What changed in this filing

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Item 1. Financial Statements

2024-05-10 compared with 2024-02-02 · 69 added, 76 removed, 328 unchanged (31% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

December 31, 2023

March 31, 2024

June 30, 2023

38 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of goods sold

5 unchanged sentences

(Loss) income before income tax provision (benefit)

( 1,249,292 )

Income tax provision (benefit)

Net (loss) income

( 1,146,190 )

(Loss) income per common share:

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended

Nine Months Ended

Operating activities:

7 unchanged sentences

Change in cash surrender value of life insurance

Provision (benefit) for deferred compensation

Provision for deferred compensation

Loss on disposal of fixed assets

Net changes in operating assets and liabilities:

29 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

Six Months Ended December 31, 2023

Nine Months Ended March 31, 2024

Balance, June 30, 2023

1 unchanged sentence

Stock option exercises

Balance, December 31, 2023

Six Months Ended December 31, 2022

Balance, March 31, 2024

Nine Months Ended March 31, 2023

Balance, June 30, 2022

1 unchanged sentence

Stock option exercises

Balance, March 31, 2023

Three Months Ended March 31, 2024

Balance, December 31, 2023

Three Months Ended December 31, 2023

Balance, September 30, 2023

Stock-based compensation expense

Stock option exercises

Balance, March 31, 2024

Three Months Ended March 31, 2023

Balance, December 31, 2022

Three Months Ended December 31, 2022

Balance, September 30, 2022

( 1,146,190 )

Stock-based compensation expense

Stock option exercises

Balance, December 31, 2022

Balance, March 31, 2023

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

March 31, 2024

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) BASIS OF PRESENTATION

The condensed consolidated balance sheets as of December 31, 2023 and June 30, 2023, the condensed consolidated statements of operations for the three and six months ended December 31, 2023 and 2022, the condensed consolidated statements of cash flows for the six months ended December 31, 2023 and 2022, and the condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 2023 and 2022, have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“U.S.

The condensed consolidated balance sheets as of March 31, 2024 and June 30, 2023, the condensed consolidated statements of operations for the three and nine months ended March 31, 2024 and 2023, the condensed consolidated statements of cash flows for the nine months ended March 31, 2024 and 2023, and the condensed consolidated statements of stockholders' equity for the three and nine months ended March 31, 2024 and 2023, have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“U.S.

GAAP”) and have not been audited.

12 unchanged sentences

The Company intends to reimburse the over withheld taxes to the impacted employees and to file amended 941-X forms with the IRS to claim a refund for both the Company overpayment of FICA taxes as well as the amounts refunded to employees.

As of March 31, 2024 the over withheld taxes due to the impacted employees was $ 354,971 and is recorded in accrued liabilities on the condensed consolidated balance sheet as of that date.

The refund expected from the IRS is $ 722,498 and is included in prepaid expenses and other current assets on the condensed consolidated balance sheet at March 31, 2024.

Based on an analysis of Accounting Standards Codification ASC 250 – “Accounting Changes and Error Corrections” (“ASC 250”), Staff Accounting Bulletin 99 – “Materiality” and Staff Accounting Bulletin 108 – “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, the Company determined that these errors did not result in the previously issued consolidated financial statements being materially misstated, and as such no restatement was necessary.

The following tables present the effect of the revision on the condensed consolidated balance sheet as of June 30, 2023, the condensed consolidated statements of operations for the three and six months ended December 31, 2022, and the condensed consolidated statement of cash flows for the six months ended December 31, 2022.

The following tables present the effect of the revision on the condensed consolidated balance sheet as of June 30, 2023, the condensed consolidated statements of operations for the three and nine months ended March 31, 2023, and the condensed consolidated statement of cash flows for the nine months ended March 31, 2023.

As of June 30, 2023

8 unchanged sentences

Total stockholders' equity

Three Months Ended December 31, 2022

Six Months Ended December 31, 2022

Three Months Ended March 31, 2023

Nine Months Ended March 31, 2023

As Previously Reported

5 unchanged sentences

( 24,271,502 )

( 23,832,185 )

( 23,826,517 )

(Loss) income before income tax provision

( 1,249,981 )

( 1,249,292 )

Net (loss) income

( 1,146,879 )

( 1,146,190 )

(Loss) income per common share:

Six Months Ended December 31, 2022

Nine Months Ended March 31, 2023

As Previously Reported

2 unchanged sentences

Accrued liabilities

Net cash (used in) provided by operating activities

The effect of this revision on the opening balances within the Company's condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 2023 and 2022 was as follows:

Net cash provided by operating activities

The effect of this revision on the opening balances within the Company's condensed consolidated statements of stockholders' equity for the three and nine months ended March 31, 2024 and 2023 was as follows:

As Previously Reported

1 unchanged sentence

Total stockholders' equity, June 30, 2022

Retained earnings, September 30, 2022

Total stockholders' equity, September 30, 2022

Retained earnings, December 31, 2022

Total stockholders' equity, December 31, 2022

Retained earnings, June 30, 2023

Total stockholders' equity, June 30, 2023

Retained earnings, September 30, 2023

Total stockholders' equity, September 30, 2023

The Company's condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 2022 have also been revised to reflect the impacts to net income as presented above.

