Table ofContents

 

 

 

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**Form 10-Q**

 

**x****     ****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**for the quarterly period ended December 31,2009**

 

**OR**

 

**o****        ****TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**CommissionFile Number: 0-3295**

 

**KOSS CORPORATION**

(Exact Name ofRegistrant as Specified in its Charter)

 

| **A DELAWARE  CORPORATION**                                      | ** ** | **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)                            |

 

Registrant’s telephone number, including area code: **(414) 964-5000**

 

Indicateby check mark whether the registrant:  (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes x  No o**(SeeExplanatory Note)**

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files).  Yes o  No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer o                     |   | Accelerated filer o         |
|-----------------------------------------------|--------|-----------------------------|
|                                          |   |                        |
| Non-accelerated filer o                       |   | Smaller reporting company x |
| (Do not check if a smaller reporting company) |   |                        |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  Yes o No****x

 

AtFebruary 16, 2010, there were 7,382,706 shares outstanding of theregistrant’s common stock, $0.005 par value per share.

 

 

 

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KOSS CORPORATION FORM 10-QDecember 31, 2009

 

INDEX

 
| ** **   | ** **            | ** **                                                                                  | **Page** |
|--------------|-----------------------|---------------------------------------------------------------------------------------------|----------|
|         |                  |                                                                                        |     |
| PART I  | FINANCIAL INFORMATION | 5                                                                                           |
|         |                  |                                                                                        |     |
|         | Item 1                | Financial Statements                                                                        | 5        |
|         |                  |                                                                                        |     |
|         | Item 2                | Management’s Discussion and  Analysis of Financial Condition and Results of Operations | 5        |
|         |                  |                                                                                        |     |
|         | Item 3                | Quantitative and Qualitative  Disclosures about Market Risk                                 | 6        |
|         |                  |                                                                                        |     |
|         | Item 4                | Controls and Procedures                                                                     | 6        |
|         |                  |                                                                                        |     |
| PART II | OTHER INFORMATION     | 7                                                                                           |
|         |                  |                                                                                        |     |
|         | Item 1                | Legal Proceedings                                                                           | 7        |
|         |                  |                                                                                        |     |
|         | Item 1A               | Risk Factors                                                                                | 7        |
|         |                  |                                                                                        |     |
|         | Item 2                | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 10       |
|         |                  |                                                                                        |     |
|         | Item 3                | Defaults upon  Senior Securities                                                            | 10       |
|         |                  |                                                                                        |     |
|         | Item 4                | Submission of Matters  to a Vote of Security Holders                                        | 10       |
|         |                  |                                                                                        |     |
|         | Item 5                | Other Information                                                                           | 11       |
|         |                  |                                                                                        |     |
|         | Item 6                | Exhibits                                                                                    | 11       |

 

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**EXPLANATORYNOTE**

 

As previously disclosedin Form 8-K Current Reports filed on December 21 and 24, 2009 and January 4,7, 11 and 20, 2010, Koss Corporation (“Company”) recently discovered certainunauthorized financial transactions from at least its fiscal year ended June 30,2005 and through December 2009.  Thefollowing is a brief summary of events that occurred since the Companydiscovered the unauthorized transactions:

 

·                  On December 21, 2009, at the Company’srequest, NASDAQ halted trading of the Company’s common stock after the Companydiscovered evidence of the unauthorized transactions.  The Company announced that a committee ofindependent directors, with the assistance of forensic accountants andindependent counsel, would conduct an internal investigation of theunauthorized transactions (“Independent Investigation”).

 

·                  On December 23, 2009, the Companyterminated Sujata Sachdeva, its Vice President of Finance, Principal AccountingOfficer and Secretary.  On January 4,2010, the Company also terminated a senior accountant and a staff accountant.

