KOSS CORP — Interim / Quarterly Report 2004

Nov 17, 2004

10-Q/A 1 d17622a1e10vqza.htm AMENDMENT TO FORM 10-Q e10vqza PAGEBREAK

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A,

Amendment No. 1

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended December 31, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-3295

KOSS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [X] NO [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES [ ] NO [X]

At December 31, 2003, there were 3,767,929 shares outstanding of the registrant’s common stock, $0.005 par value per share.

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KOSS CORPORATION AND SUBSIDIARIES FORM 10-Q/A

December 31, 2003

INDEX

TOC

PART I	FINANCIAL INFORMATION
	Item 1	Financial Statements
		Condensed Consolidated Balance Sheets (Unaudited) December 31, 2003 and June 30, 2003	4
		Condensed Consolidated Statements of Income (Unaudited) Three months and six months ended December 31, 2003 and 2002	5
		Condensed Consolidated Statements of Cash Flows (Unaudited) Six months ended December 31, 2003 and 2002	6
		Notes to Condensed Consolidated Financial Statements (Unaudited) December 31, 2003	7-8
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8-11
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	11
	Item 4	Controls and Procedures	11-12
PART II	OTHER INFORMATION
	Item 6	Exhibits and Reports on Form 8-K	13
Certification Pursuant to Rule 13a-14(a)
Certification Pursuant to Section 906

/TOC

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EXPLANATORY NOTE

Koss Corporation (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A to amend its original Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2003 (the “Original Report”).

Subsequent to the filing of the Original Report on February 17, 2004, the Company concluded that certain provisions of a stock repurchase agreement with the Chairman of the Company required the adoption of SFAS 150 “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” The new accounting pronouncement was effective for public companies for interim periods beginning after June 15, 2003.

The change is reflected in this Form 10-Q/A: (i) on the Company’s balance sheet set forth in Item 1. — Financial Statements as an increase in other assets of $49,125, an increase in derivative liability of $125,000, a decrease in contingently redeemable equity interest of $1,490,000, and an increase in stockholders’ investment of $1,414,125; (ii) on the Company’s income statement set forth in Item 1. — Financial Statements as a loss of $75,875 reflecting the cumulative effect of the change in accounting principle; (iii) on the Company’s statement of cash flows as an adjustment of $75,875 reflecting the cumulative effect of the change in accounting principle; (iv) in Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations; (v) in Item 4. — Controls and Procedures, in the discussion of Recently Issued Financial Accounting Pronouncements; and (vi) in updated certifications of certain executive officers, as of the date of this Form 10-Q/A.

This Form 10-Q/A is hereby amended, as described above, and for convenience of reference is restated in its entirety as set forth herein.

This amended quarterly report continues to speak as of the original date of the original quarterly report and unless as otherwise noted, the Company has not updated the disclosure in this amended quarterly report to speak as of a later date.

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

KOSS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	December 31, 2003 — AS REPORTED	AS AMENDED	June 30, 2003
ASSETS
Current assets:
Cash	$ 941,007	$ 941,007	$ 1,557,104
Accounts receivable	9,614,966	9,614,966	8,695,553
Income taxes receivable	—	—	181,871
Inventories	9,006,416	9,006,416	7,333,772
Other current assets	1,225,909	1,225,909	1,240,383
Total current assets	20,788,298	20,788,298	19,008,683
Property and equipment, net	1,863,790	1,863,790	1,923,817
Other assets	2,869,798	2,914,923	2,854,318
	$ 25,517,886	$ 25,567,011	$ 23,786,818
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$ 3,390,334	$ 3,390,334	$ 2,793,550
Accrued liabilities	1,621,514	1,621,514	1,499,043
Income taxes payable	287,232	287,232	—
Dividends payable	489,831	489,831	488,856
Total current liabilities	5,788,911	5,788,911	4,781,449
Deferred compensation	1,041,193	1,041,193	1,014,167
Derivative
liability	—	125,000	—
Contingently redeemable equity interest	1,490,000	—	1,490,000
Stockholders’ investment	17,197,782	18,611,907	16,501,202
	$ 25,517,886	$ 25,567,011	$ 23,786,818

See accompanying notes to the condensed consolidated financial statements.

