheets. The income tax provision in 2016 and 2015 consisted of the following:
The 2016 and 2015 tax results in an effective rate different than the federal statutory rate because of the following:
Temporary differences which give rise to deferred income tax assets and liabilities at June 30, 2016 and June 30, 2015 include:
Deferred income tax balances reflect the effects of temporary differences between the tax bases of assets and liabilities and their carrying amounts. These differences are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. The recognition of these deferred tax balances will be realized through normal recurring operations and, as such, the Company has recorded the full value of such expected benefits. The Company has no federal net operating loss carryforwards as of June 30, 2016. The Company has net operating loss carryforwards in the state of Wisconsin totaling $5,892,509 which expire in fiscal years 2030 through 2035. In addition, the Company has operating loss carryforwards in other states totaling $324,326, which expire in fiscal years 2026 through 2035. ASC Topic 740 "Income Taxes" prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. There were no additional significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return that have been recorded on the Company’s consolidated financial statements for the year ended June 30, 2016. Additionally, ASC Topic 740 provides guidance on the recognition of interest and penalties related to income taxes. No interest or penalties related to income taxes has been accrued or recognized as of and for the years ended June 30, 2016 and 2015. The Company records interest related to unrecognized tax benefits in interest expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
In the fiscal year ended June 30, 2015, the Company settled its position with a state tax authority and reduced the unrecognized tax benefits to zero. The Company does not believe it has any unrecognized tax benefits as of June 30, 2016. Any changes to the Company's unrecognized tax benefits during the fiscal years ended June 30, 2016 and 2015 would impact the effective tax rate. The Company files income tax returns in the United States federal jurisdiction and in several state jurisdictions. The Company’s federal tax returns for tax years beginning July 1, 2012 or later are open. For states in which the Company files state income tax returns, the statute of limitations is generally open for tax years ended June 30, 2012 and forward. The following are the changes in the valuation allowance:
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CREDIT FACILITY (Notes) |
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Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Credit Facility | On May 12, 2010, the Company entered into a secured credit facility ("Credit Agreement") with JPMorgan Chase Bank, N.A. (“Lender”). The Credit Agreement provided for an $8,000,000 revolving secured credit facility with interest rates either ranging from 0.0% to 0.75% over the Lender’s most recently publicly announced prime rate or 2.0% to 3.0% over LIBOR, depending on the Company’s leverage ratio. The Company pays a fee of 0.3% to 0.45% for unused amounts committed in the credit facility. On July 23, 2014, the Credit Agreement was amended to reduce the facility to $5,000,000, subject to a borrowing base calculation as defined in the Credit Agreement, and to amend certain financial covenants. On May 31, 2016, the Credit Agreement was amended to extend the expiration to July 31, 2018, and to amend certain financial covenants. In addition to the revolving loans, the Credit Agreement also provides that the Company may, from time to time, request the Lender to issue letters of credit for the benefit of the Company up to a sublimit of $2,000,000 and subject to certain other limitations. The loans may be used only for general corporate purposes of the Company. The Credit Agreement contains certain affirmative, negative and financial covenants customary for financings of this type. The negative covenants include restrictions on other indebtedness, liens, fundamental changes, certain investments, asset sales, sale and leaseback transactions and transactions with affiliates, among other restrictions. The financial covenants include minimum debt service coverage ratio requirements. The Company and the Lender also entered into the Pledge and Security Agreement dated May 12, 2010, 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. As of June 30, 2016 and 2015, there were no outstanding borrowings on the facility. The Company incurs interest expense primarily related to its secured credit facility. Interest expense was $6,075 and $12,813 for the years ended June 30, 2016 and 2015, respectively. |
ACCRUED LIABILITIES (Notes) |
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Accrued Liabilities, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities | Accrued liabilities for the years ended June 30, 2016 and 2015 are as follows:
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PRODUCT WARRANTY OBLIGATIONS (Notes) |