 

·                  On December 24, 2009, the Companyannounced that the Independent Investigation covered the fiscal years since2006 and that the previously issued financial statements on Forms 10-K for thefiscal years ended June 30, 2006 through 2009 and on Form 10-Q forthe three months ended September 30, 2009 should no longer be relied upon.

 

·                  On January 4, 2010, the Companyannounced that, upon a recommendation from its Audit Committee and approval bythe Board of Directors, it dismissed Grant Thornton LLP as its independentauditor effective December 31, 2009. The Company also announced that the committee of independent directors,on the recommendation of its advisors and management, expanded the scope of theIndependent Investigation to include fiscal year 2005, and advised that itspreviously issued financial statements on Form 10-K for that year should nolonger be relied upon. The Company also announced that preliminary estimatesindicated that the amount of unauthorized transactions since fiscal year 2005exceeded $31 million.

 

·                  On January 5, 2010, the Company, upon arecommendation from its Audit Committee and approval by the Board of Directors,appointed Baker Tilly Virchow Krause, LLP (“Baker Tilly”) as its independentauditor.

 

·                  On January 11, 2010, the Companyreleased preliminary and unaudited estimates of the total amounts of theunauthorized transactions since fiscal year 2005 as follows:

 
| · |   | FY  2005:    |   | $ | 2,195,477 |   |   |
|--------|--------|--------------|--------|---|-----------|--------|--------|
| · |   | FY  2006:    |   | $ | 2,227,669 |   |   |
| · |   | FY  2007:    |   | $ | 3,160,310 |   |   |
| · |   | FY  2008:    |   | $ | 5,040,968 |   |   |
| · |   | FY  2009:    |   | $ | 8,485,937 |   |   |
| · |   | Q1  FY 2010: |   | $ | 5,326,305 |   |   |
| · |   | Q2  FY 2010: |   | $ | 4,917,005 |   |   |

 

·                  On January 11, 2010, NASDAQ resumedtrading of the Company’s common stock.

 

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·                  On January 18, 2010, the Companyannounced the appointment of David D. Smith as Executive Vice President, ChiefFinancial Officer and Principal Accounting Officer and that Michael Kossstepped down as Chief Financial Officer effective upon Mr. Smith’sappointment.

 

As a result of theunauthorized transactions and the events described herein, the Company willrestate its previously issued consolidated financial statements for the fiscalyears ended June 30, 2008 and 2009 and for each of the quarterly periodsin the fiscal years then ended, and for the quarter ended September 30,2009.  Baker Tilly will audit theCompany’s restated consolidated financial statements for the fiscal years endedJune 30, 2008 and 2009.  The Companyintends to amend its annual report on Form 10-K for the fiscal year ended June 30,2009 and its quarterly reports on Form 10-Q for the quarters ended September 30,2008, December 31, 2008, March 31, 2009 and September 30, 2009.

 

The Company is also assistingwith the Independent Investigation by responding to requests and inquiries fromthe committee of independent directors and its forensic accountants andindependent counsel, and intends to pursue proceeds from the sale of items seized bylaw enforcement authorities, as well as from insurance coverage, potentialclaims against third parties and tax refunds.  The Company isalso addressing the legal matters described in Part II, Item 1 LegalProceedings and continues to cooperate with law enforcement and regulatoryauthorities in their investigations.

 

Because of the eventsdescribed above, the Company’s unaudited consolidated financial statements forthe quarter ended December 31, 2009 are not yet available and are notincluded in this quarterly report on Form 10-Q.  The Company intends to amend this Form 10-Qto include the quarterly unaudited consolidated financial statements as soon aspracticable after the restatements of the Company’s previously issuedconsolidated financial statements are completed.

 

Because the Company isunable to file its quarterly unaudited consolidated financial statements inthis Form 10-Q, the Company may be considered not to be current in itsfilings under the Securities Exchange Act of 1934. The Company is evaluatingthe impact of filing a partial Form 10-Q under its contractualcommitments, its obligations under NASDAQ Stock Market listing standards, andthe federal securities laws.