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KOSS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Period Ended December 31	Three Months — 2003	2002		Six Months — 2003			2002
				AS REPORTED	AS AMENDED
Net sales	$ 9,839,572	$	7,818,848	$ 19,004,263	$	19,004,263	$	16,773,826
Cost of goods sold	6,097,572		4,627,988	11,764,618		11,764,618		10,052,209
Gross profit	3,742,000		3,190,860	7,239,645		7,239,645		6,721,617
Selling, general and
administrative expense	1,972,115		1,733,143	4,001,849		4,001,849		3,613,795
Income from operations	1,769,885		1,457,717	3,237,796		3,237,796		3,107,822
Other income (expense)
Royalty income	387,367		254,760	577,692		577,692		418,721
Interest income	701		2,502	5,121		5,121		6,781
Interest expense	(960	)	—	(960	)	(960	)	(11,290	)
Income before income tax
provision and cumulative
effect of change in
accounting principles	2,156,993		1,714,979	3,819,649		3,819,649		3,522,034
Provision for income taxes	861,517		668,842	1,503,669		1,503,669		1,375,119
Income before cumulative
effect of change in
accounting principles	1,295,476		1,046,137	2,315,980		2,315,980		2,146,915
Cumulative effect of
change in accounting
principles (net of tax
effect of $49, 125)	—		—	—		(75,875	)	—
Net income	$ 1,295,476	$	1,046,137	$ 2,315,980	$	2,240,105	$	2,146,915
Earnings per common share:
Basic	$ 0.34	$	0.29	$ 0.61	$	0.59	$	0.59
Diluted	$ 0.33	$	0.27	$ 0.59	$	0.57	$	0.56
Dividends per common share	$ 0.13	$	0.13	$ 0.26	$	0.26	$	0.26

See accompanying notes to the condensed consolidated financial statements.

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KOSS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended December 31,	2003
	AS REPORTED	AS AMENDED
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income	$ 2,315,980	$	2,240,105	$	2,146,915
Adjustments to reconcile net
income to net cash provided
by operating activities:
Cumulative effect of change in
accounting principles	—		75,875
Depreciation and amortization	350,667		350,667		254,520
Deferred compensation	27,026		27,026		(26,436	)
Net changes in operating assets and
liabilities	(1,487,297	)	(1,487,297	)	(1,382,487	)
Net cash provided by operating
activities	1,206,376		1,206,376		992,512
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of equipment	(272,874	)	(272,874	)	(423,840	)
Net cash used in investing activities	(272,874	)	(272,874	)	(423,840	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid	(981,287	)	(981,287	)	(477,172	)
Purchase of common stock	(877,500	)	(877,500	)	(340,000	)
Exercise of stock options	309,188		309,188		—
Net cash used in financing
activities	(1,549,599	)	(1,549,599	)	(817,172	)
Net decrease in cash	(616,097	)	(616,097	)	(248,500	)
Cash at beginning of period	1,557,104		1,557,104		1,052,364
Cash at end of period	$ 941,007	$	941,007	$	803,864

See accompanying notes to the condensed consolidated financial statements.

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KOSS CORPORATION AND SUBSIDIARIES December 31, 2003

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	The financial statements presented herein are based on interim amounts.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial position,
results of operations and cash flows at December 31, 2003 and for all
periods presented have been made. The income from operations for the
quarter ended December 31, 2003 is not necessarily indicative of the
operating results for the full year.
	Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Registrant’s June 30, 2003 Annual Report on Form
10-K/A.
	Certain balances contained in the June 30, 2003 financial statements have
been reclassified with the December 31, 2003 presentation.
2.	EARNINGS PER COMMON SHARE
	Basic earnings per common share are computed based on the weighted
average number of common shares outstanding. The weighted average number
of common shares outstanding for the quarters ending December 31, 2003
and 2002 were 3,767,929 and 3,655,242, respectively. For the six months
ended December 31, 2003 and 2002, weighted average number of common
shares outstanding were 3,767,011 and 3,662,898, respectively. When
dilutive, stock options are included as share equivalents using the
treasury stock method. Common stock equivalents of 115,523 and 191,603
related to stock option grants were included in the computation of the
average number of shares outstanding for diluted earnings per common
share for the quarters ended December 31, 2003 and 2002, respectively.
Common stock equivalents of 126,021 and 187,599 related to stock option
grants were included in the computation of the average number of shares
outstanding for diluted earnings per common share for the six months
ended December 31, 2003 and 2002, respectively.
3.	INVENTORIES
	The classification of inventories is as follows:

Raw materials	December 31, 2003 — $ 3,104,981	$	3,039,272
Work in process	59,562		—
Finished goods	6,851,459		5,304,086
	10,016,002		8,343,358
LIFO reserve	(1,009,586	)	(1,009,586	)
	$ 9,006,416	$	7,333,772

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4.	STOCK PURCHASE AGREEMENT
	The Company has an agreement with its Chairman, John C. Koss, to, at the
request of the executor of the estate, repurchase Company common stock
from his estate in the event of his death. The Company does not have the
right to require the estate to sell stock to the Company. As such, this
arrangement is accounted for as a written put option with the fair value
of the put option recorded as a derivative liability. The fair value of
the option at December 31, 2003 was $125,000. 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 shall 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 for the balance, payable over
four years, at the prime rate of interest. The Company maintains a
$1,150,000 life insurance policy to fund a substantial portion of this
obligation. At December 31, 2003, $125,000 has been classified as a
derivative liability on the Company’s financial statements.
5.	RECENTLY ISSUED FINANCIAL ACCOUNTING PRONOUNCEMENTS
	During April 2003, the Financial Accounting Standards Board (“FASB”)
issued Statement of Accounting Standards (“SFAS”) No. 149, “Amendment of
Statement 133 on Derivative Instruments and Hedging Activities,” which
amends and clarifies financial accounting and reporting for certain
derivative instruments. We anticipate the adoption of this statement
will have a material impact on our consolidated financial statements. We
are in the process of determining the impact of this statement.
	During May 2003, the FASB issued SFAS No. 150, “Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity,” which establishes standards for the classification and
measurement of certain financial instruments with characteristics of both
liabilities and equity. The Company adopted SFAS No. 150 effective July
1, 2003. Upon adoption the Company recorded a derivative liability for
the fair market value of a written put option of $125,000 and a
cumulative effect of change in accounting principle of $75,875 (net of
the tax effect equal to $49,125) in the income statement. In addition,
the contingently redeemable equity interest as of $1,490,000, as of July
1, 2003, was reclassified into equity. See Note 4 — Stock Purchase
Agreement.
6.	DIVIDENDS DECLARED
	On December 19, 2003, the Company declared a quarterly cash dividend of
$0.13 per share for stockholders of record on December 31, 2003 to be
paid January 15, 2004. Such dividend payable has been recorded at
December 31, 2003.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Financial Condition, Liquidity and Capital Resources

Cash provided by operating activities during the six months ended December 31, 2003 amounted to $1,581,433. This was primarily a result of net income for the period partially offset by changes in operating assets and liabilities, primarily related to increases in accounts receivable, inventories, accounts payable, and income taxes payable.

Capital expenditures for new property and equipment (including production tooling) were $272,874 for the six months ended December 31, 2003. Budgeted capital expenditures for fiscal year 2004 are $1,573,000. The Company expects to generate sufficient funds through operations to fund these expenditures.

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Stockholders’ investment increased to $18,611,907 at December 31, 2003, from $16,501,202 at June 30, 2003. The increase reflects the effect of net income and the effect of the change in accounting principle related to the adoption of Statement of Accounting Standards (“SFAS”) No. 150, in connection with the stock repurchase agreement with the Chairman of the Company (for more information, see the Recently Issued Financial Accounting Pronouncements section below), offset by the purchase and retirement of common stock and dividends declared during the period.