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Product Warranty Obligations | The Company records a liability for product warranty obligations at the time of sale based upon historical warranty experience. The majority of the Company’s products carry a lifetime warranty. The Company also records a liability for specific warranty matters when they become known and are reasonably estimated. However, the Company is continuously releasing new and more complex and technologically advanced products. Even though some of these products have a shorter warranty period, it is at least reasonably possible that products could be released with certain unknown quality or design problems resulting in higher than expected warranty and related costs. These costs could have a materially adverse effect on the Company's results of operations and financial condition in the near term. The Company’s current and non-current product warranty obligations are included in accrued liabilities and other liabilities, respectively, in the Consolidated Balance Sheets. Changes to the product warranty obligations for the years ended June 30, 2016 and 2015 are as follows:
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DEFERRED COMPENSATION (Notes) |
12 Months Ended |
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Jun. 30, 2016 | |
Deferred Compensation [Abstract] | |
Deferred Compensation | The Company has deferred compensation agreements with a former and current officer. 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 Consolidated Statements of Income. The Company's current and non-current deferred compensation obligations are included in accrued liabilities and deferred compensation, respectively, in the Consolidated Balance Sheets. The net present value was calculated for the former officer using a discount factor of 2.60% and 2.70% as of June 30, 2016 and 2015, respectively. The net present value was calculated for the current officer using a discount factor of 4.80% and 4.80% at June 30, 2016 and 2015, respectively. The Board of Directors entered into an agreement to continue the 1991 base salary of the former chairman for the remainder of his life. These payments began in the fiscal year ended June 30, 2015, and payments of $150,000 and $50,000 were made under this arrangement for the years ended June 30, 2016 and 2015, respectively. The Company has a deferred compensation liability of $772,026 and $820,720 recorded as of June 30, 2016 and 2015, respectively. Deferred compensation expense of $101,306 and $166,414 was recognized under this arrangement in 2016 and 2015, respectively. The Board of Directors has approved a supplemental retirement plan with an officer that calls for annual cash compensation following retirement from the Company in an amount equal to 2% of base salary, as defined in the agreement, multiplied by the number of years of service to the Company. The retirement payments are to be paid monthly to the officer until his death and then to his surviving spouse monthly until her death. The Company has a deferred compensation liability of $1,565,688 and $1,436,766 recorded as of June 30, 2016 and 2015, respectively. Deferred compensation expense of $128,922 and a reversal of deferred compensation expense of $179,019 was recognized under this arrangement in 2016 and 2015, respectively. The Company uses life insurance policies to provide funds to meet its deferred compensation obligations. |
INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE (Notes) |
12 Months Ended |
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Jun. 30, 2016 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Income Per Common and Common Stock Equivalent Share | Basic income per share is computed based on the weighted-average number of common shares outstanding. The weighted-average number of common shares outstanding was 7,382,706 for the years ended June 30, 2016 and 2015. When dilutive, stock options are included in income per share as share equivalents using the treasury stock method. For the years ended June 30, 2016 and 2015 there were no common stock equivalents related to stock option grants that were included in the computation of the weighted-average number of shares outstanding for diluted income per share. Shares issuable upon the exercise of outstanding options of 2,140,000 and 2,245,000 were excluded from the diluted weighted average common shares outstanding for the years ended June 30, 2016 and 2015, respectively, as they would be anti-dilutive. |