 

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PART IFINANCIAL INFORMATION

 

**Item 1. Financial Statements.**

 

The information requiredby this Item is not included in this Form 10-Q.  Please see the discussion in the ExplanatoryNote.

 

**Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations.**

 

Because the Company’sunaudited consolidated financial statements for the quarter ended December 31,2009 are not yet available and are not included in this quarterly report on Form 10-Q,the Company is unable to provide comprehensive disclosure and discussion inthis section.  The Company intends tofile an amendment to this Form 10-Q after the restatements of theCompany’s previously issued consolidated financial statements are completed.

 

Results of Operations forthe Quarter Ended December 31, 2009

 

As previously reported,the Company announced that preliminary estimates of the IndependentInvestigation indicated that the amount of unauthorized transactions sincefiscal year 2005 exceeded $31 million. The Company’s results of operations have been affected during theseyears by the unauthorized transactions. Although the Independent Investigation is not complete, it appears thatapproximately $5.0 million in unauthorized transactions occurred in the quarterended December 31, 2009.  This $5.0million amount is included in the total estimated amount of over $31 million ofunauthorized transactions that occurred since fiscal year 2005.  Notwithstanding thedisruption resulting from the discovery of the unauthorized transactions, theCompany is operating in the normal course of business and expects the absenceof such unauthorized transactions to improve its future results of operations.

 

Liquidity and CapitalResources

 

The Company anticipatesthat its current liquidity and cash flow from operations will meet its cashrequirements for operations, including the additional investigation costsrelated to the unauthorized transactions, and new product development.  The Company’s cash and cash equivalents haveincreased since December 31, 2009. The unauthorized transactions adversely affected the Company’s cash flowfrom operations.  The absence of suchunauthorized transactions can be expected to result in improved cash flow inthe future.  Although the Company expectsto incur certain costs in connection with the investigation of and legalproceedings related to the unauthorized transactions, the Company will pursuereimbursement of these costs through its available insurance coverage.

 

As of December 31,2009 and as of the date of this quarterly report on Form 10-Q, theoutstanding balance on the Company’s credit facility with Harris, N.A. (the“Bank”) was $5.9 million.  The Companydoes not anticipate drawing additional amounts on the credit facility tosupport the Company’s short term cash requirements.  *See* Part II,Item 1A Risk Factors for a description of the risks associated with the creditfacility.

 

Off-Balance SheetArrangements

 

The Company has nooff-balance sheet arrangements.

 

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Recently Issued FinancialAccounting Pronouncements

 

In August 2009, the Financial AccountingStandards Board (“FASB”) issued FASB Accounting Standards Update No. 2009-05,Fair Value Measurements and Disclosures (“ASU 2009-05”), which is effective forfinancial statements issued for interim and annual periods ending after August 2009.  ASU 2009-05 amends FASB Accounting StandardsCodification (“FASB ASC”) Topic 820-10 (“FASB ASC 820-10”).  The update provides clarification on thetechniques for measurement of fair value required of a reporting entity when aquoted price in an active market for an identical liability is notavailable.  This update had no impact onthe Company’s financial position, results of operations or cash flows.

 

In May 2009, the FASB issued expanded guidanceon disclosing subsequent events, codified within ASC Topic 855-10, whichestablishes accounting and disclosure standards for events that occur after thebalance sheet date but before financial statements are issued or are availableto be issued.  It defines financialstatements as available to be issued, requiring the disclosure of the datethrough which an entity has evaluated subsequent events and the basis for thatdate, whether it be the date the financial statements were issued or the datethey were available to be issued.  Thisstandard had no impact on the Company’s financial position, results ofoperations or cash flows.

 

**Item 3.  Quantitative and Qualitative Disclosuresabout Market Risk.**

 

Notapplicable.

 

**Item 4.  Controls and Procedures.**

 

(a)                                  *Evaluationof Disclosure Controls and Procedures*.  The Company maintains a system of disclosurecontrols and procedures that were designed to and believed to providereasonable assurance that information, which is required to be timelydisclosed, is accumulated and communicated to management in a timely fashion.  A control system, no matter how wellconceived and operated, can provide only reasonable, not absolute, assurancethat the objectives of the control system are met.  It is possible for even the best controlsystem to be circumvented by those with the intent, knowledge and opportunityto do so.

 

TheCompany’s management, including the Company’s Chief Executive Officer and ChiefFinancial Officer, is reevaluating the effectiveness of the Company’sdisclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended (“ExchangeAct”)) as of the end of the period covered by this report, to identify anyenhancements that may provide greater comfort that the Company’s disclosurecontrols and procedures are effective to provide reasonable assurance thatinformation required to be disclosed by the Company in the reports that itfiles or submits under the Exchange Act is accumulated and communicated to theCompany’s management, including its principal executive officer and principal financialofficer, as appropriate to allow timely decisions regarding required disclosureand are effective to provide reasonable assurance that such information isrecorded, processed, summarized, and reported within the time periods specifiedin the SEC’s rules and forms.

 

(b)                                 *Changes inInternal Controls*.  TheCompany’s internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) was designed to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generallyaccepted accounting principles.  Because of the inherent limitationsin all control systems, no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud within the Companyhave been 

 

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detected.  Although numerous actions were takenbeginning in late December 2009 following the discovery of theunauthorized transactions, including changes relating to the Company’s bankingprocedures and certain other internal policies and procedures, as well as theother actions described in the Explanatory Note, the Company implemented noformal changes in the Company’s internal control over financial reportingduring the Company’s most recent fiscal quarter that have materially affected,or are reasonably likely to materially affect, the Company’s internal controlover financial reporting.

 

TheCompany is currently working on its plan to document, assess and test theCompany’s internal control over financial reporting in anticipation ofcomplying with the auditor attestation report requirement of Section 404of the Sarbanes-Oxley Act of 2002.  TheCompany expects that enhancements to the Company’s internal control overfinancial reporting will be implemented and that the auditor attestation willbe provided in the Company’s next annual report.

 

**PART IIOTHER INFORMATION**

 

**Item 1.****                                                          ****Legal Proceedings**

 

The Company was not subject to any material legalproceedings during the period covered by this quarterly report.  However, as a result of the unauthorizedtransactions, the following matters aroseduring January 2010:

 

·                  On January 11, 2010, the Companyreceived a letter from a law firm stating that it represented a shareholder anddemanding that the Company’s Board of Directors investigate and take legalaction against all responsible parties to ensure compensation for the Company’slosses stemming from the unauthorized transactions.  The Company’s legal counsel has respondedpreliminarily to the letter indicating that the Board of Directors willdetermine the appropriate course of action after the Independent Investigationis completed.

 

·                  On January 15,2010, a class action complaint was filed in federal court in Wisconsin againstthe Company, Michael Koss and Ms. Sachdeva.  The suit alleges violations of Section 10(b),Rule 10b-5 and Section 20(a) of the Exchange Act relating to theunauthorized transactions and requests an award of compensatory damages in anamount to be proven at trial.  *See* David A Puskala v. Koss Corporation, et al., UnitedStates District Court, Eastern District of Wisconsin, Case No. 2:2010cv00041.

 

·                  On January 26, 2010, the SEC’s Divisionof Enforcement advised the Company that it obtained a formal order ofinvestigation in connection with the unauthorized transactions. The Companyimmediately brought the unauthorized transactions to the SEC staff’s attentionwhen they were discovered in December 2009, and is cooperating fully withthe ongoing SEC investigation.