The Company's condensed consolidated statements of stockholders' equity for the three and nine months ended March 31, 2023 have also been revised to reflect the impacts to net (loss) income as presented above.

C) INVESTMENTS

17 unchanged sentences

Additionally, discrete items are treated separately from the effective rate analysis and are recorded separately as an income tax provision or benefit at the time they are recognized.

During the three and six months ended December 31, 2023, a state income tax provision of $ 1,879 and $ 3,758 was recorded for the minimum tax payments expected given the taxable net losses in those periods.

As a result of the net losses, no federal tax provision was recorded for the three and six months ended December 31, 2023.

During the three months ended December 31, 2022, a federal tax benefit of $ 74,389 and a state tax benefit of $ 28,713 were recorded based on a taxable loss.

For the six months ended December 31, 2022, as a result of additional income generated by licensing fees, offset by related legal fees and expenses, taxable income for the period was generated.

During the three and nine months ended March 31, 2024, a state income tax provision of $ 1,522 and $ 5,281 was recorded for the minimum tax payments expected given the taxable net losses in those periods.

During the three and nine months ended March 31, 2024, a federal tax benefit of $ 82,653 was recorded as a result of the return-to-provision (RTP) adjustments recorded in the period identified.

The adjustments were identified when the prior year tax returns were filed in the third quarter of fiscal year 2024.

For the nine months ended March 31, 2023, as a result of additional income generated by licensing fees, offset by related legal fees and expenses, taxable income for the period was generated.

For NOLs arising in tax years beginning after December 31, 2017, the Tax Cuts and Jobs Act (“TCJA”) limits the NOL deduction to 80 percent of taxable income.

As such, the utilization of the Company’s net operating loss carryforwards from fiscal years after 2018 is limited to 80 percent of the resulting taxable income.

Utilization of net operating loss carryforwards significantly reduced the taxable income, resulting in federal and state tax provisions of $ 374,714 and $ 120,125 , respectively, for the six-month period ended December 31, 2022.

The effective tax rate was less than 1 % for the six months ended December 31, 2023 and 5.3 % for the six months ended December 31, 2022.

Utilization of net operating loss carryforwards significantly reduced the taxable income for the nine-month period ended March 31, 2023, resulting in federal and state tax provisions of $ 374,714 and $ 89,214 , respectively.

For the three months ended March 31, 2023, a state income tax benefit of $ 30,910 was recorded mainly as a result of an update to state apportionment percentages.

No federal tax benefit or provision was recorded for that quarter.

The effective tax rate was less than 1 %, excluding the RTP adjustments, for the nine months ended March 31, 2024 and 5.1 % for the nine months ended March 31, 2023.

It is anticipated that the effective rate in the current year and future years will continue to be reduced by utilization of a portion or all of the federal and state net operating loss carryforwards that existed as of June 30, 2023.

The Company's taxable loss generated during the first half of fiscal year 2024 increased the tax loss carryforward as of December 31, 2023 to approximately $ 31,995,000 .

Given the taxable loss for the six-month period, the expectation for utilization of the estimated tax loss carryforward is lessened, and as such, the future realization of this continues to be uncertain.

The Company's taxable loss generated during the first nine months of fiscal year 2024 increased the tax loss carryforward as of March 31, 2024 to approximately $ 32,800,000 .

Given the taxable loss for the nine-month period, the expectation for utilization of the estimated tax loss carryforward is lessened, and as such, the future realization of this continues to be uncertain.

The valuation allowance was adjusted to continue to fully offset the net deferred tax asset as there is sufficient negative evidence to support a full valuation allowance.

Temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2023 and June 30, 2023 include:

December 31, 2023

Temporary differences which give rise to deferred income tax assets and liabilities at March 31, 2024 and June 30, 2023 include:

March 31, 2024

June 30, 2023

23 unchanged sentences

G) OTHER INCOME

No other income was received in the three and six months ended December 31, 2023.

