x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
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Delaware
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|
39-1168275
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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4129 North Port Washington Avenue, Milwaukee, Wisconsin
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|
53212
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(Address of principal executive offices)
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(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock $0.005 par value per share
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The Nasdaq Stock Market LLC
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NONE
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
x
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(Do not check if a smaller reporting company)
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|
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Page
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PART I
|
|
|
|
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PART II
|
|
|
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Part III
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|
|
|
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PART IV
|
|
|
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2014
|
|
2013
|
||||
United States
|
|
$
|
14,219,449
|
|
|
$
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16,371,434
|
|
Sweden
|
|
2,310,064
|
|
|
7,161,327
|
|
||
Canada
|
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1,899,573
|
|
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1,223,176
|
|
||
Cyprus
|
|
1,471,381
|
|
|
1,975,736
|
|
||
Czech Republic
|
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1,305,239
|
|
|
1,309,697
|
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Japan
|
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751,912
|
|
|
758,550
|
|
||
United Kingdom
|
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489,291
|
|
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707,724
|
|
||
Malaysia
|
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65,835
|
|
|
1,795,059
|
|
||
Russia
|
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377,135
|
|
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1,441,484
|
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||
All other countries
|
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951,003
|
|
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3,020,392
|
|
||
Net sales
|
|
$
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23,840,882
|
|
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$
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35,764,579
|
|
|
|
|
|
|
|
Per Share
|
||||||
Quarter Ended
|
|
High
|
|
Low
|
|
Dividend
|
||||||
September 30, 2012
|
|
$
|
5.30
|
|
|
$
|
4.52
|
|
|
$
|
0.06
|
|
December 31, 2012
|
|
$
|
5.25
|
|
|
$
|
4.51
|
|
|
$
|
0.06
|
|
March 31, 2013
|
|
$
|
5.55
|
|
|
$
|
4.04
|
|
|
$
|
0.06
|
|
June 30, 2013
|
|
$
|
5.11
|
|
|
$
|
4.45
|
|
|
$
|
0.06
|
|
September 30, 2013
|
|
$
|
5.35
|
|
|
$
|
4.88
|
|
|
$
|
0.06
|
|
December 31, 2013
|
|
$
|
5.26
|
|
|
$
|
4.75
|
|
|
$
|
0.06
|
|
March 31, 2014
|
|
$
|
6.59
|
|
|
$
|
4.38
|
|
|
$
|
0.06
|
|
June 30, 2014
|
|
$
|
5.15
|
|
|
$
|
2.86
|
|
|
$
|
—
|
|
Period (2014)
|
|
Total
Number
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
|
||||||
April 1-April 30
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
2,139,753
|
|
May 1-May 31
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
2,139,753
|
|
June 1-June 30
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
2,139,753
|
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
•
|
Net sales dropped
33.3%
to
$23,840,882
on volume declines at several major customers, most of which are export customers.
|
•
|
Gross profit as a percent of sales declined
38.7%
to
(1.2)%
due to the impairment charge to expense relating to capitalized software, tooling and inventory; operating costs in Mexico and impact of fixed costs on a lower sales amount.
|
•
|
Selling, general and administrative spending was lower due to decrease in profit-based compensation, reduction in spending on product development, and the favorable impact of various cost reduction efforts.
|
•
|
Unauthorized transaction related recoveries decreased primarily due to the fact that the $8,500,000 settlement of a third party lawsuit was recorded in the year ended June 30, 2013.
|
•
|
Unauthorized transaction related costs decreased primarily due to contingent legal expenses in the year ended June 30, 2013, relating to the settlement of the third party lawsuit.
|
Consolidated Performance Summary
|
|
2014
|
|
2013
|
|||
Net sales
|
|
$23,840,882
|
|
$35,764,579
|
|||
Net decrease %
|
|
(33.3
|
)%
|
|
(5.5
|
)%
|
|
Gross profit (loss)
|
|
$(281,819)
|
|
$13,405,800
|
|||
Gross profit (loss) as % of net sales
|
|
(1.2
|
)%
|
|
37.5
|
%
|
|
Selling, general and administrative expenses
|
|
$10,468,708
|
|
$13,350,456
|
|||
Selling, general and administrative expenses as % of net sales
|
|
43.9
|
%
|
|
37.3
|
%
|
|
Unauthorized transaction related costs
|
|
$388,287
|
|
$
|
2,598,454
|
|
|
Unauthorized transaction related recoveries
|
|
$(1,134,082)
|
|
$(10,185,501)
|
|||
Unauthorized transaction related costs (recoveries), net
|
|
$(745,795)
|
|
$(7,587,047)
|
|||
Income (loss) from operations
|
|
$(10,004,732)
|
|
$7,642,391
|
|||
Income (loss) from operations as % of net sales
|
|
(42.0
|
)%
|
|
21.4
|
%
|
|
Other income (expense)
|
|
$49,589
|
|
$56,090
|
|||
Income tax provision (benefit)
|
|
$(4,401,589)
|
|
$2,270,766
|
|||
Income tax provision (benefit) as % of income before taxes
|
|
44.2
|
%
|
|
29.5
|
%
|
|
|
2014
|
|
2013
|
||||
Total cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
3,591,432
|
|
|
$
|
3,496,217
|
|
Investing activities
|
|
$
|
(779,808
|
)
|
|
$
|
(914,759
|
)
|
Financing activities
|
|
$
|
(1,771,849
|
)
|
|
$
|
(1,771,849
|
)
|
Net increase in cash and cash equivalents
|
|
$
|
1,039,775
|
|
|
$
|
809,609
|
|
Years Ended June 30,
|
|
2014
|
|
2013
|
||||
Net sales
|
|
$
|
23,840,882
|
|
|
$
|
35,764,579
|
|
Cost of goods sold
|
|
17,816,754
|
|
|
22,358,779
|
|
||
Impairment of capitalized software, inventory and related items
|
|
6,305,947
|
|
|
—
|
|
||
Gross profit (loss)
|
|
(281,819
|
)
|
|
13,405,800
|
|
||
|
|
|
|
|
||||
Operating expenses:
|
|
|
|
|
||||
Selling, general and administrative expenses
|
|
10,468,708
|
|
|
13,350,456
|
|
||
Unauthorized transaction related costs and recoveries, net
|
|
(745,795
|
)
|
|
(7,587,047
|
)
|
||
Total operating expenses
|
|
9,722,913
|
|
|
5,763,409
|
|
||
|
|
|
|
|
||||
Income (loss) from operations
|
|
(10,004,732
|
)
|
|
7,642,391
|
|
||
|
|
|
|
|
||||
Other expense:
|
|
|
|
|
||||
Interest expense
|
|
49,589
|
|
|
56,090
|
|
||
|
|
|
|
|
||||
Income (loss) before income tax provision (benefit)
|
|
(9,955,143
|
)
|
|
7,698,481
|
|
||
|
|
|
|
|
||||
Income tax provision (benefit)
|
|
(4,401,589
|
)
|
|
2,270,766
|
|
||
|
|
|
|
|
||||
Net income (loss)
|
|
$
|
(5,553,554
|
)
|
|
$
|
5,427,715
|
|
|
|
|
|
|
||||
Income (loss) per common share:
|
|
|
|
|
||||
Basic
|
|
$
|
(0.75
|
)
|
|
$
|
0.74
|
|
Diluted
|
|
$
|
(0.75
|
)
|
|
$
|
0.74
|
|
|
|
|
|
|
||||
Dividends declared per common share
|
|
$
|
0.18
|
|
|
$
|
0.24
|
|
As of June 30,
|
|
2014
|
|
2013
|
||||
ASSETS
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
1,899,411
|
|
|
$
|
859,636
|
|
Accounts receivable, less allowance for doubtful accounts of $20,501 and
$43,405, respectively |
|
3,160,887
|
|
|
12,185,162
|
|
||
Inventories
|
|
7,054,932
|
|
|
10,501,172
|
|
||
Prepaid expenses and other current assets
|
|
148,200
|
|
|
465,589
|
|
||
Income taxes receivable
|
|
1,109,276
|
|
|
—
|
|
||
Deferred income taxes
|
|
2,576,023
|
|
|
1,171,453
|
|
||
Total current assets
|
|
15,948,729
|
|
|
25,183,012
|
|
||
|
|
|
|
|
||||
Equipment and leasehold improvements, net
|
|
1,840,491
|
|
|
2,337,982
|
|
||
|
|
|
|
|
||||
Other assets:
|
|
|
|
|
|
|
||
Product software development expenditures, net
|
|
—
|
|
|
2,673,291
|
|
||
Deferred income taxes
|
|
1,623,329
|
|
|
419,530
|
|
||
Cash surrender value of life insurance
|
|
4,977,409
|
|
|
4,612,842
|
|
||
Total other assets
|
|
6,600,738
|
|
|
7,705,663
|
|
||
|
|
|
|
|
||||
Total assets
|
|
$
|
24,389,958
|
|
|
$
|
35,226,657
|
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
2,464,755
|
|
|
$
|
2,685,748
|
|
Accrued liabilities
|
|
3,853,473
|
|
|
4,705,454
|
|
||
Dividends payable
|
|
—
|
|
|
442,962
|
|
||
Income taxes payable
|
|
175,000
|
|
|
2,732,524
|
|
||
Total current liabilities
|
|
6,493,228
|
|
|
10,566,688
|
|
||
|
|
|
|
|
||||
Long-term liabilities:
|
|
|
|
|
|
|
||
Deferred compensation
|
|
2,320,091
|
|
|
2,375,550
|
|
||
Derivative liability
|
|
—
|
|
|
154,745
|
|
||
Other liabilities
|
|
336,772
|
|
|
740,000
|
|
||
Total long-term liabilities
|
|
2,656,863
|
|
|
3,270,295
|
|
||
|
|
|
|
|
||||
Total liabilities
|
|
9,150,091
|
|
|
13,836,983
|
|
||
|
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
|
|
|
||
Common stock, $0.005 par value, authorized 20,000,000 shares; issued and
outstanding 7,382,706 shares |
|
36,914
|
|
|
36,914
|
|
||
Paid in capital
|
|
3,996,242
|
|
|
3,263,608
|
|
||
Retained earnings
|
|
11,206,711
|
|
|
18,089,152
|
|
||
Total stockholders' equity
|
|
15,239,867
|
|
|
21,389,674
|
|
||
|
|
|
|
|
||||
Total liabilities and stockholders' equity
|
|
$
|
24,389,958
|
|
|
$
|
35,226,657
|
|
Years Ended June 30,
|
|
2014
|
|
2013
|
||||
Operating activities:
|
|
|
|
|
|
|
||
Net income (loss)
|
|
$
|
(5,553,554
|
)
|
|
$
|
5,427,715
|
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
|
||||
Provision for (recoveries of previously written off) doubtful accounts
|
|
(182,020
|
)
|
|
13,561
|
|
||
Loss on disposals of fixed assets
|
|
—
|
|
|
212,300
|
|
||
Impairment of capitalized software, inventory and related items
|
|
6,305,947
|
|
|
—
|
|
||
Depreciation of equipment and leasehold improvements
|
|
734,664
|
|
|
840,224
|
|
||
Amortization of product software development expenditures
|
|
364,539
|
|
|
1,558,318
|
|
||
Stock-based compensation expense
|
|
684,554
|
|
|
583,069
|
|
||
Deferred income taxes
|
|
(2,608,369
|
)
|
|
729,720
|
|
||
Change in cash surrender value of life insurance
|
|
(120,627
|
)
|
|
(51,972
|
)
|
||
Deferred compensation
|
|
(210,204
|
)
|
|
198,642
|
|
||
Net changes in operating assets and liabilities (see note 17)
|
|
4,176,502
|
|
|
(6,015,360
|
)
|
||
Cash provided by operating activities
|
|
3,591,432
|
|
|
3,496,217
|
|
||
|
|
|
|
|
||||
Investing activities:
|
|
|
|
|
|
|
||
Life insurance premiums paid
|
|
(243,940
|
)
|
|
(259,279
|
)
|
||
Purchase of equipment and leasehold improvements
|
|
(535,868
|
)
|
|
(655,480
|
)
|
||
Cash used in investing activities
|
|
(779,808
|
)
|
|
(914,759
|
)
|
||
|
|
|
|
|
||||
Financing activities:
|
|
|
|
|
|
|
||
Dividends paid to stockholders
|
|
(1,771,849
|
)
|
|
(1,771,849
|
)
|
||
Cash used in financing activities
|
|
(1,771,849
|
)
|
|
(1,771,849
|
)
|
||
|
|
|
|
|
||||
Net increase in cash and cash equivalents
|
|
1,039,775
|
|
|
809,609
|
|
||
Cash and cash equivalents at beginning of year
|
|
859,636
|
|
|
50,027
|
|
||
Cash and cash equivalents at end of year
|
|
$
|
1,899,411
|
|
|
$
|
859,636
|
|
|
|
Common Stock
|
|
Paid in
|
|
Retained
|
|
|
|||||||||||
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
Total
|
|||||||||
Balance, July 1, 2012
|
|
7,382,706
|
|
|
$
|
36,914
|
|
|
$
|
2,625,039
|
|
|
$
|
14,433,286
|
|
|
$
|
17,095,239
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,427,715
|
|
|
5,427,715
|
|
||||
Dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,771,849
|
)
|
|
(1,771,849
|
)
|
||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
583,069
|
|
|
—
|
|
|
583,069
|
|
||||
Income tax benefit from stock-based compensation
|
|
—
|
|
|
—
|
|
|
55,500
|
|
|
—
|
|
|
55,500
|
|
||||
Balance, June 30, 2013
|
|
7,382,706
|
|
|
$
|
36,914
|
|
|
$
|
3,263,608
|
|
|
$
|
18,089,152
|
|
|
$
|
21,389,674
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,553,554
|
)
|
|
(5,553,554
|
)
|
||||
Dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,328,887
|
)
|
|
(1,328,887
|
)
|
||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
684,554
|
|
|
—
|
|
|
684,554
|
|
||||
Income tax benefit from stock-based compensation
|
|
—
|
|
|
—
|
|
|
48,080
|
|
|
—
|
|
|
48,080
|
|
||||
Balance, June 30, 2014
|
|
7,382,706
|
|
|
$
|
36,914
|
|
|
$
|
3,996,242
|
|
|
$
|
11,206,711
|
|
|
$
|
15,239,867
|
|
|
|
2014
|
|
2013
|
||||
Legal fees incurred
|
|
$
|
388,287
|
|
|
$
|
2,598,454
|
|
|
|
|
|
|
||||
Recoveries:
|
|
|
|
|
||||
Insurance proceeds
|
|
—
|
|
|
(15,014
|
)
|
||
Gross proceeds from the settlement of the third party lawsuit
|
|
—
|
|
|
(8,500,000
|
)
|
||
Proceeds from asset forfeitures
|
|
(1,134,082
|
)
|
|
(1,670,487
|
)
|
||
Total recoveries
|
|
(1,134,082
|
)
|
|
(10,185,501
|
)
|
||
|
|
|
|
|
||||
Unauthorized transaction related costs and recoveries, net
|
|
$
|
(745,795
|
)
|
|
$
|
(7,587,047
|
)
|
Fiscal Year Ended
June 30, |
|
Balance,
beginning
of year
|
|
Provision
charged to
expense
|
|
Amounts
written-off
|
|
Balance,
end of year
|
||||||
2014
|
|
$
|
43,405
|
|
|
(182,020
|
)
|
|
159,116
|
|
|
$
|
20,501
|
|
2013
|
|
$
|
31,559
|
|
|
13,561
|
|
|
(1,715
|
)
|
|
$
|
43,405
|
|
|
|
2014
|
||
Product software development expenditures
|
|
$
|
2,308,752
|
|
Inventories
|
|
3,451,911
|
|
|
Product design costs
|
|
246,588
|
|
|
Tooling
|
|
298,696
|
|
|
Impairment of capitalized software, inventory and related items
|
|
$
|
6,305,947
|
|
|
|
2014
|
|
2013
|
||||
Raw materials
|
|
$
|
5,593,159
|
|
|
$
|
5,019,597
|
|
Finished goods
|
|
6,327,221
|
|
|
6,690,301
|
|
||
|
|
11,920,380
|
|
|
11,709,898
|
|
||
Reserve for obsolete inventory
|
|
(4,865,448
|
)
|
|
(1,208,726
|
)
|
||
Total inventories
|
|
$
|
7,054,932
|
|
|
$
|
10,501,172
|
|
|
|
Estimated
useful lives
|
|
2014
|
|
2013
|
||||
Machinery and equipment
|
|
5-10 years
|
|
$
|
675,670
|
|
|
$
|
527,450
|
|
Furniture and office equipment
|
|
5-10 years
|
|
374,616
|
|
|
374,616
|
|
||
Tooling
|
|
5 years
|
|
3,607,314
|
|
|
3,363,464
|
|
||
Display booths
|
|
5-7 years
|
|
287,180
|
|
|
287,180
|
|
||
Computer equipment
|
|
3-5 years
|
|
1,414,517
|
|
|
1,401,056
|
|
||
Leasehold improvements
|
|
7-10 years
|
|
2,288,706
|
|
|
2,288,706
|
|
||
Assets in progress
|
|
N/A
|
|
259,328
|
|
|
318,758
|
|
||
|
|
|
|
8,907,331
|
|
|
8,561,230
|
|
||
Less: accumulated depreciation and amortization
|
|
|
|
7,066,840
|
|
|
6,223,248
|
|
||
Equipment and leasehold improvements, net
|
|
|
|
$
|
1,840,491
|
|
|
$
|
2,337,982
|
|
Fiscal Year Ended
June 30,
|
|
Balance,
beginning
of year
|
|
Amortization charged to expense
|
|
Impairment charged to expense
|
|
Balance,
end of year
|
||||||
2014
|
|
$
|
2,673,291
|
|
|
(364,539
|
)
|
|
(2,308,752
|
)
|
|
$
|
—
|
|
2013
|
|
$
|
4,231,609
|
|
|
(1,558,318
|
)
|
|
—
|
|
|
$
|
2,673,291
|
|
Year Ended June 30,
|
|
2014
|
|
2013
|
||||
Current:
|
|
|
|
|
|
|
||
Federal
|
|
$
|
(1,863,204
|
)
|
|
$
|
1,697,085
|
|
State
|
|
69,984
|
|
|
(156,039
|
)
|
||
Deferred
|
|
(2,608,369
|
)
|
|
729,720
|
|
||
Total income tax provision (benefit)
|
|
$
|
(4,401,589
|
)
|
|
$
|
2,270,766
|
|
Year Ended June 30,
|
|
2014
|
|
2013
|
||||
Federal income tax expense (benefit) at statutory rate
|
|
$
|
(3,382,307
|
)
|
|
$
|
2,617,484
|
|
State income tax expense (benefit), net of federal income tax benefit
|
|
(285,802
|
)
|
|
147,516
|
|
||
Increase in valuation allowance
|
|
148,000
|
|
|
21,890
|
|
||
Stock-based compensation
|
|
58,187
|
|
|
49,561
|
|
||
Adjustments for unrecognized tax benefits
|
|
(546,113
|
)
|
|
(449,938
|
)
|
||
Federal income tax credits
|
|
(187,349
|
)
|
|
—
|
|
||
Other
|
|
(206,205
|
)
|
|
(115,747
|
)
|
||
Total income tax provision (benefit)
|
|
$
|
(4,401,589
|
)
|
|
$
|
2,270,766
|
|
|
|
2014
|
|
2013
|
||||
Deferred income tax assets:
|
|
|
|
|
|
|
||
Deferred compensation
|
|
$
|
858,434
|
|
|
$
|
886,750
|
|
Stock-based compensation
|
|
714,350
|
|
|
524,387
|
|
||
Accrued expenses and reserves
|
|
2,701,144
|
|
|
1,177,771
|
|
||
Federal and state net operating loss carryforwards
|
|
371,744
|
|
|
267,944
|
|
||
Valuation allowance
|
|
(370,409
|
)
|
|
(222,409
|
)
|
||
Other
|
|
22,806
|
|
|
—
|
|
||
Total deferred income tax assets
|
|
4,298,069
|
|
|
2,634,443
|
|
||
|
|
|
|
|
||||
Deferred income tax liabilities:
|
|
|
|
|
|
|
||
Equipment and leasehold improvements
|
|
(98,717
|
)
|
|
(22,025
|
)
|
||
Capitalized research and development costs
|
|
—
|
|
|
(1,015,838
|
)
|
||
Other
|
|
—
|
|
|
(5,597
|
)
|
||
Net deferred income tax assets
|
|
$
|
4,199,352
|
|
|
$
|
1,590,983
|
|
|
|
2014
|
|
2013
|
||||
Current deferred income tax assets
|
|
$
|
2,576,023
|
|
|
$
|
1,171,453
|
|
Noncurrent deferred income tax assets
|
|
1,623,329
|
|
|
419,530
|
|
||
Net deferred income tax assets
|
|
$
|
4,199,352
|
|
|
$
|
1,590,983
|
|
|
|
2014
|
|
2013
|
||||
Accrued interest at beginning of year
|
|
$
|
49,150
|
|
|
$
|
150,624
|
|
Interest charges to expense
|
|
24,575
|
|
|
44,014
|
|
||
Interest charges reversed
|
|
(73,725
|
)
|
|
(145,488
|
)
|
||
Accrued interest at end of year
|
|
$
|
—
|
|
|
$
|
49,150
|
|
|
|
2014
|
|
2013
|
||||
Unrecognized tax benefits at beginning of year
|
|
$
|
696,113
|
|
|
$
|
1,146,051
|
|
Gross increases - tax positions in prior years
|
|
25,000
|
|
|
—
|
|
||
Reductions due to lapse in statute
|
|
(546,113
|
)
|
|
(249,938
|
)
|
||
Reductions based on settlements with taxing authorities
|
|
—
|
|
|
(200,000
|
)
|
||
Unrecognized tax benefits at end of year
|
|
$
|
175,000
|
|
|
$
|
696,113
|
|
Year Ended June 30,
|
|
Balance,
beginning
of year
|
|
Increase in
valuation
allowance
|
|
Release of
valuation
allowance
|
|
Balance,
end of year
|
||||||
2014
|
|
$
|
(222,409
|
)
|
|
(148,000
|
)
|
|
—
|
|
|
$
|
(370,409
|
)
|
2013
|
|
$
|
(200,486
|
)
|
|
(21,923
|
)
|
|
—
|
|
|
$
|
(222,409
|
)
|
|
|
2014
|
|
2013
|
||||
Legal and professional fees
|
|
$
|
79,900
|
|
|
$
|
2,234,584
|
|
Customer credit balances
|
|
1,988,052
|
|
|
—
|
|
||
Cooperative advertising and promotion allowances
|
|
750,433
|
|
|
622,695
|
|
||
Accrued severance
|
|
123,720
|
|
|
—
|
|
||
Accrued returns
|
|
89,663
|
|
|
179,723
|
|
||
Product warranty obligations
|
|
385,852
|
|
|
371,500
|
|
||
Interest
|
|
—
|
|
|
53,692
|
|
||
Employee benefits
|
|
129,518
|
|
|
131,905
|
|
||
Management bonuses and profit-sharing
|
|
37,500
|
|
|
845,762
|
|
||
Sales commissions and bonuses
|
|
148,278
|
|
|
197,914
|
|
||
Other
|
|
120,557
|
|
|
67,679
|
|
||
|
|
3,853,473
|
|
|
$
|
4,705,454
|
|
Year Ended June 30,
|
|
Balance,
beginning
of year
|
|
Provision
charged to
expense
|
|
Warranty
expenses
incurred
|
|
Balance,