 

**Item 1A.****                                                 ****Risk Factors**

 

Inaddition to the other information set forth in this report and in the Form 8-KCurrent Reports referred to in the Explanatory Note, you should also carefullyconsider the risk factors discussed below 

 

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andin the Company’s Annual Report on Form 10-K for the year ended June 30,2009, which could materially affect the Company’s business, financial conditionor operating results.  These risks arenot the only risks facing the Company. Additional risk and uncertainties not currently known that the Companycurrently deems to be immaterial also may materially adversely affect theCompany’s business, financial condition or operating results.

 

***The Company is currently unable to determine the extent to which theunauthorized transactions will affect the Company’s previously issuedconsolidated financial statements.***

 

Asdescribed in the Explanatory Note, the Company is restating its previouslyissued consolidated financial statements since fiscal year 2008 because of theunauthorized transactions during that period. As of the date of this quarterly report, the Company has not determinedthe effect of the unauthorized transactions on its financial statements for theapplicable periods.  The restatementscould result in materially adverse adjustments to the Company’s previouslyreported financial results.

 

***The Company is currently unable to assess the amounts that may be recoveredthrough the proceeds from the sale of items seized by law enforcement,insurance, potential claims against third parties or tax refunds.***

 

TheCompany has estimated that the amount of the unauthorized transactions exceeds$31 million since fiscal year 2005.  Over25,000 items have been seized by law enforcement authorities. Although theCompany intends topursue proceeds from the sale of items seized by lawenforcement authorities, as well as from insurance coverage, potential claimsagainst third parties and tax refunds, the Company cannot reasonably assess theamounts or timing of such recoveries. The Company’s inability to recover its losses could have a significantand adverse effect on its future financial condition.

 

***The Company’s inability to file its quarterly financial statements inthis Form 10-Q in a timely manner could result in a loss of liquidity forthe Company’s common stock if its shares are delisted by the NASDAQ StockExchange.***

 

TheCompany’s inability to timely file quarterly financial statements for theperiod ended December 31, 2009 may lead NASDAQ to assert a violation ofits continued listing rules and may result in delisting of the Company’scommon stock from the NASDAQ Stock Exchange. Such delisting may cause a loss of liquidity for shares of the Company’scommon stock.  The Company is workingdiligently to complete the restatements of the Company’s previously issuedconsolidated financial statements since fiscal year 2008 and the Company intendsto amend the applicable periodic reports as promptly as it is able to doso.  The Company cannot predict withcertainty when these financial statements will be available or what actionNASDAQ will take in response to the partial filing of this Form 10-Q.

 

***Legal proceedings related to the unauthorized transactions mayadversely affect the Company’s results of operations, cash flows and financialcondition.***

 

Asfurther described in Part II, Item 1, Legal Proceedings, the Company iscurrently addressing several legal mattersrelated to the unauthorized transactions. The Company is unable at thistime to quantify its exposure, if any. The costs of dealing with these matters and any penalties and awardsthat may be assessed against the Company could be substantial, and may adverselyaffect the Company’s future results of operations, cash flows and financialcondition.

 

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***The Company’s stock price may fluctuate as a resultof the unauthorized transactions and because of the uncertainties about theireffect on the Company’s financial condition.***

 

Uncertaintiesabout the effect of the unauthorized transactions and significant developmentsrelated to the unauthorized transactions, such as the results of therestatements of the Company’s previously issued consolidated financialstatements, the legal matters described above or the results andrecommendations of the Independent Investigation, could cause fluctuation inthe Company’s stock price.  The Company’s common stock could also besubject to wide fluctuations in response to additional business factors such asthe following:

 

·                  the sale or availability for sale ofsubstantial amounts of the Company’s common stock;

 

·                  actual or anticipated fluctuations in theCompany’s operating results or its competitors’ operating results;

 

·                  announcements by the Company or itscompetitors of new products;

 

·                  capacity changes, significant contracts,acquisitions or strategic investments;

 

·                  the Company’s growth rate and itscompetitors’ growth rates;

 

·                  changes in stock market analystrecommendations regarding the Company, its competitors or the industrygenerally, or lack of analyst coverage of the Company’s common stock;

 

·                  sales of the Company’s common stock by itsexecutive officers, directors and significant stockholders or sales ofsubstantial amounts of common stock; and

 

·                  changes in accounting principles.

 

***The effect of the discovery of the unauthorized transactions on theCompany’s credit facility with Harris, N.A. is uncertain.***

 

TheCompany is party to a credit facility under which the Company has anoutstanding balance of approximately $5.9 million.  The Company notified the Bank of theunauthorized transactions immediately after they were discovered.  Since then, the Company and the Bank havebeen in discussions about what actions, if any, the Bank may take in responseto the unauthorized transactions.  TheBank may declare an event of default under the credit facility, which couldresult in the inability of the Company to draw funds under, or lead toacceleration of the maturity and/or termination of, the credit facility.

 

Thecredit facility contains affirmative, negative and financial covenantscustomary for financings of this type. The Company’s ability to comply with these covenants is subject tovarious risks and uncertainties. In addition, events beyond the Company’scontrol could affect its ability to comply with and maintain the financialtests and ratios required by this indebtedness. Any failure by the Company to comply with and maintain all applicablefinancial tests and ratios and to comply with all applicable covenants couldresult in an event of default with respect to a substantial portion of its debtwhich would result in the acceleration of the maturity and/or the terminationof the credit facility.  Even if theCompany is able to comply with all applicable covenants, the restrictions onits ability to operate its 

 

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businessin its sole discretion could harm the business by, among other things, limitingits ability to take advantage of financing, mergers, acquisitions and othercorporate opportunities.

 

**Item 2.****                                                        ****Unregistered Sales ofEquity Securities and Use of Proceeds**

 

In April of 1995, the Board of Directorsapproved a stock repurchase program authorizing the Company to purchase itscommon stock from time to time for its own account.  No purchases were made by the Company underthe stock repurchase program during the quarter ended December 31, 2009.

 

**Item 3.****                                                        ****Defaults Upon SeniorSecurities**

 

None.

 

**Item 4.****                                                        ****Submission of Matters toa Vote of Security Holders**

 

On November 19,2009, the Company held a Special Meeting of Stockholders (the “SpecialMeeting”).  The Special Meeting was heldin order for the stockholders to approve the increase in the number ofauthorized shares of the Company from eight million five hundred thousand(8,500,000) to twenty million (20,000,000) with a $0.005 par value in order toaccommodate a two-for-one forward stock split. On September 10, 2009,NASDAQ notified the Company that it no longer met the 750,000 minimum publiclyheld shares requirement under Listing Rule 5450(b)(1)(B) forcontinued listing on The NASDAQ Global Market. The proposed stock split wouldcause the Company’s total number of publicly held shares to exceed the 750,000minimum threshold while maintaining the Company’s compliance with NASDAQ’sother continued listing requirements, thus bringing the Company into compliancewith Listing Rule 5450(b)(1)(B).

 

There were 3,691,353shares of common stock eligible to vote at the Special Meeting, of which3,049,141 shares were present at the Special Meeting in person or by proxy,which constituted a quorum.  Thefollowing is a summary of the results of the voting:

 
| ** **                                                                                                                                                                                        | ** ** | ** ** | ** ** | **Number of Votes** | ** ** | **Broker**  | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|---------------------|------------|-------------|------------|
| ** **                                                                                                                                                                                        | ** ** | **For**    | ** ** | **Against**         | ** ** | **Abstain** | ** ** | **Non-Votes** | ** ** |
| Proposal  to Authorize the Board of Directors, in its Discretion, to Amend the  Company’s Restated Certificate of Incorporation to Increase the Number of  Authorized Shares of Common Stock |       | 3,047,367  |       | 1,574               |       | 200         |       | 0 |   |

 

On November 19,2009, after the Special Meeting, the Company filed the amendment to theRestated Certificate of Incorporation increasing the number of authorizedshares to 20,000,000.  On December 1,2009, the Company completed the stock split by distributing a stock dividend ofone share of common stock for each share of common stock outstanding on November 20,2009, the record date for the stock split.

 

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**Item 5.****                                                        ****Other Information**

 

None.

 

**Item 6.****                                                        ****Exhibits**

 

See Exhibit Indexattached hereto.

 

**CAUTIONARY STATEMENT REGARDINGFORWARD-LOOKING STATEMENTS**

 

This Form 10-Qcontains forward-looking statements within the meaning of that term in thePrivate Securities Litigation Reform Act of 1995 (the “Act”) (Section 27Aof the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934).  Additional written or oralforward-looking statements may be made by the Company from time to time infilings with the Securities Exchange Commission, press releases, orotherwise.  Statements contained in this Form 10-Qthat are not historical facts are forward-looking statements made pursuant tothe safe harbor provisions of the Act. Forward-looking statements may include, but are not limited to,projections of revenue, income or loss and capital expenditures, statementsregarding future operations, anticipated financing needs, compliance withfinancial covenants in loan agreements, plans for acquisitions or sales ofassets or businesses, plans relating to products or services of the Company,assessments of materiality, predictions of future events, the effects ofpending and possible litigation, and assumptions relating to the foregoing.  In addition, when used in this Form 10-Q,the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans”and variations thereof and similar expressions are intended to identifyforward-looking statements.

 

Forward-looking statementsare inherently subject to risks and uncertainties, some of which cannot bepredicted or quantified based on current expectations.  Consequently, future events and actualresults could differ materially from those set forth in, contemplated by, orunderlying the forward-looking statements contained in this Form 10-Q, orin other Company filings, press releases, or otherwise.  In addition to the factors discussed in this Form 10-Q,other factors that could contribute to or cause such differences include, butare not limited to, developments in any one or more of the followingareas:  future fluctuations in economicconditions, the receptivity of consumers to new consumer electronicstechnologies, the rate and consumer acceptance of new product introductions,competition, pricing, the number and nature of customers and their productorders, production by third party vendors, foreign manufacturing, sourcing andsales (including foreign government regulation, trade and importationconcerns), borrowing costs, changes in tax rates, pending or threatenedlitigation and investigations, fluctuations in currency exchange rates andother risk factors which may be detailed from time to time in the Company’sSecurities and Exchange Commission filings.

 

Readersare cautioned not to place undue reliance on any forward-looking statementscontained herein, which speak only as of the date hereof.  The Company undertakes no obligation topublicly release the result of any revisions to these forward-lookingstatements that may be made to reflect events or circumstances after the datehereof or to reflect the occurrence of unexpected events.

 

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Signatures

 

Pursuant to therequirements of the Securities and Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
| ** **                         | **KOSS CORPORATION**                                                                |
|------------------------------------|-------------------------------------------------------------------------------------|
| ** **                         | ** **                                                                          |
|                               |                                                                                |
| Date:  February 16, 2010 | */s/ Michael J. Koss*                                                          |
|                               | Michael J. Koss                                                                     |
|                               | Vice Chairman,  President and                                                       |
|                               | Chief Executive Officer                                                             |
|                               |                                                                                |
|                               |                                                                                |
| Date:  February 16, 2010 | */s/ David D. Smith*                                                                |
|                               | David D. Smith                                                                      |
|                               | Executive  Vice President, Chief Financial Officer and Principal Accounting Officer |

 