STOCK OPTIONS (Notes) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options | In 2012, pursuant to the recommendation of the Board of Directors, the stockholders ratified the creation of the Company’s 2012 Omnibus Incentive Plan (the “2012 Plan”), which superseded the 1990 Flexible Incentive Plan (the "1990 Plan"). The 2012 Plan is administered by a committee of the Board of Directors and provides for granting of various stock-based awards including stock options to eligible participants, primarily officers and certain key employees. A total of 2,000,000 shares of common stock were available under the terms of the 2012 Plan plus shares outstanding under the 1990 Plan which expire or are otherwise forfeited, canceled or terminated after July 25, 2012, the Effective Date of the 2012 Plan. As of June 30, 2016, there were 1,374,308 options available for future grants. Options vest over a three to five year period from the date of grant, with a maximum term of five to ten years. 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 expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the expected term and vesting schedules. The expected volatility is determined based on the Company’s historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based on historical data. As of June 30, 2016, there was $690,190 of total unrecognized compensation cost related to stock options granted under the 2012 Plan and 1990 Plan. This cost is expected to be recognized over a weighted average period of 2.30 years. Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures. The Company recognized stock-based compensation expense of $444,175 and $630,539 in 2016 and 2015, respectively. These expenses were included in selling, general and administrative expenses. There was no cash received from stock option exercises during 2016 or 2015. Options are granted at a price equal to or greater than the market value of the common stock on the date of grant. The per share weighted average fair value of the stock options granted during the years ended June 30, 2016 and 2015 were $0.75 and $0.73, respectively. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. For the options granted in 2016 and 2015, the Company used the following weighted-average assumptions:
The following table identifies options granted, exercised, canceled, or available for exercise pursuant to the 1990 Plan and the 2012 Plan:
A summary of intrinsic value and cash received from stock option exercises and fair value of vested stock options for the fiscal years ended June 30, 2016 and 2015 is as follows:
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STOCK REPURCHASE PROGRAM (Notes) |
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Jun. 30, 2016 | |
Stock Purchase Agreement Disclosure [Abstract] | |
Stock Purchase Agreements | The Company has an agreement with the former chairman, in the event of his death, at the request of the executor of his estate, to repurchase his Company common stock from his estate. The Company does not have the right to require the estate to sell stock to the Company. 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. As of June 30, 2016, the estate of the former chairman does not hold a material amount of Company stock. As such, there is no exposure that the executor of the former chairman's estate may require the Company to repurchase a material amount of stock in the event of his death. The repurchase price is 95% of the fair market value of the common stock on the date that notice to repurchase is provided to the Company. 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 his 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 at the prime rate of interest for the balance payable over four years. The Company maintains a $1,150,000 life insurance policy to fund a substantial portion of this obligation. In April 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 amount authorized for repurchase under the program. As of June 30, 2016, the Board had authorized the repurchase of an aggregate of $45,500,000 of common stock under the stock repurchase program, of which $43,360,247 had been expended. No shares were repurchased in 2016 or 2015. |
ADDITIONAL CASH FLOW INFORMATION (Notes) |
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Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional Cash Flow Information | The net changes in cash as a result of changes in operating assets and liabilities consist of the following:
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EMPLOYEE BENEFIT PLANS (Notes) |
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Jun. 30, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Employee Benefit Plans | Substantially all domestic employees are participants in the Koss Employee Stock Ownership Trust (KESOT) under which an annual contribution in either cash or common stock may be made at the discretion of the Board of Directors. No contributions were made for the fiscal years 2016 or 2015. The Company maintains a retirement savings plan under Section 401(k) of the Internal Revenue Code. This plan covers all employees of the Company who have completed one full fiscal quarter of service. Matching contributions can be made at the discretion of the Board of Directors. For fiscal years 2016 and 2015, the matching contribution was 50% and 25% of employee contributions to the plan, respectively. Vesting of Company contributions occurs immediately. Company contributions were $186,877 and $91,354 during 2016 and 2015, respectively. |
FOREIGN SALES AND SIGNIFICANT CUSTOMERS (Notes) |
