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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 September 30, 2002
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 (I.R.S. Employer Identification No.)
incorporation or organization)
4129 North Port Washington Avenue, Milwaukee, Wisconsin 53212
- --------------------------------------------------------------------------------
(Address of principal executive office) (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
--- ---
At September 30, 2002, there were 3,911,756 shares outstanding of the
Registrant's common stock, $0.005 par value per share.
KOSS CORPORATION AND SUBSIDIARIES
FORM 10-Q
September 30, 2002
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 2002 and June 30, 2002 3
Condensed Consolidated Statements
of Income (Unaudited)
Three months ended September 30, 2002 and 2001 4
Condensed Consolidated Statements of Cash
Flows (Unaudited)
Three months ended September 30, 2002 and 2001 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) September 30, 2002 6-7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Item 4 Controls and Procedures 11
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security-Holders 12
Item 6 Exhibits and Reports on Form 8-K 13
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KOSS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 2002 June 30, 2002
------------------ -------------
ASSETS
Current Assets:
Cash $ 1,747,336 $ 1,052,364
Accounts receivable 7,297,440 8,371,187
Inventories 8,298,415 6,380,212
Other current assets 1,510,068 1,315,901
----------- -----------
Total current assets 18,853,259 17,119,664
Property and Equipment, net 1,713,368 1,778,055
Other Assets 1,428,415 1,428,415
----------- -----------
$21,995,042 $20,326,134
=========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable $ 2,465,979 $ 1,854,316
Accrued liabilities 1,441,743 1,587,551
Income taxes payable 1,075,279 506,102
Dividends payable 477,172 440,466
----------- -----------
Total current liabilities 5,460,173 4,388,435
Deferred Compensation 711,163 737,599
Other Liabilities 437,354 437,354
Contingently Redeemable Equity Interest 1,490,000 1,490,000
Stockholders' Investment 13,896,352 13,272,746
----------- -----------
$21,995,042 $20,326,134
=========== ===========
See accompanying notes.
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KOSS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended September 30 2002 2001
----------- -----------
Net sales $ 8,954,978 $ 8,951,411
Cost of goods sold 5,424,221 5,499,520
----------- -----------
Gross profit 3,530,757 3,451,891
Selling, general and
administrative expense 1,880,652 1,925,964
----------- -----------
Income from operations 1,650,105 1,525,927
Other income (expense)
Royalty income 163,961 167,714
Interest income 4,279 7,281
Interest expense (11,290) (10,964)
----------- -----------
Income before income tax provision 1,807,055 1,689,958
Provision for income taxes 706,277 659,084
----------- -----------
Net income $ 1,100,778 $ 1,030,874
=========== ===========
Earnings per common share:
Basic $0.30 $0.27
Diluted $0.29 $0.25
=========== ===========
Dividends per common share $0.13 $0.125
=========== ===========
See accompanying notes.
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KOSS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended September 30 2002 2001
----------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 1,100,778 $ 1,030,874
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 150,069 154,785
Deferred compensation (26,436) 28,770
Net changes in operating assets and
liabilities 18,020 (242,933)
----------- -----------
Net cash provided by operating
activities 1,242,431 971,496
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of equipment
and leasehold improvements (106,993) (158,820)
----------- -----------
Net cash provided by
investing activities (106,993) (158,820)
----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayments under line of credit agreements -- (615,000)
Borrowings under line of credit agreements -- 4,080,400
Dividends paid (440,466) --
Purchase of common stock for treasury -- (3,391,312)
Purchase and retirement of common stock -- (844,325)
Exercise of stock options -- 112,200
----------- -----------
Net cash used in financing
activities (440,466) (658,037)
----------- -----------
Net increase in cash 694,972 154,639
Cash at beginning of period 1,052,364 181,678
----------- -----------
Cash at end of period $ 1,747,336 $ 336,317
=========== ===========
See accompanying notes.
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KOSS CORPORATION AND SUBSIDIARIES
September 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 September 30, 2002
and for all periods presented have been made. The income from
operations for the quarter ended September 30, 2002 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, 2002, Annual Report
on Form 10-K.