In the three and six months ending December 31, 2022, the Company received licensing proceeds of $ 0 and $ 33,000,000 , respectively, which was recorded as other income.

No other income was received in the three and nine months ended March 31, 2024.

In the three and nine months ending March 31, 2023, the Company received licensing proceeds of $ 0 and $ 33,000,000 , respectively, which was recorded as other income.

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

G) DEFERRED COMPENSATION

H) DEFERRED COMPENSATION

The Company’s deferred compensation liability is for a current officer and is calculated based on years of service and compensation, along with various assumptions related to expected retirement date, discount rates, and mortality tables.

The related expense is calculated using the net present value of the expected payments and is included in selling, general and administrative expenses in the condensed consolidated statements of operations.

The deferred compensation liability recorded at December 31, 2023 and June 30, 2023 is $ 2,060,375 and $ 1,997,120 , respectively.

The increase in the deferred compensation liability for the current officer during the six months ended December 31, 2023 resulted in compensation expense under this arrangement of $ 63,255 .

A reduction to deferred compensation expense of $ 46,075 was recognized in the six months ended December 31, 2022.

The deferred compensation liability recorded at March 31, 2024 and June 30, 2023 is $ 2,110,507 and $ 1,997,120 , respectively.

The increase in the deferred compensation liability for the current officer, and thus the compensation expense recorded during the nine months ended March 31, 2024, was due mainly to the annual increase in the future payments under the arrangement.

Compensation expense recorded under this arrangement was $ 113,387 for the first three quarters of the current fiscal year.

Deferred compensation expense of $ 62,783 was recognized in the nine months ended March 31, 2023.

I) RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

20 unchanged sentences

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not have, or are not expected by management to have a material impact on the Company’s present or future consolidated financial statements .

The following tables summarize the unrealized positions for the held-to-maturity debt securities as of December 31, 2023 and June 30, 2023:

December 31, 2023

The following tables summarize the unrealized positions for the held-to-maturity debt securities as of March 31, 2024 and June 30, 2023:

March 31, 2024

Amortized cost basis

7 unchanged sentences

US Treasury securities

The following tables summarize the fair value and amortized cost basis of the held-to-maturity debt securities by contractual maturity as of December 31, 2023 and June 30, 2023:

December 30, 2023

The following tables summarize the fair value and amortized cost basis of the held-to-maturity debt securities by contractual maturity as of March 31, 2024 and June 30, 2023:

March 31, 2024

Amortized Cost Basis

5 unchanged sentences

The components of inventories were as follows:

December 31, 2023

March 31, 2024

June 30, 2023

15 unchanged sentences

The negative covenants include restrictions on other indebtedness, liens, fundamental changes, certain investments, disposition of assets, mergers and liquidations, among other restrictions.

As of December 31, 2023, the Company was in compliance with all covenants related to the Credit Agreement.

As of December 31, 2023 and June 30, 2023, there were no outstanding borrowings on the facility.

As of March 31, 2024, the Company was in compliance with all covenants related to the Credit Agreement.

As of March 31, 2024 and June 30, 2023, there were no outstanding borrowings on the facility.

REVENUE RECOGNITION

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

United States

2 unchanged sentences

Effective July 1, 2023, the Company increased its deferral rates from 2.4 % to 3 % for domestic sales and decreased its deferral rate from 10 % to 8 % for export sales to reflect recent warranty experience.

In the six months ended December 31, 2023 and 2022, the Company recognized revenue, which was included in the deferred revenue liability at the beginning of the periods of $ 197,718 and $ 210,236 , respectively, for performance obligations related to consumer and customer warranties.

In the nine months ended March 31, 2024 and 2023, the Company recognized revenue, which was included in the deferred revenue liability at the beginning of the periods of $ 264,251 and $ 284,584 , respectively, for performance obligations related to consumer and customer warranties.

The Company estimates that the deferred revenue performance obligations are satisfied within one year to three years and therefore uses that same timeframe for recognition of the deferred revenue.

(LOSS) INCOME PER COMMON AND COMMON STOCK EQUIVALENT SHARE

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

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

Diluted (loss) income per common share is calculated assuming the exercise of stock options except where the result would be anti-dilutive.

The following table reconciles the numerator and denominator used to calculate basic and diluted (loss) income per share:

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Net (loss) income

( 1,146,190 )

Weighted average shares, basic

2 unchanged sentences

Net (loss) income attributable to common shareholders per share:

(1) Excludes 713,846 , 743,465 , and 590,046 weighted average stock options during the three and six months ended December 31, 2023 and the three months ended December 31, 2022, respectively, as the impact of such awards was anti-dilutive.