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Foreign Sales and Significant Customers [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Sales and Significant Customers | The Company’s net foreign sales amounted to $10,504,583 during 2016 and $7,450,744 during 2015. The Company’s sales by country were as follows:
Sales during 2016 and 2015 to the Company's five largest customers, which are generally large national retailers or foreign distributors, represented approximately 47% and 45% of the Company's net sales, respectively. Included in these percentages were sales to a single Scandinavian distributor which represented approximately 17% and 15% of the Company's net sales during 2016 and 2015, respectively. Net sales to a single United States customer represented approximately 11% and 8% of the Company's net sales during 2016 and 2015, respectively. |
COMMITMENTS AND CONTINGENCIES (Notes) |
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Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | The Company leases its facility in Milwaukee, Wisconsin from Koss Holdings, LLC, which is wholly-owned by the former chairman. On May 15, 2012, the lease was renewed for a period of five years, ending June 30, 2018, and is being accounted for as an operating lease. The lease extension maintained the rent at a fixed rate of $380,000 per year. The Company is responsible for all property maintenance, insurance, taxes and other normal expenses related to ownership. Total rent expense was $380,000 in both 2016 and 2015. |
LEGAL MATTERS (Notes) |
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Jun. 30, 2016 | |||||
Commitments and Contingencies Disclosure [Abstract] | |||||
Legal Matters | As of June 30, 2016, the Company is party to the following matter related to the unauthorized transactions described below:
The ultimate resolution of this matter is not determinable unless otherwise noted. We also are subject to a variety of other claims and suits that arise from time to time in the ordinary course of our business. Although management currently believes that resolving these claims against us, individually or in aggregate, will not have a material adverse impact on our consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Consolidation | BASIS OF CONSOLIDATION — The consolidated financial statements include the accounts of Koss and its subsidiary, Koss UK, which is a 100%-owned subsidiary. All significant intercompany accounts and transactions have been eliminated. |
Revenue Recognition | REVENUE RECOGNITION — The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; shipment and delivery have occurred; the seller’s price to the buyer is fixed and determinable; and collectibility is reasonably assured. When these criteria are generally satisfied, the Company recognizes revenue. The Company also offers certain customers the right to return products that do not meet the standards agreed with the customer. The Company continuously monitors such product returns and cannot guarantee that they will continue to experience the same return rates that they have experienced in the past. The Company records a provision for estimated returns based on prior product rates of return. Any significant increase in product quality failure rates and the resulting credit returns could have a material adverse impact on the Company’s operating results for the period or periods in which such returns materialize. The Company provides for certain sales incentives. The Company records a provision for estimated incentives based upon the incentives offered to customers on product related sales in the same period as the related revenues are recorded. The provision is recorded as a reduction of sales. The Company also records a provision for estimated sales returns and allowances on product related sales in the same period as the related revenues are recorded. These estimates are based on historical sales returns, analysis of credit memo data and other known factors. If the historical data the Company uses to calculate these estimates does not properly reflect future returns, adjustments may be required in future periods. |
Shipping and Handling Fees and Costs | SHIPPING AND HANDLING FEES AND COSTS — Shipping and handling costs charged to customers have been included in net sales. Shipping and handling costs incurred by the Company have been included in cost of goods sold. |
Research and Development | RESEARCH AND DEVELOPMENT — Research and development activities charged to operations as a component of selling, general and administrative expenses in the accompanying Consolidated Statements of Income amounted to $91,259 in fiscal year 2016. There were no research and development activities charged to operations in fiscal year 2015. |
Advertising Costs | ADVERTISING COSTS — Advertising costs included within selling, general and administrative expenses in the accompanying Consolidated Statements of Income were $143,518 in 2016 and $154,505 in 2015. Such costs are expensed as incurred. |
Income Taxes | INCOME TAXES — The Company operates as a C Corporation under the Internal Revenue Code of 1986, as amended (the "Code"). Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred income tax assets and liabilities are adjusted through the provision for income taxes. The differences relate principally to different methods used for depreciation and amortization for income tax purposes, net operating losses, capitalization requirements of the Code, allowances for doubtful accounts, provisions for excess and obsolete inventory, stock-based compensation, warranty reserves, and other income tax related carryforwards. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. |
Income Per Common and Common Stock Equivalent Share | INCOME PER COMMON AND COMMON STOCK EQUIVALENT SHARE — Income per common and common stock equivalent share is calculated under the provisions of Topic 260 in the Accounting Standards Codification ("ASC") which provides for calculation of “basic” and “diluted” income per share. Basic income per common and common stock equivalent share includes no dilution and is computed by dividing net income by the weighted average common shares outstanding for the period. Diluted income per common and common stock equivalent share reflects the potential dilution of securities that could share in the earnings of an entity. See Note 11 for additional information on income per common and common stock equivalent share. |
Cash and Cash Equivalents | CASH AND CASH EQUIVALENTS — The Company considers depository accounts and investments with a maturity at the date of acquisition and expected usage of three months or less to be cash and cash equivalents. The Company maintains its cash on deposit at a commercial bank located in the United States of America. The Company periodically has cash balances in excess of insured amounts. The Company has not experienced and does not expect to incur any losses on these deposits. |
Accounts Receivable | ACCOUNTS RECEIVABLE — Accounts receivable consists of unsecured trade receivables due from customers. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due item and general economic conditions. See Note 3 for additional information on accounts receivable. |
Inventories | INVENTORIES — The Company’s inventory is valued at the lower of last-in, first-out ("LIFO") cost or market. The carrying value of inventory is reviewed for impairment on at least a quarterly basis or more frequently if warranted due to changes in market conditions. See Note 4 for additional information on inventory. |
Equipment and Leasehold Improvements | EQUIPMENT AND LEASEHOLD IMPROVEMENTS — Equipment and leasehold improvements are stated at cost. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Major expenditures for property and equipment and significant renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation and amortization are removed from the accounts and any resulting gains or losses are included in operations. |
Life Insurance Policies | LIFE INSURANCE POLICIES — Life insurance policies are stated at cash surrender value or at the amount the Company would receive in the case of split-dollar arrangements. Increases in cash surrender value are included in selling, general and administrative expenses in the Consolidated Statements of Income, which is where the annual premiums are recorded. |
Product Warranty Obligations | PRODUCT WARRANTY OBLIGATIONS — Estimated future warranty costs related to products are charged to cost of goods sold during the period the related revenue is recognized. The product warranty liability reflects the Company’s best estimate of probable obligations under those warranties. See Note 9 for additional information on product warranty obligations. |
Deferred Compensation | DEFERRED COMPENSATION — The Company’s deferred compensation liabilities are for a current and former officer and are calculated based on compensation, years of service 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 Consolidated Statements of Income. See Note 10 for additional information on deferred compensation. |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS — Cash equivalents, accounts receivable and accounts payable approximate fair value based on the short maturity of these instruments. |
Impairment of Long-Lived Assets | IMPAIRMENT OF LONG-LIVED ASSETS — The Company evaluates the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company evaluates the recoverability of equipment and leasehold improvements annually or more frequently if events or circumstances indicate that an asset might be impaired. If an asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Management determines fair value using a undiscounted future cash flow analysis or other accepted valuation techniques. No impairments of the Company's long-lived assets were recorded in the years ended June 30, 2016 and 2015. |
Legal Costs | LEGAL COSTS — All legal costs related to litigation are charged to operations as incurred, except settlements, which are expensed when a claim is probable and can be estimated. Recoveries of legal costs are recorded when the amount and items to be paid are confirmed by the insurance company. Proceeds from the settlement of legal disputes are recorded in income when the amounts are determinable and the collection is certain. |
Stock-Based Compensation | STOCK-BASED COMPENSATION — The Company has a stock-based employee compensation plan, which is described more fully in Note 12. The Company accounts for stock-based compensation in accordance with ASC 718 "Compensation - Stock Compensation". Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. |
New Accounting Pronouncements | NEW ACCOUNTING PRONOUNCEMENTS — Accounting Standards Update ("ASU") No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, is part of the Financial Accounting Standards Board ("FASB") simplification initiative. This update requires deferred tax assets and liabilities to be classified as noncurrent in a classified statement of financial position. The Company adopted this update retrospectively during the year ended June 30, 2016 and has reflected the change on the Consolidated Balance Sheets. |
Use of Estimates | USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Reclassifications | RECLASSIFICATIONS — Certain amounts previously reported have been reclassified to conform to the current presentation. |
UNAUTHORIZED TRANSACTION RELATED RECOVERIES (Tables) |
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Unauthorized Transaction Related Costs and Recoveries | For the fiscal years ended June 30, 2016 and 2015, the costs and recoveries were as follows:
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ACCOUNTS RECEIVABLE (Tables) |
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Change in the Allowance for Doubtful Accounts | Changes in the allowance for doubtful accounts were as follows:
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INVENTORIES (Tables) |
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Schedule of Inventory, Current | The components of inventories at June 30, 2016 and 2015 were as follows:
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EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Tables) |
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Property, Plant and Equipment, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | The major categories of equipment and leasehold improvements at June 30, 2016 and 2015 are summarized as follows:
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) | The income tax provision in 2016 and 2015 consisted of the following:
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Schedule of Effective Income Tax Rate Reconciliation | The 2016 and 2015 tax results in an effective rate different than the federal statutory rate because of the following:
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Schedule of Deferred Tax Assets and Liabilities | Temporary differences which give rise to deferred income tax assets and liabilities at June 30, 2016 and June 30, 2015 include:
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Summary of Positions for which Significant Change in Unrecognized Tax Benefits is Reasonably Possible | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
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Summary of Valuation Allowance | The following are the changes in the valuation allowance:
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ACCRUED LIABILITIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Liabilities | Accrued liabilities for the years ended June 30, 2016 and 2015 are as follows:
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PRODUCT WARRANTY OBLIGATIONS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Standard Product Warranty Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Product Warranty Liability | Changes to the product warranty obligations for the years ended June 30, 2016 and 2015 are as follows:
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STOCK OPTIONS (Tables) |
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | For the options granted in 2016 and 2015, the Company used the following weighted-average assumptions:
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Schedule of Share-based Compensation - Options Granted, Exercised, Cancelled, or Available for Exercise | The following table identifies options granted, exercised, canceled, or available for exercise pursuant to the 1990 Plan and the 2012 Plan:
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Intrinsic Value and Cash Received from Stock Option Exercises and Fair Value of Vested Stock Options | A summary of intrinsic value and cash received from stock option exercises and fair value of vested stock options for the fiscal years ended June 30, 2016 and 2015 is as follows:
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ADDITIONAL CASH FLOW INFORMATION (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash Flow, Supplemental Disclosures | The net changes in cash as a result of changes in operating assets and liabilities consist of the following:
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FOREIGN SALES AND SIGNIFICANT CUSTOMERS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Sales and Significant Customers [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales by Country | The Company’s sales by country were as follows:
|
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Accounting Policies [Abstract] | ||
Wholly owned former subsidiary, ownership percentage | 100.00% | |
Research and development expensed | $ 91,259 | $ 0 |
Advertising costs expensed | $ 143,518 | $ 154,505 |
UNAUTHORIZED TRANSACTION RELATED RECOVERIES (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Unauthorized Transactions, Costs and Related Recoveries, Net [Abstract] | |||
Legal fees incurred | $ 1,714,074 | $ 152,492 | |
Gross proceeds from the settlement of the third party lawsuit | $ 3,000,000 | 3,000,000 | 0 |
Proceeds from asset forfeitures | (75) | (121,465) | |
Unauthorized transaction related (recoveries) costs, net | $ (1,286,001) | $ 31,027 |
ACCOUNTS RECEIVABLE, CHANGE IN ALLOWANCE FOR DOUBTFUL ACCOUNTS (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2014 |
|
Receivables [Abstract] | |||
Provision for doubtful accounts | $ 28,514 | $ 25,725 | |
Amounts written-off | 447 | 20,174 | |
Recoveries of previously written-off | 1,056 | 0 | |
Allowance for doubtful accounts | $ 55,175 | $ 26,052 | $ 20,501 |
ACCOUNTS RECEIVABLE, NARRATIVE (Details) |
Jun. 30, 2016
Rate
|
Jun. 30, 2015
Rate
|
---|---|---|
Receivables [Abstract] | ||
Trade accounts receivable, two largest customers, percentage | 18.00% | 26.00% |
Foreign trade accounts receivable, denominated in US dollars, percentage | 28.00% | 5.00% |
INVENTORIES, NARRATIVE (Details) - USD ($) |
Jun. 30, 2016 |
Jun. 30, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
LIFO reserve | $ 471,174 | $ 753,439 |
INVENTORIES, COMPONENTS OF INVENTORIES (Details) - USD ($) |
Jun. 30, 2016 |
Jun. 30, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 3,466,907 | $ 5,374,333 |
Finished goods | 7,570,026 | 6,246,072 |
Gross inventory | 11,036,933 | 11,620,405 |
Reserve for obsolete inventory | (2,441,448) | (4,437,965) |
Total inventories | $ 8,595,485 | $ 7,182,440 |
INCOME TAXES, TAX PROVISION (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||
Federal | $ 169,350 | $ (100,126) |
State | 2,675 | (167,282) |
Deferred Federal, State and Local, Tax Expense (Benefit) | 702,013 | 284,783 |
Total income tax provision | $ 874,038 | $ 17,375 |
INCOME TAXES, EFFECTIVE TAX RATE RECONCILIATION (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||
Federal income tax expense at statutory rate | $ 769,433 | $ 169,996 |
State income tax expense (benefit), net of federal income tax benefit | 91,660 | (21,442) |
Decrease in valuation allowance | (370,000) | 0 |
Stock-based compensation | 447,180 | 53,596 |
Adjustments for unrecognized tax benefits | 0 | (175,000) |
Other | (64,235) | (9,775) |
Total income tax provision | $ 874,038 | $ 17,375 |
INCOME TAXES, TEMPORARY DIFFERENCES (Details) - USD ($) |
Jun. 30, 2016 |
Jun. 30, 2015 |
---|---|---|
Deferred Income Tax Assets: | ||
Deferred compensation | $ 864,954 | $ 835,270 |
Stock-based compensation | 603,159 | 889,325 |
Accrued expenses and reserves | 1,390,910 | 2,075,601 |
Federal and state net operating loss carryforwards | 418,296 | 463,237 |
Valuation allowance | (409) | (370,409) |
Equipment and leasehold improvements | 0 | 11,566 |
Other | 5,979 | 14,650 |
Total deferred income tax assets | 3,282,889 | 3,919,240 |
Deferred Income Tax Liabilities: | ||
Equipment and leasehold improvements | (67,390) | 0 |
Other | (2,943) | (4,671) |
Net deferred income tax assets | $ 3,212,556 | $ 3,914,569 |
INCOME TAXES, NARRATIVE (Details) - USD ($) |
Jun. 30, 2016 |
Jun. 30, 2015 |
---|---|---|
Operating Loss Carryforwards [Line Items] | ||
Unrecognized tax benefits that would impact effective tax rate | $ 0 | $ 0 |
Internal Revenue Service (IRS) [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards | 0 | |
Wisconsin Department of Revenue [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards | 5,892,509 | |
State and Local Jurisdiction [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards | $ 324,326 |
INCOME TAXES, UNRECOGNIZED TAX BENEFITS (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||
Unrecognized tax benefits at beginning of year | $ 0 | $ 175,000 |
Reductions based on settlements with taxing authorities | 0 | (175,000) |
Unrecognized tax benefits at end of year | $ 0 | $ 0 |
INCOME TAXES, VALUATION ALLOWANCE (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Movement in Valuation Allowances and Reserves [Roll Forward] | ||
Balance, beginning of year | $ (370,409) | |
Balance, end of year | (409) | $ (370,409) |
Valuation Allowance of Deferred Tax Assets [Member] | ||
Movement in Valuation Allowances and Reserves [Roll Forward] | ||
Balance, beginning of year | (370,409) | (370,409) |
Increase in valuation allowance | 0 | 0 |
Release of valuation allowance | 370,000 | 0 |
Balance, end of year | $ (409) | $ (370,409) |
ACCRUED LIABILITIES (Details) - USD ($) |