The Company amended its existing credit facility in October 2003, extending the maturity date of the unsecured line of credit to November 1, 2004. This credit facility provides for borrowings up to a maximum of $10,000,000. The Company can use this credit facility for working capital purposes or for the purchase of its own common stock pursuant to the Company’s common stock repurchase program. Borrowings under this credit facility bear interest at the bank’s prime rate, or LIBOR plus 1.75%. This credit facility includes certain financial covenants that require the Company to maintain a minimum tangible net worth and specified current, interest coverage, and leverage ratios. The Company uses its credit facility from time to time, although there was no utilization of this credit facility at December 31, 2003 or June 30, 2003.

In April of 1995, the Board of Directors approved a stock repurchase program authorizing the Company to purchase from time to time up to $2,000,000 of its common stock for its own account. Subsequently, the Board of Directors periodically have approved increases in the stock repurchase program. The most recent increase was for an additional $2,000,000 in January 2003, for a maximum of $37,500,000. The Company intends to effectuate all stock purchases either on the open market or through privately negotiated transactions, and intends to finance all stock purchases through its own cash flow or by borrowing for such purchases.

For the six month period ended December 31, 2003, the Company purchased 45,000 shares of its common stock at a net price of $13.59 per share, for a total net purchase price of $611,325. The Company will continue to repurchase its shares from the open market when the Board of Directors determines the shares to be undervalued. As of the date hereof, the Company’s Board of Directors has authorized the repurchase by the Company of up to $2,112,685.82 in Company common stock at the discretion of the Chief Executive Officer of the Company.

From the commencement of the Company’s stock repurchase program through December 31, 2003, the Company has purchased a total of 4,969,180 shares for a total gross purchase price of $40,655,545, (representing an average gross purchase price of $8.18 per share) and a total net purchase price of $36,030,060 (representing an average net purchase price of $7.25 per share). The difference between the total gross purchase price and the total net purchase price is the result of the Company purchasing from certain employees shares of the Company’s stock acquired by such employees pursuant to the Company’s stock option program. In determining the dollar amount available for additional purchases under the stock repurchase program, the Company uses the total net purchase price paid by the Company for all stock purchases, as authorized by the Board of Directors.

The Company also has an Employee Stock Ownership Plan and Trust (“ESOP”) pursuant to which shares of the Company’s stock are purchased by the ESOP for allocation to the accounts of ESOP participants. For the six months ended December 31, 2003, the ESOP purchased 3,633 shares of the Company’s stock.

Results of Operations

Net sales for the second quarter ended December 31, 2003 rose 26% to $9,839,572 from $7,818,848 for the same period in 2002. Net sales for the six months ended December 31, 2003 were $19,004,263 up 13% compared with $16,773,826 during the same six months one year ago. This was due to sales increases in the Company’s largest accounts both in the U.S. and Europe.

Gross profit as a percent of net sales was 38% for the quarter ended December 31, 2003 compared to 41% for the same period in the prior year. For the six month period ended December 31, 2003, the gross profit

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percentage was 38% compared to 40% for the same period in 2002. This was primarily due to the Company experiencing higher incoming freight costs compared to prior years.

Selling, general and administrative expenses for the quarter ended December 31, 2003 were $1,972,115 or 20% of net sales, compared to $1,733,143 or 22% of net sales for the same period in 2002. For the six month period ended December 2003, these expenses were $4,001,849 or 21% of net sales, compared to $3,613,795 or 22% of net sales, for the same period in 2002.

For the second quarter ended December 31, 2003, income from operations was $1,769,885 versus $1,457,717 for the same period in the prior year. Income from operations for the six months ended December 31, 2003 was $3,237,796 as compared to $3,107,822 for the same period in 2002. This was due to the Company experiencing higher sales volume.

Effective July 1, 1998, the Company entered into a License Agreement and an Addendum thereto with Logitech Electronics Inc. of Ontario, Canada whereby the Company licensed to Logitech the right to sell multimedia/computer speakers under the Koss brand name. This License Agreement covers North America and certain countries in South America and Europe, requiring royalty payments by Logitech through June 30, 2008, subject to certain minimum annual royalty amounts.