For the six months ended December 31, 2022, no stock options were anti-dilutive.

(1) Excludes 700,911 , 729,384 , and 999,557 weighted average stock options during the three and nine months ended March 31, 2024 and the three months ended March 31, 2023, respectively, as the impact of such awards was anti-dilutive.

For the nine months ended March 31, 2023, no stock options were anti-dilutive.

RELATED PARTY TRANSACTIONS

4 unchanged sentences

The Company is responsible for all property maintenance, insurance, taxes and other normal expenses related to ownership.

During the six months ended December 31, 2022, the Company accrued and made charitable contributions of $ 79,000 to the Koss Foundation (the “Foundation”), a 501(c)(3) charitable organization for which Michael J.

During the nine months ended March 31, 2023, the Company accrued and made charitable contributions of $ 79,000 to the Koss Foundation (the “Foundation”), a 501(c)(3) charitable organization for which Michael J.

Koss and John C.

1 unchanged sentence

Neither officer receives fees or compensation from the Foundation for holding these positions.

There were no charitable contributions made to the Foundation during the three and six months ended December 31, 2023.

There were no charitable contributions made to the Foundation during the three and nine months ended March 31, 2024.

ACCOUNTS RECEIVABLE CONCENTRATIONS

As of December 31, 2023, the Company’s top three accounts receivable customers represented approximately 23 %, 18 % and 14 % of trade accounts receivable.

As of March 31, 2024, the Company’s top three accounts receivable customers represented approximately 25 %, 12 % and 10 % of trade accounts receivable.

The top three accounts receivable customers as of June 30, 2023 represented approximately 24 %, 14 % and 13 %.

3 unchanged sentences

All contributions to date have been fully allocated to employees’ company contribution accounts.

No contributions were made for the three or six months ended December 31, 2023 or 2022, respectively.

No contributions were made for the three or nine months ended March 31, 2024 or 2023, respectively.

STOCK-BASED COMPENSATION

1 unchanged sentence

Concurrently with the adoption of the new plan, the Koss Corporation 2012 Omnibus Incentive Plan (the “2012 Plan”) was terminated.

The 2023 Plan is administered by the Compensation Committee of the Board of Directors and provides for the granting of various stock-based incentive awards to eligible participants, primarily officers and certain key employees of the Company.

The Compensation Committee of the Board of Directors administers the 2023 Plan and provides for the granting of various stock-based incentive awards to eligible participants, primarily officers and certain key employees of the Company.

2,000,000 shares of common stock were authorized for issuance under the 2023 Plan, plus any shares subject to awards remaining outstanding under the 2012 Plan that expired or are otherwise forfeited, canceled, or terminated.

2 unchanged sentences

As with the 2012 Plan, pursuant to the 2023 Plan new shares will be issued upon exercise of stock options.

As of March 31, 2024, no new stock-based awards have been granted under the 2023 Plan.

LEGAL MATTERS

As of December 31, 2023, the Company is involved in the matters described below:

As of March 31, 2024, the Company is involved in the matters described below:

• The Company maintains a program focused on enforcing its intellectual property and, in particular, certain patents in its patent portfolio.

3 unchanged sentences

Depending on the response to and the underlying results of the enforcement program, the Company may continue to litigate its claims, enter into licensing arrangements or reach some other outcome potentially advantageous to its competitive position.

During the six months ended December 31, 2022, in connection with its intellectual property enforcement program, the Company granted a license covering certain of its patents and recognized gross proceeds of $ 33,000,000 , which was recorded as other income.

Total legal fees and related expenses of $ 1,125,000 and $ 22,141,408 in the three and six months ended December 31, 2022, respectively, offset these proceeds and were recorded as selling, general and administrative expense.

During the nine months ended March 31, 2023, in connection with its intellectual property enforcement program, the Company granted a license covering certain of its patents and recognized gross proceeds of $ 33,000,000 , which was recorded as other income.

Total legal fees and related expenses of $ 22,141,408 in the nine months ended March 31, 2023, respectively, offset these proceeds and were recorded as selling, general and administrative expense.

• The Company was notified by One-E-Way, Inc.

3 unchanged sentences

Depending on the results of the investigation and the defense of these allegations, the ultimate resolution of this matter may have a material effect on the Company's condensed consolidated financial statements.

The Company estimates that this matter will ultimately be resolved at a cost of approximately $ 41,000 and has accrued this amount as of December 31, 2023 and June 30, 2023.

The Company estimates that this matter will ultimately be resolved at a cost of approximately $ 41,000 and has accrued this amount as of March 31, 2024 and June 30, 2023.

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

14 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements