KOSS CORP — Interim / Quarterly Report 2009

May 8, 2009

10-Q 1 a09-11585_110q.htm QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(D)

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*SECURITIES AND EXCHANGE COMMISSION*

*Washington, D.C. 20549*

*Form 10-Q*

| x | QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| --- | --- |
| for the
quarterly period ended March 31, 2009 | |
| OR | |
| o | TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

*Commission File Number 0-3295*

*KOSS CORPORATION*

(Exact Name of Registrant as Specified in its Charter)

| A
DELAWARE CORPORATION | 39-1168275 |
| --- | --- |
| (State or other
jurisdiction of | (I.R.S. Employer
Identification No.) |
| incorporation or
organization) | |

| 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 o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

At May 01, 2009, there were 3,691,353 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

March 31, 2009

INDEX

PART I	FINANCIAL INFORMATION		Page
	Item 1	Financial Statements
		Condensed Consolidated
Balance Sheets March 31, 2009 (Unaudited) and June 30, 2008	3
		Condensed Consolidated
Statements of Income (Unaudited) Three months and nine months ended
March 31, 2009 and 2008	4
		Condensed Consolidated
Statements of Cash Flows (Unaudited) Nine months ended March 31, 2009
and 2008	5
		Notes to Condensed
Consolidated Financial Statements (Unaudited) March 31, 2009	6-8
	Item 2	Management’s
Discussion and Analysis of Financial Condition and Results of Operations	9-11
	Item 3	Quantitative
and Qualitative Disclosures About Market Risk	11
	Item 4	Controls and
Procedures	11
PART II	OTHER INFORMATION
	Item 1A	Risk Factors	12
	Item 2	Unregistered
Sales of Equity Securities and Use of Proceeds	12
	Item 3	Submission
of Matters to Vote of Security-Holders	12
	Item 4	Exhibits	12

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*PART I*

*FINANCIAL INFORMATION*

*Item 1. Financial Statements.*

KOSS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited) — March 31, 2009	June 30, 2008
ASSETS
Current assets:
Cash	$ 2,627,275	$ 3,322,873
Accounts receivable	7,539,157	10,148,646
Inventories	10,571,212	9,374,344
Deferred income taxes	783,995	783,995
Other current assets	508,382	504,806
Total current assets	22,030,021	24,134,664
Property and equipment, net	3,899,537	2,746,367
Deferred income taxes	1,066,853	1,066,853
Other assets	1,954,124	2,029,123
Total Assets	$ 28,950,535	$ 29,977,007
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$ 2,801,506	$ 2,950,721
Accrued liabilities	1,077,326	1,808,467
Dividends payable	479,876	480,395
Income tax payable	11,896	347,507
Total current liabilities	4,370,604	5,587,090
Deferred compensation	1,047,482	1,047,482
Derivative liability	125,000	125,000
Stockholders’ investment	23,407,449	23,217,435
Total Liabilities & Stockholders’ Investments	$ 28,950,535	$ 29,977,007

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 March 31	Three Months — 2009	2008	Nine Months — 2009	2008
Net sales	$ 8,145,930	$ 10,003,648	$ 29,919,559	$ 34,740,651
Cost of goods sold	5,531,938	6,438,524	19,422,223	22,059,172
Gross profit	2,613,992	3,565,124	10,497,336	12,681,479
Selling, general and administrative expense	2,388,169	2,602,122	8,342,795	7,757,424
Income from operations	225,823	963,002	2,154,541	4,924,055
Other income
Royalty income	—	87,501	58,333	262,501
Interest income	2	11,929	15,501	109,120
Income before income tax provision	225,825	1,062,432	2,228,375	5,295,676
Provision for income taxes	88,058	414,435	854,390	2,065,453
Net income	$ 137,767	$ 647,997	$ 1,373,985	$ 3,230,223
Earnings per common share
Basic	$ 0.04	$ 0.18	$ 0.37	$ 0.88
Diluted	$ 0.04	$ 0.18	$ 0.37	$ 0.87
Dividends per common share	$ 0.13	$ 0.13	$ 0.39	$ 1.39

See accompanying notes to the condensed consolidated financial statements.

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KOSS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended March 31,	2009		2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 1,373,895		$ 3,230,223
Adjustments to reconcile net income to net cash by operating
activities:
Depreciation and amortization	648,841		843,289
Stock compensation expense	299,997		408,789
Net changes in operating assets and liabilities	267,491		113,359
Net cash provided by operating activities	2,590,224		4,595,660
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment	(1,802,011	)	(762,194	)
Net cash used in investing activities	(1,802,011	)	(762,194	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid	(1,440,191	)	(5,115,390	)
Purchase of common stock	(43,620	)	(1,268,786	)
Exercise of stock options	—		1,413,867
Net cash used in financing activities	(1,483,811	)	(4,970,309	)
Net decrease in cash	(695,598	)	(1,136,843	)
Cash at beginning of period	3,322,873		4,187,682
Cash at end of period	$ 2,627,275		$ 3,050,839

See accompanying notes to the condensed consolidated financial statements.

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KOSS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2009

(Unaudited)

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The financial statements presented herein are based on interim amounts. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2009 and for all periods presented have been made. All significant intercompany transactions have been eliminated. The income from operations for the quarter and nine months ended March 31, 2009 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, 2008 Annual Report on Form 10-K.

1. 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 March 31, 2009 and 2008 were 3,691,359 and 3,690,371, respectively. For the nine months ended March 31, 2009 and 2008, weighted average number of common shares outstanding were 3,693,522 and 3,680,321, respectively. When dilutive, stock options are included as share equivalents using the treasury stock method. For the quarter ended March 31, 2009 there were no common stock equivalents related to stock option grants included in the computation of the average number of shares outstanding for diluted earnings per common share as inclusion would have been anti-dilutive. For the quarter ended March 31, 2008 there were 12,107 common stock equivalents. For the nine months ended March 31, 2009 there were no common stock equivalents related to stock option grants included in the computation of the average number of shares outstanding for diluted earnings per common share. For the nine months ended March 31, 2008 there were 18,065 common stock equivalents.

1. INCOME TAXES

We file income tax returns in the United States (Federal), Wisconsin (state) and various other state jurisdictions. We are not currently subject to income tax examinations in any of our significant tax jurisdictions. Tax years open to examination by tax authorities under the statute of limitations include fiscal 2006 through 2008 for Federal and fiscal 2003 through 2008 for most states jurisdictions.

We adopted the provisions for FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, on July 1, 2007. As a result of the implementation of FIN 48, we did not recognize a significant change in the liability for unrecognized tax benefits. The total liability for unrecognized tax benefits was approximately $267,000 as of March 31, 2009. The liability does not include an amount for accrued penalties. We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes. We do not expect a significant increase or decrease to the total amounts of unrecognized tax benefits within the next 12 months.

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There was no change in the amount of unrecognized tax benefits during the nine months ended March 31, 2009.

1. INVENTORIES

The classification of inventories is as follows:

Raw materials and work in process	March 31, 2009 — $ 3,594,030		June 30, 2008 — $ 4,212,089
Finished goods	8,196,048		6,381,121
	11,790,078		10,593,210
LIFO reserve	(1,218,866	)	(1,218,866	)
	$ 10,571,212		$ 9,374,344

1. 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 March 31, 2009 was $125,000. The repurchase price is 95% of the fair market value of the common stock on the date that notice, if the estate elects, to repurchase is provided to the Company. Under the agreement, the total number of shares to be repurchased will be sufficient to provide proceeds which are the lesser of $2,500,000 or the amount of estate taxes and administrative expenses incurred by the Chairman’s estate. The Company may elect to pay the purchase price in cash or may elect to pay cash equal to 25% of the total amount due and to execute a promissory note for the balance, payable over four years, at the prime rate of interest. The Company maintains a $1,150,000 life insurance policy to fund a substantial portion of this obligation. At March 31, 2009 and June 30, 2008, $125,000 has been classified as a derivative liability on the Company’s financial statements.

1. DIVIDENDS DECLARED

On March 17, 2009, the Company declared a quarterly cash dividend of $0.13 per share for the stockholders of record on March 31, 2009 to be paid April 15, 2009. Such dividend payable has been recorded at March 31, 2009.

1. STOCK-BASED COMPENSATION

In 1990, pursuant to the recommendation of the Board of Directors, the stockholders ratified the creation of the Company’s 1990 Flexible Incentive Plan (the “1990 Plan”). The 1990 Plan is administered by a committee of the Board of Directors and provides for the granting of various stock-based awards including stock options to eligible participants, primarily officers and certain key employees. A total of 225,000 shares of common stock were available in the first year of the Plan’s existence. Each year thereafter additional shares equal to 25% of the shares outstanding as of the first day of the applicable fiscal year were reserved for issuance pursuant to the 1990 Plan. On July 22, 1992, the Board of Directors authorized the reservation of an additional 250,000 shares for the 1990 Plan, which was approved by the stockholders. In 1993, the Board of Directors authorized the reservation of an additional 300,000 shares for the 1990 Plan, which was approved by the stockholders. In 1997, the Board of Directors authorized the reservation of an

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additional 300,000 shares for the 1990 Plan, which was approved by the stockholders. In 2001, the Board of Directors authorized the reservation of an additional 300,000 shares for the 1990 Plan, which was also approved by the stockholders. Options generally vest over four or five years, with a maximum term of five to ten years.

We account for stock options and restricted stock issued under the plan in accordance with Statement of Accounting Standards (‘SFAS’) No. 123 (R), “Share Based Payments”. The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. The fair value of each restricted stock grant was based on the market price of the underlying common stock as of the date of grant. The resulting compensation cost is amortized on a straight-line basis over the vesting period.

A summary of stock option activity under the plan for the nine months ended March 31, 2009 is as follows:

	Number of Shares (in thousands)	Range of Exercise Price Per Share	Average Exercise Price
Balance,
July 30, 2008	561,654	$15.51–$28.80	$ 21.49
Granted	—	—	—
Exercised	—	—	—
Forfeited	—	—	—
Balance, March 31, 2009	561,654	$15.51–$28.80	$ 21.49

The range of options as of March 31, 2009 is as follows:

	Number of Options Outstanding/Exercisable	Weighted Average Exercise Price Outstanding/Exercisable	Weighted Average Remaining Contractual Life (Years)
$15.51-$19.47	219,654
/ 76,904	$17.37
/ $17.57	4.52
$21.42-$24.11	262,000
/ 201,000	$22.92
/ $23.32	2.15
$26.18-$28.80	80,000
/ 38,000	$28.15
/ $28.25	3.35
	561,654
/ 315,904	$21.49
/ $26.79

1. CREDIT FACILITY

On February 16, 2009, the Company entered into a new credit facility for an unsecured line of credit for up to a maximum of $10,000,000 up to and including January 29, 2010. This credit facility replaces the Company’s previous credit facility, which has been terminated and contained substantially the same terms as the Company’s new credit facility. The Company can use the new credit facility for working capital, to refinance existing indebtedness, for stock repurchase and for general corporate purposes. Borrowings under this credit facility bear interest at either the bank’s most recently publicly announced prime rate or at a LIBOR-based rate determined in accordance with the loan agreement. This credit facility includes financial covenants that require the Company to maintain a minimum tangible net worth, liabilities to tangible net worth ratios and interest coverage ratios. The Company uses its credit facility from time to time, although there was no utilization of this credit facility at March 31, 2009 or June 30, 2008. The Company did not utilize the credit facility during the quarter or nine months ended March 31, 2009.

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*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 nine months ended March 31, 2009 amounted to $2,590,224. This was a result of net income for the period adjusted for changes in operating assets and current liabilities, which arose primarily out of increases in other current assets, and decreases in accrued liabilities, and accounts payable.

Capital expenditures for new equipment (including production tooling) were $1,802,011 for the nine months ended March 31, 2009. Capital expenditures for fiscal year 2009 are expected to be approximately $2.6 million. The Company expects to generate sufficient funds through operations to fund these expenditures.

Stockholders’ investment increased to $23,407,449 at March 31, 2009, from $23,217,435 at June 30, 2008. The net increase reflects net income and exercise of stock options offset by the effect of the purchase and retirement of common stock and dividends declared.

On February 16, 2009, the Company entered into a new credit facility for an unsecured line of credit for up to a maximum of $10,000,000 up to and including January 29, 2010. This credit facility replaces the Company’s previous credit facility, which has been terminated and contained substantially the same terms as the Company’s new credit facility. The Company can use the new credit facility for working capital, to refinance existing indebtedness, for stock repurchase and for general corporate purposes. Borrowings under this credit facility bear interest at either the bank’s most recently publicly announced prime rate or at a LIBOR-based rate determined in accordance with the loan agreement. This credit facility includes financial covenants that require the Company to maintain a minimum tangible net worth, liabilities to tangible net worth ratios and interest coverage ratios. The Company uses its credit facility from time to time, although there was no utilization of this credit facility at March 31, 2009 or June 30, 2008. The Company did not utilize the credit facility during the quarter or nine months ended March 31, 2009.