end of year
|
||||||
2014
|
|
$
|
1,111,500
|
|
|
97,300
|
|
|
(486,176
|
)
|
|
$
|
722,624
|
|
2013
|
|
$
|
1,132,500
|
|
|
541,585
|
|
|
(562,585
|
)
|
|
$
|
1,111,500
|
|
|
|
2014
|
|
2013
|
||||
Interest benefit (expense) on secured credit facility
|
|
$
|
587
|
|
|
$
|
(44,993
|
)
|
Interest expense for tax positions related to unauthorized transactions
|
|
(24,575
|
)
|
|
(44,014
|
)
|
||
Interest reversals for tax positions related to unauthorized transactions
|
|
73,725
|
|
|
145,488
|
|
||
Other interest expense
|
|
(148
|
)
|
|
(391
|
)
|
||
Interest reversal
|
|
$
|
49,589
|
|
|
$
|
56,090
|
|
|
|
2014
|
|
2013
|
||
Expected stock price volatility
|
|
47
|
%
|
|
58
|
%
|
Risk free interest rate
|
|
1.27
|
%
|
|
0.52
|
%
|
Expected dividend yield
|
|
4.00
|
%
|
|
4.00
|
%
|
Expected forfeitures
|
|
1.50
|
%
|
|
1.50
|
%
|
Expected life of options
|
|
4.6 years
|
|
|
4.6 years
|
|
|
|
Number of
Shares |
|
Stock
Options Price Range |
|
Weighted
Average Exercise Price |
|
Weighted
Average Remaining Contractual Life - Years |
|
Aggregate
Intrinsic Value of In-The- Money Options |
|||||
Shares under option at July 1, 2012
|
|
1,514,308
|
|
|
$3.90 - $13.09
|
|
$
|
6.99
|
|
|
4.36
|
|
$
|
88,352
|
|
Granted
|
|
430,000
|
|
|
$4.97 - $5.47
|
|
$
|
5.29
|
|
|
|
|
|
||
Exercised
|
|
—
|
|
|
—
|
|
—
|
|
|
|
|
|
|
||
Expired
|
|
(203,308
|
)
|
|
$7.88 - $8.53
|
|
8.45
|
|
|
|
|
|
|
||
Forfeited
|
|
—
|
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
Shares under option at June 30, 2013
|
|
1,741,000
|
|
|
$3.90 - $13.09
|
|
$
|
6.40
|
|
|
4.39
|
|
$
|
55,160
|
|
Granted
|
|
445,000
|
|
|
$5.30 - $5.83
|
|
$
|
5.64
|
|
|
|
|
|
|
|
Exercised
|
|
—
|
|
|
—
|
|
—
|
|
|
|
|
|
|
||
Expired
|
|
(120,000
|
)
|
|
$11.01
|
|
$
|
11.01
|
|
|
|
|
|
|
|
Forfeited
|
|
—
|
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
Shares under option at June 30, 2014
|
|
2,066,000
|
|
|
$3.90 - $13.09
|
|
$
|
5.97
|
|
|
4.13
|
|
$
|
—
|
|
Exercisable as of June 30, 2013
|
|
672,582
|
|
|
$3.90 - $13.09
|
|
$
|
7.52
|
|
|
|
|
|
|
|
Exercisable as of June 30, 2014
|
|
904,918
|
|
|
$3.90 - $13.09
|
|
$
|
6.39
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
||||
Total intrinsic value of stock options exercised
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash received from stock option exercises
|
|
$
|
—
|
|
|
$
|
—
|
|
Total fair value of stock options vested
|
|
$
|
586,342
|
|
|
$
|
436,047
|
|
|
|
2014
|
|
2013
|
||||
Accounts receivable
|
|
$
|
9,206,295
|
|
|
$
|
(6,872,186
|
)
|
Inventories
|
|
(5,672
|
)
|
|
(1,104,822
|
)
|
||
Income taxes receivable
|
|
(1,109,276
|
)
|
|
—
|
|
||
Prepaid expenses and other current assets
|
|
317,389
|
|
|
(78,523
|
)
|
||
Income taxes payable
|
|
(2,509,444
|
)
|
|
1,641,973
|
|
||
Accounts payable
|
|
(467,581
|
)
|
|
(1,918,832
|
)
|
||
Accrued liabilities
|
|
(851,981
|
)
|
|
2,331,030
|
|
||
Other liabilities
|
|
(403,228
|
)
|
|
(14,000
|
)
|
||
Net change
|
|
$
|
4,176,502
|
|
|
$
|
(6,015,360
|
)
|
|
|
|
|
|
||||
Net cash (refunded) paid during the year for:
|
|
|
|
|
|
|
||
Income taxes
|
|
$
|
1,867,181
|
|
|
$
|
(92,253
|
)
|
Interest
|
|
$
|
—
|
|
|
$
|
45,545
|
|
|
|
2014
|
|
2013
|
||||
United States
|
|
$
|
14,219,449
|
|
|
$
|
16,371,434
|
|
Sweden
|
|
2,310,064
|
|
|
7,161,327
|
|
||
Canada
|
|
1,899,573
|
|
|
1,223,176
|
|
||
Cyprus
|
|
1,471,381
|
|
|
1,975,736
|
|
||
Czech Republic
|
|
1,305,239
|
|
|
1,309,697
|
|
||
Japan
|
|
751,912
|
|
|
758,550
|
|
||
United Kingdom
|
|
489,291
|
|
|
707,724
|
|
||
Malaysia
|
|
65,835
|
|