2. EARNINGS PER COMMON SHARE AND STOCK SPLIT
Basic earnings per 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 September 30, 2002
and 2001 were 3,855,625 and 3,835,612, respectively. When dilutive,
stock options are included as share equivalents using the treasury
stock method. Common stock equivalents of 185,071 and 123,889 related
to stock option grants were included in the computation of the average
number of shares outstanding for diluted earnings per share for the
quarters ended September 30, 2002 and 2001, respectively.
On October 2, 2001, the Company declared a 2 for 1 stock split of the
Company's common stock for stockholders of record on October 22, 2001,
with the effective date being November 5, 2001. Earnings per common
share amounts disclosed have been restated to give effect to the common
stock split.
3. INVENTORIES
The classification of inventories is as follows:
September 30, 2002 June 30, 2002
------------------ -------------
Raw materials and
work in process $3,726,500 $2,288,918
Finished goods 5,359,276 4,878,655
---------- ----------
9,085,776 7,167,573
LIFO Reserve (787,361) (787,361)
---------- ----------
$8,298,415 $6,380,212
========== ==========
4. STOCK PURCHASE AGREEMENT
The Company has an agreement with its Chairman to repurchase stock from
his estate in the event of his death. The repurchase price is 95% of
the fair market value of the
6 of 19
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 is obligated to pay in cash 25% of the total amount
due and to execute a promissory note at the prime rate of interest for
the balance. The Company maintains a $1,150,000 life insurance policy
to fund a substantial portion of this obligation. At September 30, 2002
and June 30, 2002, $1,490,000 has been classified as a Contingently
Redeemable Equity Interest reflecting the estimated obligation in the
event of execution of the agreement.
5. NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued FAS No. 143, "Accounting for Asset
Retirement Obligations" and in August 2001, issued No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." FAS No. 143
establishes accounting standards for the recognition and measurement of
an asset retirement obligation. FAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived
assets, superseding FAS No. 121. SFAS No. 143 and SFAS No. 144 was
effective for the Company on July 1, 2002. The statements did not have
an impact on the Company's results of operations or financial position.
In November 2001, the EITF reached a consensus on EITF No. 01-9,
"Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products." This issue addresses various
aspects of the accounting for consideration given by a vendor to a
customer or reseller of the vendor's products and was effective for the
Company's fiscal quarter ended March 31, 2002. The implementation of
this issue did not have a material impact on the Company's results of
operations for the quarter ended September 30, 2002.
In June 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 146, "Accounting for Exit or
Disposal Activities." This statement addresses the recognition,
measurement, and reporting of costs associated with exit and disposal
activities, including restructuring activities. The scope of the
current statement also includes (1) costs related to a termination
contract that is not a capital lease and (2) termination benefits that
employees who are involuntarily terminated receive under the terms of a
one-time benefit arrangement that is not an ongoing benefit arrangement
or an individual deferred-compensation contract. SFAS No. 146 will be
effective for exit or disposal activities that are initiated after
December 31, 2002. The Company is currently evaluating the impact of
SFAS No. 146.
6. DIVIDENDS DECLARED
On September 23, 2002, the Company declared a quarterly cash dividend
of $0.13 per share for stockholders of record on September 30, 2002 to
be paid October 15, 2002, such dividend payable has been recorded at
September 30, 2002.
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KOSS CORPORATION AND SUBSIDIARIES
FORM 10-Q - September 30, 2002
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Liquidity
Cash provided by operating activities during the three months ended September
30, 2002 amounted to $1,242,431. This was a result of net income for the period
adjusted for changes in operating assets and liabilities, primarily related to
increases in inventories, accounts payable and income taxes payable and
decreases in accounts receivable.
Capital expenditures for new property and equipment (including production
tooling) were $106,993 for the quarter. Budgeted capital expenditures for fiscal
year 2003 are $1,082,000. The Company expects to generate sufficient funds
through operations to fund these expenditures.
Stockholders' investment increased to $13,896,352 at September 30, 2002, from
$13,272,746 at June 30, 2002. The increase reflects the effect of net income and
dividends.
The Company amended its existing credit facility in July 2002, extending the
maturity date of the unsecured line of credit to November 1, 2003. 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 stock pursuant to the Company's 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
September 30, 2002 and June 30, 2002.