Jun. 30, 2016 |
Jun. 30, 2015 |
---|---|---|
Accrued Liabilities, Current [Abstract] | ||
Cooperative advertising and promotion allowances | $ 479,645 | $ 400,114 |
Product warranty obligations | 305,275 | 312,664 |
Customer credit balances | 47,753 | 261,977 |
Current deferred compensation | 150,000 | 150,000 |
Accrued returns | 140,918 | 97,026 |
Employee benefits | 83,113 | 93,568 |
Legal and professional fees | 127,329 | 70,000 |
Management bonuses and profit-sharing | 147,450 | 71,381 |
Sales commissions and bonuses | 70,050 | 68,890 |
Other | 50,119 | 49,407 |
Total accrued liabilities | $ 1,601,652 | $ 1,575,027 |
PRODUCT WARRANTY OBLIGATIONS (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance, beginning of year | $ 531,891 | $ 722,624 |
Provision charged to expense | 214,827 | 103,925 |
Warranty expenses incurred | (263,188) | (294,658) |
Balance, end of year | $ 483,530 | $ 531,891 |
DEFERRED COMPENSATION (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||
Distributions Paid | $ 150,000 | $ 50,000 |
Liability | $ 2,187,714 | $ 2,107,486 |
Former Chairman of the Board | ||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||
Discount factor | 2.60% | 2.70% |
Liability | $ 772,026 | $ 820,720 |
Expense | $ 101,306 | $ 166,414 |
Officer of Company | ||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||
Discount factor | 4.80% | 4.80% |
Liability | $ 1,565,688 | $ 1,436,766 |
Expense | $ 128,922 | $ (179,019) |
Cash compensation - percent of base salary times number of years of service | 2.00% |
INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE (Details) - shares |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Earnings Per Share, Basic and Diluted [Abstract] | ||
Weighted average number of shares outstanding | 7,382,706 | 7,382,706 |
Common stock equivalents related to stock option grants that were included in the computation of the weighted-average number of shares outstanding | 0 | 0 |
Shares under option excluded as anti-dilutive | 2,140,000 | 2,245,000 |
STOCK OPTIONS, WEIGHTED AVERAGE ASSUMPTIONS (Details) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016
Rate
|
Jun. 30, 2015
Rate
|
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Expected stock price volatility | 50.00% | 43.00% |
Risk free interest rate | 1.48% | 1.52% |
Expected dividend yield | 4.00% | 4.00% |
Expected forfeitures | 5.60% | 1.50% |
Expected life of options | 4 years 6 months | 4 years 7 months 7 days |
STOCK OPTIONS, INTRINSIC VALUE AND CASH RECEIVED ON EXERCISES, FAIR VALUE OF VESTED OPTIONS (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Total intrinsic value of stock options exercised | $ 0 | $ 0 |
Cash received from stock option exercises | 0 | 0 |
Total fair value of stock options vested | $ 583,727 | $ 696,958 |
STOCK REPURCHASE PROGRAM (Details) |
12 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Stock Purchase Agreement Disclosure [Abstract] | |
Maximum amount Board will approve per repurchase | $ 2,000,000 |
Authorized amount | 45,500,000 |
Inception to date repurchased | $ 43,360,247 |
ADDITIONAL CASH FLOW INFORMATION (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Supplemental Cash Flow Elements [Abstract] | ||
Accounts receivable | $ 735,388 | $ (311,182) |
Inventories | 1,413,045 | 127,508 |
Income taxes receivable | 377,976 | (903,745) |
Prepaid expenses and other current assets | (66,945) | 199,844 |
Income taxes payable | 0 | (175,000) |
Accounts payable | (205,598) | (292,501) |
Accrued liabilities | 26,625 | (2,428,446) |
Other liabilities | (40,972) | (117,545) |
Net change | 2,679,409 | 2,125,917 |
Net cash paid (refunded) during the year for: | ||
Income taxes | 558,202 | (985,585) |
Interest | $ 6,075 | $ 12,813 |
EMPLOYEE BENEFIT PLANS, KOSS EMPLOYEE STOCK OWNERSHIP TRUST (KESOT) (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Compensation and Retirement Disclosure [Abstract] | ||
Koss Employee Stock Ownership Trust (KESOT), cash contributions | $ 0 | $ 0 |
EMPLOYEE BENEFIT PLANS, RETIREMENT SAVINGS PLAN UNDER SECTION 401(K) (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Compensation and Retirement Disclosure [Abstract] | ||
Company match, percentage | 50.00% | 25.00% |
Company contributions | $ 186,877 | $ 91,354 |
FOREIGN SALES AND SIGNIFICANT CUSTOMERS FOREIGN SALES AND SIGNIFICANT CUSTOMERS, NARRATIVE (Details) - Sales Revenue, Net [Member] - Customer Concentration Risk [Member] |
12 Months Ended | |
---|---|---|
Jun. 30, 2016
Rate
|
Jun. 30, 2015
Rate
|
|
Five largest customers [Member] | ||
Concentration Risk [Line Items] | ||
Concentration Risk, Percentage | 47.00% | 45.00% |
Single Scandinavian Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration Risk, Percentage | 17.00% | 15.00% |
Single United States Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration Risk, Percentage | 11.00% | 8.00% |
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Term | 5 years | |
Annual lease commitment | $ 380,000 | |
Rent expense | $ 380,000 | $ 380,000 |
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