In April of 1995, the Board of Directors approved a stock repurchase program authorizing the Company to purchase from time to time up to $2,000,000 of its common stock for its own account. Subsequently, the Board of directors periodically has approved increases in the stock repurchase program. The most recent increase was for an additional $2,000,000 in October 2006, for a maximum of $45,500,000. The Company intends to effectuate all stock purchases either on the open market or through privately negotiated transactions, and intends to finance all stock purchases through its own cash flow or by borrowing for such purchases.

For the quarter ended March 31, 2009, the Company purchased 168 shares of its common stock at an average net price of $9.30 per share, for a total net purchase price of $1,562. For the nine months ended March 31, 2009, the Company purchased 3,998 shares of its common stock at an average net price of $10.91 per share, for a total net purchase price of $43,620.

From the commencement of the Company’s stock repurchase program through March 31, 2009, the Company has purchased a total of 5,474,102 shares for a total gross purchase price of $52,768,873 (representing an average gross purchase price of $9.64 per share) and a total net purchase price of $41,945,130 (representing an average net purchase price of $7.66 per share). The difference between the total gross purchase price and the total net purchase price is the result of the Company receiving from employees cash acquired from such employees pursuant to the Company’s stock option program. In determining the dollar amount available for additional purchases under the stock repurchase program, the

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Company uses the total net purchase price by the Company for all stock purchases, as authorized by the Board of Directors.

The Company also has an Employee Stock Ownership Plan and Trust (“ESOP”) pursuant to which shares of the Company’s common stock are purchased by the ESOP for allocation to the accounts of ESOP participants. There were no ESOP purchases of the Company’s common stock for the nine months ended March 31, 2009.

Results of Operations

Net sales for the third quarter ended March 31, 2009 declined by 19% to $8,145,930 from $10,003,648 for the same period in 2008. Net sales for the nine months ended March 31, 2009 declined by 14% to $29,919,559 from $34,740,651 for the same period in 2008. The decrease is primarily the result of soft U.S. retail sales.

Gross profit as a percent of net sales was 32% for the quarter ended March 31, 2009 compared to 36% for the same period in the prior year. For the nine months ended March 31, 2009 the gross profit percentage was 35% compared to 37% for the same period in the prior year. The decrease in gross profit for the nine months ended March 31, 2009 was primarily due to a less profitable model mix sold in that period.

Selling, general and administrative expenses for the quarter ended March 31, 2009 were $2,388,169 or 29% of net sales, compared to $2,602,122 or 26% of net sales for the same period in 2008. For the nine month period ended March 31, 2009, these expenses were $8,342,795 or 28% of net sales, compared to $7,757,424 or 22% of net sales, for the same period in 2008. This increase is due to extra costs incurred related to engineering, research development and marketing.

For the quarter ended March 31, 2009, income from operations was $225,825 compared to $963,002 for the same period in the prior year. Income from operations for the nine months ended March 31, 2009 was $2,154,541 compared to $4,924,055 for the same period in 2008, a 56% decrease. Income from operations decreased primarily as a result of decreased net sales for the quarter and nine months ended March 31, 2009.

For the quarter ended March 31, 2009, net income decreased 79% to $137,767 from $647,997 for the same period in 2008. Net income for the nine months ended March 31, 2009, decreased 57% from $3,230,223 in 2008 to $1,373,985 in 2009. Net income decreased primarily as a result of decreased net sales for the quarter and nine months ended March 31, 2009.

Royalty income for the quarter ended March 31, 2009 was zero compared to $87,501 for the quarter ended March 31, 2008. For the nine month period ended March 31, 2009, royalty income was $58,333 compared to $262,501 for the same period ended March 31, 2008.

Interest income for the quarter was $2 compared to $11,929 for the same quarter in 2008. For the nine month period ended March 31, 2009, interest income was $15,501, compared to $109,120, for the same period in the prior year. Interest income fluctuates in relation to cash balances on hand throughout the year and fluctuations in interest rates earned.

The provision for income taxes for the quarter ended March 31, 2009, was $88,058 compared to $414,435 for the same period last year. For the nine months ended March 31, 2009, the provision for income taxes was $854,390 compared with $2,065,453 for the same period last year. The effective tax rate was 39% for each of the quarters.