|
1,795,059
|
|
||
Russia
|
|
377,135
|
|
|
1,441,484
|
|
||
All other countries
|
|
951,003
|
|
|
3,020,392
|
|
||
Net sales
|
|
$
|
23,840,882
|
|
|
$
|
35,764,579
|
|
•
|
On February 18, 2010, the Company filed an action against American Express Company, American Express Travel Related Services Company, Inc., AMEX Card Services Company, Decision Science, and Pamela S. Hopkins in Superior Court of Maricopa County, Arizona, case no. CV2010-006631. The claims alleged include aiding and abetting breach of fiduciary duty, aiding and abetting fraud, and conversion relating to the unauthorized transactions. The case is proceeding in the Superior Court with respect to those claims.
|
•
|
On December 17, 2010, the Company filed an action against Park Bank in Circuit Court of Milwaukee County, Wisconsin alleging claims of negligence and breach of fiduciary duty relating to the unauthorized transactions. The Company voluntarily dismissed the negligence claim and the case is proceeding in the Circuit Court.
|
•
|
On March 6, 2014, the Company filed a replevin action against Red Fusion Studios, Inc. ("Red Fusion") in Circuit Court of Milwaukee County, Wisconsin, Case No. 14CV001885, seeking the return of the Company's property and information following the termination of the agreement that the Company had with Red Fusion for the development of the Company's Striva Technology. Red Fusion filed counterclaims relating to fees that Red Fusion alleges it is owed as a result of the termination. The Company has since received most if not all of the property and information that it was seeking. The case is proceeding in the Circuit Court.
|
KOSS CORPORATION
|
|
||
|
|
||
By:
|
/s/ Michael J. Koss
|
|
August 28, 2014
|
|
Michael J. Koss
|
|
|
|
Vice Chairman
|
|
|
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President
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Chief Executive Officer
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Chief Operating Officer
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By:
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/s/ David D. Smith
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August 28, 2014
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David D. Smith
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Executive Vice President
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Chief Financial Officer
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Principal Accounting Officer
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Secretary
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/s/ John C. Koss
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/s/ Michael J. Koss
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John C. Koss, Director
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Michael J. Koss, Director
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/s/ Lawrence S. Mattson
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/s/ John J. Stollenwerk
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Lawrence S. Mattson, Director
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John J. Stollenwerk, Director
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/s/ Thomas L. Doerr
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/s/ Theodore H. Nixon
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Thomas L. Doerr, Director
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Theodore H. Nixon, Director
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Exhibit No.
