x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
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Delaware
|
|
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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Emerging growth company
o
|
|
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Page
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PART I
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|
|
|
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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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2017
|
|
2016
|
||||
United States
|
|
$
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15,965,159
|
|
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$
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15,496,763
|
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People's Republic of China
|
|
2,332,704
|
|
|
969,848
|
|
||
Czech Republic
|
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1,107,555
|
|
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1,231,731
|
|
||
Sweden
|
|
1,056,746
|
|
|
4,322,582
|
|
||
Malaysia
|
|
647,707
|
|
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669,782
|
|
||
Canada
|
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547,745
|
|
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400,672
|
|
||
Russian Federation
|
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522,080
|
|
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125,362
|
|
||
All other countries
|
|
1,874,585
|
|
|
2,784,606
|
|
||
Net sales
|
|
$
|
24,054,281
|
|
|
$
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26,001,346
|
|
|
|
|
|
|
||||
Quarter Ended
|
|
High
|
|
Low
|
||||
September 30, 2015
|
|
$
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2.61
|
|
|
$
|
2.14
|
|
December 31, 2015
|
|
$
|
2.96
|
|
|
$
|
1.91
|
|
March 31, 2016
|
|
$
|
2.35
|
|
|
$
|
1.51
|
|
June 30, 2016
|
|
$
|
2.45
|
|
|
$
|
1.93
|
|
September 30, 2016
|
|
$
|
2.60
|
|
|
$
|
1.96
|
|
December 31, 2016
|
|
$
|
3.69
|
|
|
$
|
2.08
|
|
March 31, 2017
|
|
$
|
2.76
|
|
|
$
|
2.01
|
|
June 30, 2017
|
|
$
|
2.29
|
|
|
$
|
1.59
|
|
Period (2017)
|
|
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.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
•
|
Net sales decreased
7.5%
to
$24,054,281
on volume declines with distributors in Scandinavia, the Czech Republic, Asia and Africa. This was partially offset by improvement in the domestic market as well as increased sales to an original equipment manufacturer ("OEM") customer in Asia.
|
•
|
Gross profit as a percent of sales decreased
5.7%
to
28.7%
. This change was primarily due to mix of sales by product and by channel as well as a product closeout of inventory previously written down during the year.
|
•
|