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. In January of 1996, the Board of Directors
approved an increase in the stock repurchase program from $2,000,000 to
$3,000,000. In July of 1997, the Board of Directors again approved an increase
in the stock repurchase program from $3,000,000 to $5,000,000. In January of
1998, the Board of Directors approved an increase of an additional $2,000,000,
increasing the total stock repurchase program from $5,000,000 to $7,000,000. In
August of 1998, the Board of Directors approved an increase of $3,000,000 in the
Company's stock repurchase program, thereby increasing the total amount of stock
repurchases from $7,000,000 to $10,000,000. In April of 1999, the Board of
Directors again approved an increase in the stock repurchase program from
$10,000,000 to $15,000,000. In October of 1999, the Board of Directors increased
the stock repurchase program by another $5,000,000, up to a maximum of
$20,000,000, and in July of 2000 the Board increased the program by an
additional $5,000,000, for a maximum of $25,000,000. In January of 2001 the
Board of Directors approved an increase in the stock repurchase program from
$25,000,000 to $28,000,000, another increase in April of 2001 of an additional
$3,000,000, an additional increase of $3,000,000 in July of 2001, and an
additional $1,500,000 in April of 2002, for a maximum of $35,500,000. 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.
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From the commencement of the Company's stock repurchase program through
September 30, 2002, the Company has purchased a total of 4,856,680 shares for a
total gross purchase price of $38,577,045 (representing an average gross
purchase price of $7.94 per share) and a total net purchase price of $34,502,072
(representing an average net purchase price of $7.10 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 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 quarter ended September 30, 2002, the
ESOP did not purchase any shares of the Company's stock.
Results of Operations
Net sales for the first quarter ended September 30, 2002 were $8,954,978
compared with $8,951,411 for the same period in 2001, an increase of $3,567.
Gross profit as a percent of net sales stayed steady at 39% for the quarter
ended September 30, 2002 compared with 39% in the prior year.
Selling, general and administrative expenses for the quarter ended September 30,
2002 were $1,880,652 or 21% of net sales, compared to $1,925,964 or 22% of net
sales for the same period in 2001
For the first quarter ended September 30, 2002, income from operations was
$1,650,105 versus $1,525,927 for the same period in the prior year
Effective July 1, 1998, the Company entered into a License Agreement and an
Addendum thereto with Logitech Electronics Inc. ("Logitech") 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
("Jiangsu"), 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, 2003. Pursuant to this License
Agreement, Jiangsu has agreed to meet certain minimum royalty amounts each year.
The products covered by this License Agreement include various consumer
electronics products.
Royalty income for the quarter ended September 30, 2002 was $163,961, compared
to $167,714 for the quarter ended September 30, 2001.
Interest income for the quarter was $4,279 as compared to $7,281 for the same
quarter in 2001. The decrease in interest income in 2002 is a result of lower
levels of invested excess cash.
9 of 19
Interest expense amounted to $11,290 for the quarter as compared to $10,964 for
the same period in the prior year.
On October 2, 2001, the Company declared a 2 for 1 stock split of the Company's
common stock for stockholders of record on October 22, 2001, with the effective
date being November 5, 2001. All earnings per common share amounts herein have
been restated to give effect to the common stock split.
On September 23, 2002, the Company declared a quarterly cash dividend of $0.13
per share payable on October 15, 2002 to stockholders of record on September 30,
2002, which is recorded as dividends payable.
New Accounting Pronouncements
In July 2001, the FASB issued FAS No. 143, "Accounting for Asset Retirement
Obligations" and in August 2001, issued No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." FAS No. 143 establishes accounting standards
for the recognition and measurement of an asset retirement obligation. FAS No.
144 addresses financial accounting and reporting for the impairment or disposal
of long-lived assets, superseding FAS No. 121. SFAS No. 143 and SFAS No. 144 was
effective for the Company on July 1, 2002. The statements did not have an impact
on the Company's results of operations or financial position.