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Exhibit Description
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3.1
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Amended and Restated Certificate of Incorporation of Koss Corporation, as in effect on November 19, 2009. Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2009 and incorporated herein by reference.
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3.2
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By-Laws of Koss Corporation. 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.
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10.1
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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. *
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10.2
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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. *
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10.3
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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. *
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10.4
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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. *
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10.5
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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.
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10.6
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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.
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10.7
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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.
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10.8
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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.
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10.9
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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.
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10.10
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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. *
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10.11
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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
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Credit Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. Filed as Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 and incorporated by reference herein.
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10.13
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Pledge and Security Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. Filed as Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 and incorporated by reference herein.
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10.14
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Koss Corporation 2012 Omnibus Incentive Plan (Incorporated by reference to Appendix B to Koss Corporation's Definitive Proxy Statement on Schedule 14A filed on August 27, 2012). *
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10.15
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Amendment No. 2 dated July 24, 2013 to Credit Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. **
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10.16
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Amendment No. 3 dated July 23, 2014 to Credit Agreement dated May 12, 2010, between Koss Corporation and JPMorgan Chase Bank, N.A. **
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14
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Koss Corporation Code of Ethics. Filed as Exhibit 14 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2011 and incorporated by reference herein.
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23.1
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Consent of Baker Tilly Virchow Krause, LLP. **
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31.1
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Rule 13a -14(a)/15d-14(a) Certification of Chief Executive Officer. **
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31.2
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Rule 13a -14(a)/15d-14(a) Certification of Chief Financial Officer. **
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32.1
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Section 1350 Certification of Chief Executive Officer. ***
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32.2
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Section 1350 Certification of Chief Financial Officer. ***
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101
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The following financial information from Koss Corporation's Annual Report on Form 10-K for the year ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for the years ended June 30, 2014 and 2013, (ii) Consolidated Balance Sheets as of June 30, 2014 and 2013, (iii) Consolidated Statements of Cash Flows for the years ended June 30, 2014 and 2013, (iv) Consolidated Statements of Stockholders' Equity for the years ended June 30, 2014 and 2013 and (v) the Notes to Consolidated Financial Statements. **
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*
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Denotes a management contract or compensatory plan or arrangement
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**
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Filed herewith
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***
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Furnished herewith
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a.
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All references to the Credit Agreement in the Credit Agreement or any of the Loan Documents shall refer to the Credit Agreement as amended hereby.
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b.
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Section 1.01 (Defined Terms) shall be amended to revise the definition of “Maturity Date” set forth therein to read as follows:
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a.
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All references to the Credit Agreement in the Credit Agreement or any of the Loan Documents shall refer to the Credit Agreement as amended hereby.
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b.
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Section 1.01 (Defined Terms) shall be amended as follows:
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c.
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Section 5.01(b) shall be amended in its entirety to read as follows:
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d.
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Section 5.01(e) shall be amended in its entirety to read as follows:
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e.
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Section 6.12(a) shall be amended in its entirety to read as follows:
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g.
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Section 6.12(c) shall be amended in its entirety to read as follows:
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h.
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Exhibit A shall be replaced by Exhibit A attached hereto.
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2.
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Based on my knowledge, this 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 report;
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3.
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Based on my knowledge, the consolidated financial statements, and other financial information included in this 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 report;
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4.
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I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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August 28, 2014
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/s/ Michael J. Koss
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Michael J. Koss
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Chief Executive Officer, President and
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Chief Operating Officer
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2.
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Based on my knowledge, this 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 report;
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3.
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Based on my knowledge, the consolidated financial statements, and other financial information included in this 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 report;
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4.
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I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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August 28, 2014
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/s/ David D. Smith
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David D. Smith
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Executive Vice President and
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Chief Financial Officer
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/s/ Michael J. Koss
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Michael J. Koss
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Chief Executive Officer, President and
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Chief Operating Officer
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August 28, 2014
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/s/ David D. Smith
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David D. Smith
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Executive Vice President and
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Chief Financial Officer
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August 28, 2014
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