Selling, general and administrative spending was lower as a result of decreased costs for profit-based compensation, stock-based compensation, legal expense and outside information technology ("IT") services. These reductions were partially offset by an increase in 401(k) match expense.
|
•
|
Unauthorized transaction related costs (recoveries) decreased because the prior year included the settlement of the lawsuit with American Express.
|
Consolidated Performance Summary
|
|
2017
|
|
2016
|
||
Net sales
|
|
$24,054,281
|
|
$26,001,346
|
||
Net sales (decrease) increase %
|
|
(7.5
|
)%
|
|
7.3
|
%
|
Gross profit
|
|
$6,895,304
|
|
$8,942,572
|
||
Gross profit as % of net sales
|
|
28.7
|
%
|
|
34.4
|
%
|
Selling, general and administrative expenses
|
|
$7,599,882
|
|
$7,959,460
|
||
Selling, general and administrative expenses as % of net sales
|
|
31.6
|
%
|
|
30.6
|
%
|
Unauthorized transaction related costs (recoveries), net
|
|
$67,548
|
|
$(1,286,001)
|
||
Interest expense
|
|
$964
|
|
$6,075
|
||
(Loss) income before income tax provision
|
|
$(773,090)
|
|
$2,263,038
|
||
(Loss) income before income tax provision as % of net sales
|
|
(3.2
|
)%
|
|
8.7
|
%
|
Income tax provision
|
|
$190,546
|
|
$874,038
|
||
Income tax provision as % of (loss) income before taxes
|
|
(24.6
|
)%
|
|
38.6
|
%
|
|
|
2017
|
|
2016
|
||||
Total cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
234,252
|
|
|
$
|
314,625
|
|
Investing activities
|
|
(537,362
|
)
|
|
(579,498
|
)
|
||
Financing activities
|
|
—
|
|
|
—
|
|
||
Net (decrease) in cash and cash equivalents
|
|
$
|
(303,110
|
)
|
|
$
|
(264,873
|
)
|
As of June 30,
|
|
2017
|
|
2016
|
||||
ASSETS
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
432,283
|
|
|
$
|
735,393
|
|
Accounts receivable, less allowance for doubtful accounts of $55,872 and
$55,175, respectively |
|
3,931,541
|
|
|
3,530,854
|
|
||
Inventories
|
|
8,345,343
|
|
|
8,595,485
|
|
||
Prepaid expenses and other current assets
|
|
206,395
|
|
|
281,099
|
|
||
Income taxes receivable
|
|
32,814
|
|
|
583,507
|
|
||
Total current assets
|
|
12,948,376
|
|
|
13,726,338
|
|
||
|
|
|
|
|
||||
Equipment and leasehold improvements, net
|
|
1,408,091
|
|
|
1,514,472
|
|
||
|
|
|
|
|
||||
Other assets:
|
|
|
|
|
|
|
||
Deferred income taxes
|
|
3,042,257
|
|
|
3,212,556
|
|
||
Cash surrender value of life insurance
|
|
6,024,929
|
|
|
5,667,105
|
|
||
Total other assets
|
|
9,067,186
|
|
|
8,879,661
|
|
||
|
|
|
|
|
||||
Total assets
|
|
$
|
23,423,653
|
|
|
$
|
24,120,471
|
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
2,243,110
|
|
|
$
|
1,966,656
|
|
Accrued liabilities
|
|
1,149,395
|
|
|
1,601,652
|
|
||
Total current liabilities
|
|
3,392,505
|
|
|
3,568,308
|
|
||
|
|
|
|
|
||||
Long-term liabilities:
|
|
|
|
|
|
|
||
Deferred compensation
|
|
2,294,418
|
|
|
2,187,714
|
|
||
Other liabilities
|
|
164,418
|
|
|
178,255
|
|
||
Total long-term liabilities
|
|
2,458,836
|
|
|
2,365,969
|
|
||
|
|
|
|
|
||||
Total liabilities
|
|
5,851,341
|
|
|
5,934,277
|
|
||
|
|
|
|
|
||||
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
|
|
5,420,710
|
|
|
5,070,956
|
|
||
Retained earnings
|
|
12,114,688
|
|
|
13,078,324
|
|
||
Total stockholders' equity
|
|
17,572,312
|
|
|
18,186,194
|
|
||
|
|
|
|
|
||||
Total liabilities and stockholders' equity
|
|
$
|
23,423,653
|
|
|
$
|
24,120,471
|
|
Years Ended June 30,
|
|
2017
|
|
2016
|
||||
Net sales
|
|
$
|
24,054,281
|
|
|
$
|
26,001,346
|
|
Cost of goods sold
|
|
17,158,977
|
|
|
17,058,774
|
|
||
Gross profit
|
|
6,895,304
|
|
|
8,942,572
|
|
||
|
|
|
|
|
||||
Selling, general and administrative expenses
|
|
7,599,882
|
|
|
7,959,460
|
|
||
Unauthorized transaction related costs (recoveries), net
|
|
67,548
|
|
|
(1,286,001
|
)
|
||
Interest expense
|
|
964
|
|
|
6,075
|
|
||
(Loss) income before income tax provision
|
|
(773,090
|
)
|
|
2,263,038
|
|
||
|
|
|
|
|
||||
Income tax provision
|
|
190,546
|
|
|
874,038
|
|
||
|
|
|
|
|
||||
Net (loss) income
|
|
$
|
(963,636
|
)
|
|
$
|
1,389,000
|
|
|
|
|
|
|
||||
(Loss) income per common share:
|
|
|
|
|
||||
Basic
|
|
$
|
(0.13
|
)
|
|
$
|
0.19
|
|
Diluted
|
|
$
|
(0.13
|
)
|
|
$
|
0.19
|
|
Years Ended June 30,
|
|
2017
|
|
2016
|
||||
Operating activities:
|
|
|
|
|
|
|
||
Net (loss) income
|
|
$
|
(963,636
|
)
|
|
$
|
1,389,000
|
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
|
||||
(Recovery of) provision for doubtful accounts
|
|
(1,872
|
)
|
|
28,514
|
|
||
Loss on disposal of equipment and leasehold improvements
|
|
6,230
|
|
|
40,710
|
|
||
Depreciation of equipment and leasehold improvements
|
|
503,585
|
|
|
487,134
|
|
||
Stock-based compensation expense
|
|
349,754
|
|
|
444,175
|
|
||
Deferred income taxes
|
|
170,299
|
|
|
702,013
|
|
||
Change in cash surrender value of life insurance
|
|
(223,896
|
)
|
|
(177,740
|
)
|
||
Change in deferred compensation accrual
|
|
256,704
|
|
|
230,228
|
|
||
Deferred compensation paid
|
|
(150,000
|
)
|
|
(150,000
|
)
|
||
Net changes in operating assets and liabilities (see note 14)
|
|
287,084
|
|
|
(2,679,409
|
)
|
||
Cash provided by operating activities
|
|
234,252
|
|
|
314,625
|
|
||
|
|
|
|
|
||||
Investing activities:
|
|
|
|
|
|
|
||
Life insurance premiums paid
|
|
(133,928
|
)
|
|
(129,702
|
)
|
||
Purchase of equipment and leasehold improvements
|
|
(403,434
|
)
|
|
(449,796
|
)
|
||
Cash (used in) investing activities
|
|
(537,362
|
)
|
|
(579,498
|
)
|
||
|
|
|
|
|
||||
Net (decrease) in cash and cash equivalents
|
|
(303,110
|
)
|
|
(264,873
|
)
|
||
Cash and cash equivalents at beginning of year
|
|
735,393
|
|
|
1,000,266
|
|
||
Cash and cash equivalents at end of year
|
|
$
|
432,283
|
|
|
$
|
735,393
|
|
|
|
Common Stock
|
|
Paid in
|
|
Retained
|
|
|
|||||||||||
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
Total
|
|||||||||
Balance, June 30, 2015
|
|
7,382,706
|
|
|
$
|
36,914
|
|
|
$
|
4,626,781
|
|
|
$
|
11,689,324
|
|
|
$
|
16,353,019
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,389,000
|
|
|
1,389,000
|
|
||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
444,175
|
|
|
—
|
|
|
444,175
|
|
||||
Balance, June 30, 2016
|
|
7,382,706
|
|
|
36,914
|
|
|
5,070,956
|
|
|
13,078,324
|
|
|
18,186,194
|
|
||||
Net (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(963,636
|
)
|
|
(963,636
|
)
|
||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
349,754
|
|
|
—
|
|
|
349,754
|
|
||||
Balance, June 30, 2017
|
|
7,382,706
|
|
|
$
|
36,914
|
|
|
$
|
5,420,710
|
|
|
$
|
12,114,688
|
|
|
$
|
17,572,312
|
|
|
|
2017
|
|
2016
|
||||
Legal fees incurred
|
|
$
|
77,500
|
|
|
$
|
1,714,074
|
|
Gross proceeds from settlement of the third party lawsuit
|
|
—
|
|
|
(3,000,000
|
)
|
||
Proceeds from asset forfeitures
|
|
(9,952
|
)
|
|
(75
|
)
|
||
Unauthorized transaction related costs (recoveries),
net |
|
$
|
67,548
|
|
|
$
|
(1,286,001
|
)
|
Fiscal Year Ended
June 30, |
|
Balance,
beginning of year |
|
Net increase
in allowance |
|
Balance,
end of year |
|||||
2017
|
|
$
|
55,175
|
|
|
697
|
|
|
$
|
55,872
|
|
2016
|
|
$
|
26,052
|
|
|
29,123
|
|
|
$
|
55,175
|
|
|
|
2017
|
|
2016
|
||||
Raw materials
|
|
$
|
2,900,499
|
|
|
$
|
3,466,907
|
|
Finished goods
|
|
7,895,561
|
|
|
7,570,026
|
|
||
|
|
10,796,060
|
|
|
11,036,933
|
|
||
Reserve for obsolete inventory
|
|
(2,450,717
|
)
|
|
(2,441,448
|
)
|
||
Total inventories
|
|
$
|
8,345,343
|
|
|
$
|
8,595,485
|
|
|
|
Estimated
useful lives
|
|
2017
|
|
2016
|
||||
Machinery and equipment
|
|
5-10 years
|
|
$
|
593,595
|
|
|
$
|
592,189
|
|
Furniture and office equipment
|
|
5-10 years
|
|
359,041
|
|
|
373,716
|
|
||
Tooling
|
|
5 years
|
|
4,646,749
|
|
|
4,299,776
|
|
||
Display booths
|
|
5 years
|
|
253,680
|
|
|
253,680
|
|
||
Computer equipment
|
|
3-5 years
|
|
758,820
|
|
|
768,620
|
|
||
Leasehold improvements
|
|
3-15 years
|
|
2,317,263
|
|
|
2,387,626
|
|
||
Assets in progress
|
|
N/A
|
|
188,342
|
|
|
210,189
|
|
||
|
|
|
|
9,117,490
|
|
|
8,885,796
|
|
||
Less: accumulated depreciation and amortization
|
|
|
|
7,709,399
|
|
|
7,371,324
|
|
||
Equipment and leasehold improvements, net
|
|
|
|
$
|
1,408,091
|
|
|
$
|
1,514,472
|
|
Year Ended June 30,
|
|
2017
|
|
2016
|
||||
Current:
|
|
|
|
|
|
|
||
Federal
|
|
$
|
19,822
|
|
|
$
|
169,350
|
|
State
|
|
425
|
|
|
2,675
|
|
||
Deferred
|
|
170,299
|
|
|
702,013
|
|
||
Total income tax provision
|
|
$
|
190,546
|
|
|
$
|
874,038
|
|
Year Ended June 30,
|
|
2017
|
|
2016
|
||||
Federal income tax (benefit) expense at statutory rate
|
|
$
|
(262,851
|
)
|
|
$
|
769,433
|
|
State income tax (benefit) expense, net of federal income tax benefit
|
|
(32,287
|
)
|
|
91,660
|
|
||
Increase (decrease) in valuation allowance
|
|
444,000
|
|
|
(370,000
|
)
|
||
Stock-based compensation
|
|
51,197
|
|
|
447,180
|
|
||
Other
|
|
(9,513
|
)
|
|
(64,235
|
)
|
||
Total income tax provision
|
|
$
|
190,546
|
|
|
$
|
874,038
|
|
|
|
2017
|
|
2016
|
||||
Deferred income tax assets:
|
|
|
|
|
|
|
||
Deferred compensation
|
|
$
|
904,435
|
|
|
$
|
864,954
|
|
Stock-based compensation
|
|
621,966
|
|
|
603,159
|
|
||
Accrued expenses and reserves
|
|
1,280,181
|
|
|
1,390,910
|
|
||
Federal and state net operating loss carryforwards
|
|
751,021
|
|
|
418,296
|
|
||
Valuation allowance
|
|
(444,409
|
)
|
|
(409
|
)
|
||
Other
|
|
—
|
|
|
5,979
|
|
||
Total deferred income tax assets
|
|
3,113,194
|
|
|
3,282,889
|
|
||
|
|
|
|
|
||||
Deferred income tax liabilities:
|
|
|
|
|
|
|
||
Equipment and leasehold improvements
|
|
(67,675
|
)
|
|
(67,390
|
)
|
||
Other
|
|
(3,262
|
)
|
|
(2,943
|
)
|
||
Net deferred income tax assets
|
|
$
|
3,042,257
|
|
|
$
|
3,212,556
|
|
Year Ended June 30,
|
|
Balance,
beginning
of year
|
|
(Increase) decrease
in valuation allowance |
|
Balance,
end of year
|
|||||
2017
|
|
$
|
(409
|
)
|
|
(444,000
|
)
|
|
$
|
(444,409
|
)
|
2016
|
|
$
|
(370,409
|
)
|
|
370,000
|
|
|
$
|
(409
|
)
|
|
|
2017
|
|
2016
|
||||
Cooperative advertising and promotion allowances
|
|
$
|
415,050
|
|
|
$
|
479,645
|
|
Product warranty obligations
|
|
220,541
|
|
|
305,275
|
|
||
Customer credit balances
|
|
21,175
|
|
|
47,753
|
|
||
Current deferred compensation
|
|
150,000
|
|
|
150,000
|
|
||
Accrued returns
|
|
53,915
|
|
|
140,918
|
|
||
Employee benefits
|
|
54,074
|
|
|
83,113
|
|
||
Legal and professional fees
|
|
86,500
|
|
|
127,329
|
|
||
Management bonuses and profit-sharing
|
|
—
|
|
|
132,950
|
|
||
Sales commissions and bonuses
|
|
83,654
|
|
|
84,550
|
|
||
Other
|
|
64,486
|
|
|
50,119
|
|
||
|
|
$
|
1,149,395
|
|
|
$
|
1,601,652
|
|
Year Ended June 30,
|
|
Balance,
beginning
of year
|
|
Provision
charged to
expense
|
|
Warranty
expenses
incurred
|
|
Balance,
end of year
|
||||||
2017
|
|
$
|
483,530
|
|
|
159,990
|
|
|
(258,561
|
)
|
|
$
|
384,959
|
|
2016
|
|
$
|
531,891
|
|
|
214,827
|
|
|
(263,188
|
)
|
|
$
|
483,530
|
|
|
|
2017
|
|
2016
|
||
Expected stock price volatility
|
|
54
|
%
|
|
50
|
%
|
Risk free interest rate
|
|
1.17
|
%
|
|
1.48
|
%
|
Expected dividend yield
|
|
—
|
%
|
|
4.00
|
%
|
Expected forfeitures
|
|
15.31
|
%
|
|
5.60
|
%
|
Expected life of options
|
|
5.9 years
|
|
|
4.5 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 June 30, 2015
|
|
2,245,000
|
|
|
$2.24 - $13.09
|
|
$
|
5.33
|
|
|
3.69
|
|
$
|
1,676
|
|
Granted
|
|
410,000
|
|
|
$2.05 - $2.83
|
|
$
|
2.72
|
|
|
|
|
|
||
Exercised
|
|
—
|
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
Expired
|
|
(458,000
|
)
|
|
$3.00 - $13.09
|
|
$
|
6.25
|
|
|
|
|
|
|
|
Forfeited
|
|
(57,000
|
)
|
|
$3.00 - $6.00
|
|
$
|
4.34
|
|
|
|
|
|
|
|
Shares under option at June 30, 2016
|
|
2,140,000
|
|
|
$2.05 - $9.74
|
|
$
|
4.66
|
|
|
3.51
|
|
$
|
—
|
|
Granted
|
|
485,000
|
|
|
$2.20 - $2.42
|
|
$
|
2.33
|
|
|
|
|
|
|
|
Exercised
|
|
—
|
|
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
Expired
|
|
(372,000
|
)
|
|
$2.57 - $9.74
|
|
$
|
6.24
|
|
|
|
|