The Company has a License Agreement with Jiangsu Electronics Industries Limited, a subsidiary of Orient Power Holdings Limited, by way of an assignment of a previously existing License Agreement with Trabelco N.V. Orient Power is based in Hong Kong and has an extensive portfolio of audio and video products. This License Agreement covers the United States, Canada, and Mexico, and has been renewed through December 31, 2004. Pursuant to this License Agreement, Jiangsu Electronics has agreed to meet certain minimum royalty amounts each year. The products covered by this License Agreement include various consumer electronics products.

Effective June 30, 2003, the Company entered into a License Agreement with Sonigem Products, Inc. (“Sonigem”) of Ontario, Canada whereby the Company licensed to Sonigem the right to sell video and communications products under the Koss brand name. This License Agreement covers Canada, requiring royalty payments by Sonigem through June 30, 2010, subject to certain minimum annual royalty amounts.

Royalty income for the quarter ended December 31, 2003 was $387,367, compared to $254,760 for the quarter ended December 31, 2002. For the six month period ended December 31, 2003 royalty income was $577,692 compared to $418,721 for the period ending December 31, 2002. The increase in royalty income was due to increased sales by Jiangsu Electronics.

Interest income for the quarter was $701 as compared to $2,502 for the same quarter in 2002. For the six month period interest income was $5,121 compared to $6,781. The decrease in interest income in 2003 is a result of lower levels of invested excess cash.

Interest expense was $960 compared to $11,290 for the six months ended December 31, 2003.

On December 19, 2003, the Company declared a quarterly cash dividend of $0.13 per share payable on January 15, 2004 to stockholders of record on December 31, 2003, which is recorded as dividends payable.

Recently Issued Financial Accounting Pronouncements

During April 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Accounting Standards (“SFAS”) No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” which amends and clarifies financial accounting and reporting for certain derivative instruments. We do not anticipate the adoption of this statement will have a material impact on our

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consolidated financial statements, as we are not currently a party to derivative financial instruments included in this standard.

During May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” which establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The Company adopted SFAS No. 150 effective July 1, 2003. Upon adoption the company recorded a derivative liability for the fair market value of a written put option of $125,000 and a cumulative effect of change in accounting principle of $75,875 (net of the tax effect equal to $49,125) in the income statement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In management’s opinion, the Company does not engage in any material risk sensitive activities and does not have any market risk sensitive instruments, other than the Company’s commercial credit facility used for working capital purposes and stock repurchases as disclosed on page 8 of this Form 10-Q.

Item 4. Controls and Procedures.

The Company’s management, including the Chief Executive Officer/Chief Financial Officer, evaluated the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report and concluded that the Company’s disclosure controls and procedures were effective. Subsequent to the date of the initial filing of this quarterly report on Form 10-Q, management became aware that a provision in the Company’s stock repurchase agreement with its Chairman required adjustments to the Company’s financial statements upon a change of accounting principles mandated subsequent to the date of the agreement. Our management has now subscribed to additional publications in order to keep current on applicable accounting issues and our new independent auditors will brief us on new accounting pronouncements and releases to attempt to avoid any similar errors in the future. Our financial reporting process with respect to preparation and review of regulatory filings have also been enhanced to include the utilization of a checklist by the preparer and reviewer to ensure that new accounting pronouncements and regulatory requirements are incorporated in the filing.

The discovery of the error in the recording of the cumulative effect of the change in accounting principle has affected, to some extent, the Company’s previous conclusion about the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Management is of the view that this error does not constitute a “material weakness” in the Company’s internal control over financial reporting identified by management. A “material weakness” is defined, in the relevant accounting literature, as a “reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by errors or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions.” Although this error could constitute a “significant deficiency,” management has considered the significance of the error (together with other reported errors) in light of the financial statements taken as whole and believes that the error does not evidence or constitute a “material weakness” in the Company’s disclosure controls and procedures.