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Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

*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 which may be used for working capital, to refinance existing indebtedness, for stock repurchase for general corporate purposes, as disclosed in the “Financial Condition, Liquidity and Capital Resources” section of the “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” above.

*Item 4. Controls and Procedures.*

(a) Evaluation of Disclosure Controls and Procedures . The Company maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The Company, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer/Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report, has concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b) Changes in Internal Controls . The Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. However, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

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*PART II*

*OTHER INFORMATION*

Item 1A Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in our Annual Report on Form 10-K for the year ended June 30, 2008, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risk and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

*Item 2 Unregistered Sales of Equity Securities and Use of Proceeds*

The following table presents information with respect to purchases of common stock of the Company made during the quarter ended March 31, 2009, by the Company.

*COMPANY REPURCHASES OF EQUITY SECURITIES*

Period (2009)	Total # of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plan (1)	Approximate Dollar Value of Shares Available under Repurchase Plan
January 1 – January 31	168	$ 9.30	0	$ 2,125,887
February 1 – February 28	0	$ 0.00	0	$ 2,125,887
March 1 – March 31	0	$ 0.00	0	$ 2,125,887

(1) In April of 1995, the Board of Directors approved a stock repurchase program authorizing the Company to purchase from time to time up to $2,000,000 of its common stock for its own account. Subsequently, the Board of Directors periodically has approved increases in the stock repurchase program. The most recent increase was for an additional $2,000,000 in October 2006, for a maximum of $45,500,000 of which $43,374,113 had been expended through March 31, 2009.

Item 3 Submission of Matters to Vote of Security-Holders

None.

Item 4 Exhibits

See Exhibit Index attached hereto.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

	KOSS CORPORATION
Date: May 08, 2009	/s/ Michael J. Koss
	Michael J. Koss
	Vice Chairman, President,
	Chief Executive Officer,
	Chief Financial Officer
Date: May 08, 2009	/s/ Sue Sachdeva
	Sue Sachdeva
	Vice President—Finance,
	Secretary

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*EXHIBIT INDEX*

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

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| 10.12 | Loan Agreement, effective as of February 17, 1995. Filed as
Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995 and incorporated herein by reference. |
| --- | --- |
| 10.13 | Amendment
to Loan Agreement dated June 15, 1995, effective as of February 17,
1995. Filed as Exhibit 10.13 to the Company’s Annual Report on
Form 10-K for the year ended June 30, 1995 and incorporated herein
by reference. |
| 10.14 | Amendment
to Loan Agreement dated April 29, 1999. Filed as Exhibit 10.14 to
the Company’s Annual Report on Form 10-K for the year ended
June 30, 1999 and incorporated herein by reference. |
| 10.15 | Amendment
to Loan Agreement dated December 15, 1999. Filed as Exhibit 10.15
to the Company’s Annual Report on Form 10-K for the year ended
June 30, 2000 and incorporated herein by reference. |
| 10.16 | Amendment
to Loan Agreement dated October 10, 2001. Filed as Exhibit 10.16 to
the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31,
2001 and incorporated herein by reference. |
| 10.17 | License
Agreement dated June 30, 1998 between Koss Corporation and Logitech
Electronics Inc. (including Addendum to License Agreement dated June 30,
1998). Filed as Exhibit 10.18 to the Company’s Annual Report on
Form 10-K for the year ended June 30, 1998 and incorporated herein
by reference. |
| 10.18 | Amendment
and Extension Agreement between Koss Corporation and Logitech Electronics
Inc. dated May 1, 2001. Filed as Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001
and incorporated herein by reference. |
| 10.19 | License
Agreement dated June 30, 2003 between Koss Corporation and Sonigem
Products, Inc. Filed as Exhibit 10.19 to the Company’s Annual
Report on Form 10-K for the year ended June 30, 2005 and
incorporated herein by reference. |
| 10.20 | Amendment
to License Agreement dated August 1, 2005, between Koss Corporation and
Sonigem Products, Inc. Filed as Exhibit 10.20 to the Company’s
Annual Report on Form 10-K for the year ended June 30, 2005 and
incorporated herein by reference. |
| 10.21 | Loan
Agreement dated February 16, 2009, between Koss Corporation and Harris
N.A., a national banking association* |
| 31.1 | Rule 13a-14(a)/15d-14(a) Certification
of Chief Executive Officer/Chief Financial Officer * |
| 32.1 | Section 1350
Certification of Chief Executive Officer/Chief Financial Officer ** |

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

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