EX-99.1 2 a10-16170_1ex99d1.htm EX-99.1

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

CONTACT:

MICHAEL J. KOSS

August 19, 2010

 

President & CEO

 

 

(414) 964-5000

 

 

mjkoss@koss.com

 

Koss Posts Fourth Quarter Loss on Fees Related to Unauthorized Transactions and Financial Restatements

 

Milwaukee, Wisconsin:  Koss Corporation (NASDAQ SYMBOL: KOSS), the U.S. based high-fidelity stereophone creator, has announced fiscal year-end and fourth quarter earnings for the period ended June 30, 2010.

 

“Koss had very challenging third and fourth quarters as we dealt with a continuing slow market in the U.S. and the costs involved with the restatements of our financial information due to the unauthorized transactions discovered in December of 2009,” Michael J. Koss, President and CEO, told employees here today.

 

Sales for the twelve months ended June 30, 2010 slipped 3% to $40,598,722 compared to $41,717,114 for the same period one year ago. The net loss for 2010 was $3,572,225 compared to a loss of $257,158 in 2009.  Fiscal year 2010 included $10,286,988 of unauthorized transactions that occurred from July 2009 through December 2009 as previously reported.  Also, the Company incurred a total of $1,666,986 of net charges for legal fees for investigation and defense as well as other professional fees offset by insurance proceeds relating to the unauthorized transactions.  In fiscal year 2009, there were unauthorized transactions of $8,498,434.  Diluted loss per share for the twelve months was $0.48 compared to a loss of $0.03 one year ago.

 

Sales for the fourth quarter ended June 30, 2010 dropped by 14% to $8,113,392 compared to $9,431,829 for the same period one year ago.  The net loss for the quarter was $423,450 compared to a loss of $1,094,567 for the fourth quarter last year.  The fourth quarter for this year included net charges of $1,116,439 related to the unauthorized transactions for legal fees for investigation and defense as well as other professional fees offset by insurance proceeds.  The fourth quarter ended June 30, 2009 included $2,716,334 of unauthorized transactions.

 

Fourth quarter diluted loss per share was $0.05 compared to a loss of $0.14 one year ago.

 

The Company’s former VP of Finance, Sujata Sachdeva, pled guilty in the criminal case filed against her, and her sentencing is currently scheduled for October 22, 2010.

 

“Our amended Form 10-K/A filed on June 30, 2010 chronicles the misappropriation and circumvention of the Company’s internal controls and established operating procedures by the terminated employees of the

 


 

Company’s accounting department.  The Company was actually stronger in terms of net sales and gross margins than originally reported,” Michael Koss said.

 

Koss went on to say that the Company will incur additional legal and professional fees related to the unauthorized transactions, but expects to recover a portion of the Company’s stolen funds through the forfeiture and sale of seized assets, and is also pursuing insurance proceeds and certain claims filed against third parties.

 

Despite the recent difficulties, Michael Koss noted that the Company is optimistic about the coming year and recently introduced three new models to its existing line of stereophones and earbuds. Koss will pay a dividend of $0.06 per share on October 15, 2010 to shareholders of record on September 30, 2010.

 

Koss Corporation designs, manufactures and markets a complete line of high-fidelity stereophones, speaker-phones, computer headsets, telecommunications headsets, active noise canceling stereophones, wireless stereophones, and compact disc recordings of American Symphony Orchestras on the Koss Classics label.

 

This press release contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “forecasts,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating forward-looking statements, you should specifically consider various factors that may cause actual results to vary from those contained in the forward-looking statements, such as general economic conditions, in particular, consumer demand for the Company’s and its customers’ products, competitive and technological developments, foreign currency fluctuations, and costs of operations. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. In addition, such uncertainties and other operational matters are discussed further in the Company’s quarterly and annual filings with the Securities and Exchange Commission.

 


 

KOSS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months

 

Twelve Months

 

Period Ended June 30

 

2010

 

2009

 

2010

 

2009

 

Net sales

 

$

8,113,392

 

$

9,431,829

 

$

40,598,722

 

$

41,717,114

 

Cost of goods sold

 

5,116,607

 

5,528,184

 

23,730,311

 

23,168,422

 

Gross profit

 

2,996,785

 

3,903,645

 

16,868,411

 

18,548,692

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

2,269,250

 

2,679,280

 

9,870,204

 

10,390,352

 

Unauthorized transactions

 

—

 

2,716,334

 

10,286,988

 

8,498,434

 

Unauthorized transaction related costs and recoveries, net

 

1,116,439

 

—

 

1,666,986

 

—

 

Total Operating Expenses

 

3,385,689

 

5,395,614

 

21,824,178

 

18,888,786

 

Loss from operations

 

(388,904

)

(1,491,969

)

(4,955,767

)

(340,094

)

Other Income (Expense):

 

 

 

 

 

 

 

 

 

Royalty income

 

—

 

—

 

—

 

208,750

 

Interest income

 

228

 

1

 

263

 

15,503

 

Interest expense

 

(119,531

)

(50,450

)

(429,138

)

(216,751

)

Total Other (Expense) Income, net

 

(119,303

)

(50,449

)

(428,875

)

7,502

 

Loss before income tax benefit

 

(508,207

)

(1,542,418

)

(5,384,642

)

(332,592

)

Income tax benefit

 

(84,757

)

(447,851

)

(1,812,417

)

(75,434

)

Net loss

 

$

(423,450

)

$

(1,094,567

)

$

(3,572,225

)

$

(257,158

)

Loss per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.05

)

$

(0.14

)

$

(0.48

)

$

(0.03

)

Diluted

 

$

(0.05

)

$

(0.14

)

$

(0.48

)

$

(0.03

)

Dividends declared per common share

 

$

0.06

 

$

0.065

 

$

0.245

 

$

0.26