Therefore, based on an overall evaluation of the Company’s disclosure controls and procedures, including an evaluation of any possible significant deficiencies and the corrective actions taken by the management in response to the discovery of the accounting error, the Company’s management concludes that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer/Chief Financial Officer, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

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There has been no change in the Company’s internal control over financial reporting that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Subsequent to the date of the initial filing of this quarterly report on Form 10-Q, there have been changes, as described above, in the Company’s internal control over financial reporting. Management is of the view that these changes have not materially affected and are not reasonably likely to materially affect, the Company’s internal control over financial reporting.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified based on current expectations. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements contained in this Form 10-Q/A, or in other Company filings, press releases, or otherwise. In addition to the factors discussed in this Form 10-Q/A, other factors that could contribute to or cause such differences include, but are not limited to, developments in any one or more of the following areas: future fluctuations in economic conditions, the receptivity of consumers to new consumer electronics technologies, the rate and consumer acceptance of new product introductions, competition, pricing, the number and nature of customers and their product orders, production by third party vendors, foreign manufacturing, sourcing and sales (including foreign government regulation, trade and importation concerns), borrowing costs, changes in tax rates, pending or threatened litigation and investigations, and other risk factors which may be detailed from time to time in the Company’s Securities and Exchange Commission filings.

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

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PART II OTHER INFORMATION

Item 6 Exhibits and Reports on Form 8-K

(a)	Exhibits Filed
	See Exhibit Index attached hereto.
(b)	Reports on Form 8-K
	On October 8, 2003, the Company filed a Current Report on
Form 8-K to report a press release. The matter was reported
under Items 7, 9 and 12 of Form 8-K.

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Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| Date:
November 17, 2004 | /s/ Michael J. Koss |
| --- | --- |
| | Michael J. Koss |
| | Vice Chairman, President, |
| | Chief Executive Officer, |
| | Chief Financial Officer |
| Date: November 17, 2004 | /s/ Sue Sachdeva |
| | Sue Sachdeva |
| | Vice President—Finance
Secretary |

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EXHIBIT INDEX

The Company will furnish a copy of any exhibit described below upon request and upon reimbursement to the Company of its reasonable expenses of furnishing such exhibit, which shall be limited to a photocopying charge of $0.25 per page and, if mailed to the requesting party, the cost of first-class postage.

Designation — of Exhibit	Exhibit Title	Incorporation — by Reference
3.1	Certificate of Incorporation of Koss Corporation, as in
effect on September 25, 1996	(1	)
3.2	By-Laws of Koss Corporation, as in effect on
September 25, 1996	(2	)
4.1	Certificate of Incorporation of Koss Corporation, as in
effect on September 25, 1996	(1	)
4.2	By-Laws of Koss Corporation, as in effect on
September 25, 1996	(2	)
10.1	Officer Loan Policy	(3	)
10.3	Supplemental Medical Care Reimbursement Plan	(4	)
10.4	Death Benefit Agreement with John C. Koss	(5	)
10.5	Stock Purchase Agreement with John C. Koss	(6	)
10.6	Salary Continuation Resolution for John C . Koss	(7	)
10.7	1983 Incentive Stock Option Plan	(8	)
10.8	Assignment of Lease to John C. Koss	(9	)
10.9	Addendum to Lease	(10	)
10.10	1990 Flexible Incentive Plan	(11	)
10.12	Loan Agreement, effective as of February 17,
1995	(12	)
10.13	Amendment to Loan Agreement dated June 15, 1995,
effective as of February 17, 1995	(13	)
10.14	Amendment to Loan Agreement dated April 29,
1999	(14	)
10.15	Amendment to Loan Agreement dated December 15, 1999	(15	)
10.16	Amendment to Loan Agreement dated October 10, 2001	(16	)