In November 2001, the EITF reached a consensus on EITF No. 01-9, "Accounting for
Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's
Products." This issue addresses various aspects of the accounting for
consideration given by a vendor to a customer or reseller of the vendor's
products and was effective for the Company's fiscal quarter ended March 31,
2002. The implementation of this issue did not have a material impact on the
Company's results of operations for the quarter ended September 30, 2002.
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146, "Accounting for Exit or Disposal
Activities." This statement addresses the recognition, measurement, and
reporting of costs associated with exit and disposal activities, including
restructuring activities. The scope of the current statement also includes (1)
costs related to a termination contract that is not a capital lease and (2)
termination benefits that employees who are involuntarily terminated receive
under the terms of a one-time benefit arrangement that is not an ongoing benefit
arrangement or an individual deferred-compensation contract. SFAS No. 146 will
be effective for exit or disposal activities that are initiated after December
31, 2002. The Company is currently evaluating the impact of SFAS No. 146.
10 of 19
Controls and Procedures
The Company's management, including the Chief Executive Officer/Chief Financial
Officer, evaluated the Company's disclosure controls and procedures within 90
days of the filing of this report and concluded that the Company's disclosure
controls and procedures were effective. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls, including any corrective actions with regard to significant
deficiencies and material weaknesses subsequent to their evaluation. Management,
including the Chief Executive Officer/Chief Financial Officer, periodically
reviews the Company's internal controls for effectiveness and plans to conduct
quarterly evaluations of its disclosure controls and procedures.
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," or "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, 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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PART II OTHER INFORMATION
Item 4 Submission of Matters to Vote of Security-Holders
(a) On October 17, 2002 an Annual Meeting of Stockholders was held.
(b) Proxies for the election of directors were solicited pursuant to
Regulation 14. There was no solicitation in opposition to
management's nominees, and all such nominees were elected.
(c) There were 3,670,554 shares of common stock eligible to vote at the
Annual Meeting, of which 3,227,805 shares were present at the
Annual Meeting in person or by proxy, which constituted a quorum.
The following is a summary of the results of the voting:
Number of Votes Broker
------------------------ ---------
For Withheld Non-Votes
---------- -------- ---------
Nominees for 1-year terms ending in 2003:
John C. Koss 3,224,356 3,449 0
Thomas L. Doerr 3,224,530 3,275 0
Michael J. Koss 3,224,530 3,275 0
Lawrence S. Mattson 3,224,356 3,449 0
Martin F. Stein 3,224,530 3,275 0
John J. Stollenwerk 3,223,756 4,049 0
Number of Votes Broker
------------------------------------ ---------
For Against Abstain Non-Votes
------------ --------- ------- ---------
Appointment of
PricewaterhouseCoopers LLP
as independent auditors
for the year ended
June 30, 2003 3,220,583 7,222 0 0
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Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits Filed
See Exhibit Index attached hereto.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended September 30, 2002.
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 authorized.
KOSS CORPORATION
Dated: 11/4/02 /s/ Michael J. Koss
--------- -------------------------------------
Michael J. Koss
Vice Chairman, President,
Chief Executive Officer,
Chief Financial Officer
Dated: 11/4/02 /s/ Sue Sachdeva
--------- -------------------------------------
Sue Sachdeva
Vice President--Finance, and
Secretary
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KOSS CORPORATION
CERTIFICATION OF PERIODIC FINANCIAL REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Koss, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Koss Corporation
(the "registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. As the registrant's certifying officer I am responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. As the registrant's certifying officer I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. As the registrant's certifying officer I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 4, 2002
/s/ Michael J. Koss
- -------------------
Michael J. Koss
Chief Executive Officer, President and
Chief Financial Officer
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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 Incorporation
of Exhibit Exhibit Title 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)
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10.16 Amendment to Loan Agreement dated October 10, 2001 (16)
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)
10.29 Partial Assignment, Termination and Modification of
Lease ...................................................... (29)
10.30 Restated Lease ............................................. (30)
22 List of Subsidiaries of Koss Corporation .................. (31)
(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)
(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)
17 of 19
(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 the sole Exhibit 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)
(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 0-3295)
18 of 19
(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)
(31) Incorporated by reference from Exhibit 22 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1988
(Commission File No. 0-3295)
19 of 19