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EXHIBIT INDEX

 
| **Exhibit No.** | ** ** | **Exhibit Description**                                                                                                                                                                                                                                                              |
|----------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                                                                                                                      |
| 3.1                  |       | Amended  and Restated Certificate of Incorporation of Koss Corporation, as in effect  on November 19, 2009.*                                                                                                                                                                         |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 3.2                  |       | By-Laws  of Koss Corporation, as in effect on September 25, 1996.  Filed as Exhibit 3.2 to the Company’s  Annual Report on Form 10-K for the year ended June 30, 1996 and  incorporated herein by reference.                                                |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.1                 |       | Death  Benefit Agreement with John C. Koss.   Filed as Exhibit 10.4 to the Company’s Annual Report on  Form 10-K for the year ended June 30, 1996 and incorporated herein  by reference.                                                                         |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.2                 |       | Stock  Purchase Agreement with John C. Koss.  Filed  as Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the  year ended June 30, 1996 and incorporated herein by reference.                                                                         |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.3                 |       | Salary  Continuation Resolution for John C. Koss.   Filed as Exhibit 10.6 to the Company’s Annual Report on Form 10-K  for the year ended June 30, 1996 and incorporated herein by reference.                                                                    |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.4                 |       | 1983  Incentive Stock Option Plan.  Filed as  Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the  year ended June 30, 1996 and incorporated herein by reference.                                                                                   |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.5                 |       | Assignment  of Lease to John C. Koss.  Filed as  Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the  year ended June 30, 1988 and incorporated herein by reference.                                                                                |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.6                 |       | Addendum  to Lease.  Filed as Exhibit 10.8  to the Company’s Annual Report on Form 10-K for the year ended  June 30, 1988 and incorporated herein by reference.                                                                                                  |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.7                 |       | Amendment  to Lease.  Filed as Exhibit 10.22  to the Company’s Annual Report on Form 10-K for the year ended  June 30, 2000 and incorporated herein by reference.                                                                                                |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.8                 |       | Partial  Assignment, Termination and Modification of Lease.  Filed as Exhibit 10.25 to the  Company’s Annual Report on Form 10-K for the year ended June 30,  2001 and incorporated herein by reference.                                                         |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.9                 |       | Restated  Lease.  Filed as Exhibit 10.26 to  the Company’s Annual Report on Form 10-K for the year ended  June 30, 2001 and incorporated herein by reference.                                                                                                    |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.10                |       | 1990  Flexible Incentive Plan.  Filed as  Exhibit 25 to the Company’s Annual Report on Form 10-K for the year  ended June 30, 1990 and incorporated herein by reference.                                                                                         |
|                 |       |                                                                                                                                                                                                                                                                                      |
| 10.11                |       | Consent  of Directors (Supplemental Executive Retirement Plan for Michael J. Koss  dated March 7, 1997).  Filed as  Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the  quarter ended March 31, 1997 and incorporated herein by reference. |

 

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Table of Contents

 
| 10.12  |   | License  Agreement dated June 30, 1998 between Koss Corporation and Logitech  Electronics Inc. (including Addendum to License Agreement dated June 30,  1998).  Filed as Exhibit 10.18 to  the Company’s Annual Report on Form 10-K for the year ended  June 30, 1998 and incorporated herein by reference. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                           |
| 10.13  |   | Amendment  and Extension Agreement between Koss Corporation and Logitech Electronics  Inc. dated May 1, 2001.  Filed as  Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the  quarter ended March 31, 2001 and incorporated herein by reference.                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                           |
| 10.14  |   | License  Agreement dated June 30, 2003 between Koss Corporation and Sonigem  Products, Inc.  Filed as  Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the  year ended June 30, 2005 and incorporated herein by reference.                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                           |
| 10.15  |   | Amendment  to License Agreement dated August 1, 2005, between Koss Corporation and  Sonigem Products, Inc.  Filed as  Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the  year ended June 30, 2005 and incorporated herein by reference.                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                           |
| 10.16  |   | Loan  Agreement dated February 16, 2009, between Koss Corporation and Harris  N.A., a national banking association. Filed as Exhibit 10.21 to the  Company’s Quarterly Report on Form 10-Q for the quarter ended  March 31, 2009 and incorporated by reference herein.                                                |

 

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| * |   | Filed  herewith |
|---|--------|-----------------|

 

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