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Designation — of Exhibit	Exhibit Title	Incorporation — by Reference
10.17	License Agreement dated November 15, 1991 between
Koss Corporation and Trabelco N.V. (a subsidiary
of Hagemeyer N.V.) for North America, Central
America and South America (including Amendment
to License Agreement dated November 15, 1991;
Renewal Letter dated November 18, 1994; and Second
Amendment to License Agreement dated September 29, 1995)	(17	)
10.18	License Agreement dated September 29, 1995 between
Koss Corporation and Trabelco N.V. (a subsidiary
of Hagemeyer N.V.) for Europe (including First
Amendment to License Agreement dated December 26,
1995)	(18	)
10.19	Third Amendment and Assignment of License Agreement to Jiangsu Electronics Industries Limited dated
as of March 31, 1997	(19	)
10.20	Fourth Amendment to License Agreement between Koss Corporation and Jiangsu Electronics Industries
Limited dated as of May 29, 1998	(20	)
10.21	Fifth Amendment to License Agreement between Koss Corporation and Jiangsu Electronics Industries
Limited dated March 30, 2001	(21	)
10.22	Sixth Amendment to License Agreement between Koss Corporation and Jiangsu Electronics Industries
Limited dated August 15, 2001	(22	)
10.23	Seventh Amendment to License Agreement between Koss Corporation and Jiangsu Electronics Industries
Limited dated December 28, 2001	(23	)
10.24	Eighth Amendment to License Agreement between
Koss Corporation and Jiangsu Electronics Industries
Limited dated July 31, 2002	(24	)
10.25	License Agreement dated June 30, 1998 between Koss Corporation and Logitech Electronics Inc.
(including Addendum to License Agreement dated June 30, 1998)	(25	)
10.26	Amendment and Extension Agreement between Koss Corporation and Logitech Electronics Inc. dated May
1, 2001	(26	)
10.27	Consent of Directors (Supplemental Executive
Retirement Plan for Michael J. Koss dated
March 7, 1997)	(27	)
10.28	Amendment to Lease	(28	)

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Designation — of Exhibit	Exhibit Title	Incorporation — by Reference
10.29	Partial Assignment, Termination and Modification of
Lease	(29	)
10.30	Restated Lease	(30	)
31.1	Certification pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934	(Filed and
attached hereto)
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002	(Furnished and
attached hereto)
(1)	Incorporated by reference from Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(2)	Incorporated by reference from Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(3)	Incorporated by reference from Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(4)	Incorporated by reference from Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(5)	Incorporated by reference from Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(6)	Incorporated by reference from Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(7)	Incorporated by reference from Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(8)	Incorporated by reference from Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(9)	Incorporated by reference from Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1988
(Commission File No. 0-3295)
(10)	Incorporated by reference from Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1988
(Commission File No. 0-3295)

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Designation		Incorporation
of Exhibit	Exhibit Title	by Reference
(11)	Incorporated by reference from Exhibit 25 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1990
(Commission File No. 0-3295)
(12)	Incorporated by reference from Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
1995 (Commission File No. 0-3295)
(13)	Incorporated by reference from Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1995
(Commission File No. 0-3295)
(14)	Incorporated by reference from Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1999
(Commission File No. 0-3295
(15)	Incorporated by reference from Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2000
(Commission File No. 0-3295)
(16)	Incorporated by reference from Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December
31, 2001 (Commission File No. 0-3295)
(17)	Incorporated by reference from Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(18)	Incorporated by reference from Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996
(Commission File No. 0-3295)
(19)	Incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (Commission File No. 0-3295)
(20)	Incorporated by reference from Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1998
(Commission File No. 0-3295)
(21)	Incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2001 (Commission File No. 0-3295)
(22)	Incorporated by reference from Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2001
(Commission File No. 0-3295)
(23)	Incorporated by reference from Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December
31, 2001 (Commission File No. 0-3295)

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Designation		Incorporation
of Exhibit	Exhibit Title	by Reference
(24)	Incorporated by reference from Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2002
(Commission File No. 0-3295)
(25)	Incorporated by reference from Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1998
(Commission File No. 0-3295)
(26)	Incorporated by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2001 (Commission File No. 0-3295)
(27)	Incorporated by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (Commission File No. 0-3295)
(28)	Incorporated by reference from Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2000
(Commission File No. 0-3295)
(29)	Incorporated by reference from Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2001
(Commission File No. 0-3295)
(30)	Incorporated by reference from Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2001
(Commission File No. 0-3295)

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