|
|
|
Forfeited
|
|
(73,000
|
)
|
|
$2.20 - $5.30
|
|
$
|
3.00
|
|
|
|
|
|
|
|
Shares under option at June 30, 2017
|
|
2,180,000
|
|
|
$2.05 - $7.76
|
|
$
|
3.93
|
|
|
3.47
|
|
$
|
—
|
|
Exercisable as of June 30, 2016
|
|
1,084,000
|
|
|
$2.24 - $9.74
|
|
$
|
5.57
|
|
|
2.47
|
|
$
|
—
|
|
Exercisable as of June 30, 2017
|
|
1,105,166
|
|
|
$2.05 - $7.76
|
|
$
|
4.88
|
|
|
2.28
|
|
$
|
—
|
|
|
|
2017
|
|
2016
|
||||
Total intrinsic value of stock options exercised
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash received from stock option exercises
|
|
$
|
—
|
|
|
$
|
—
|
|
Total fair value of stock options vested
|
|
$
|
461,720
|
|
|
$
|
583,727
|
|
|
|
2017
|
|
2016
|
||||
Accounts receivable
|
|
$
|
(398,815
|
)
|
|
$
|
(735,388
|
)
|
Inventories
|
|
250,142
|
|
|
(1,413,045
|
)
|
||
Income taxes receivable
|
|
550,693
|
|
|
(377,976
|
)
|
||
Prepaid expenses and other current assets
|
|
74,704
|
|
|
66,945
|
|
||
Accounts payable
|
|
276,454
|
|
|
(205,598
|
)
|
||
Accrued liabilities
|
|
(452,257
|
)
|
|
26,625
|
|
||
Other liabilities
|
|
(13,837
|
)
|
|
(40,972
|
)
|
||
Net change
|
|
$
|
287,084
|
|
|
$
|
(2,679,409
|
)
|
|
|
|
|
|
||||
Net cash paid (refunded) during the year for:
|
|
|
|
|
|
|
||
Income taxes
|
|
$
|
(523,342
|
)
|
|
$
|
558,202
|
|
Interest
|
|
$
|
964
|
|
|
$
|
6,075
|
|
|
|
2017
|
|
2016
|
||||
United States
|
|
$
|
15,965,159
|
|
|
$
|
15,496,763
|
|
People's Republic of China
|
|
2,332,704
|
|
|
969,848
|
|
||
Czech Republic
|
|
1,107,555
|
|
|
1,231,731
|
|
||
Sweden
|
|
1,056,746
|
|
|
4,322,582
|
|
||
Malaysia
|
|
647,707
|
|
|
669,782
|
|
||
Canada
|
|
547,745
|
|
|
400,672
|
|
||
Russian Federation
|
|
522,080
|
|
|
125,362
|
|
||
All other countries
|
|
1,874,585
|
|
|
2,784,606
|
|
||
Net sales
|
|
$
|
24,054,281
|
|
|
$
|
26,001,346
|
|
•
|
On December 17, 2010, the Company filed an action against Park Bank in Circuit Court of Milwaukee County, Wisconsin alleging a claim of breach of the Uniform Fiduciaries Act relating to the unauthorized transactions, as previously reported. In 2015, Park Bank filed third party claims based on contribution and subrogation against Grant Thornton LLP and Michael Koss. The Court granted motions to dismiss the contribution claims against Grant Thornton LLP and Michael Koss, but determined that it was premature to decide the subrogation claims at this stage of the proceedings. On or around March 11, 2016, the Court entered an order granting Park Bank's motion for summary judgment that dismissed the case. On March 22, 2016, the Company filed a Notice of Appeal that appeals the order granting Park Bank's motion for summary judgment and the Court's denial of the motion to dismiss the subrogation claims. Park Bank also filed a cross–appeal that appeals the Court's order that granted the motions to dismiss the contribution claims against Grant Thornton LLP and Michael Koss. The case remains on appeal.
|
KOSS CORPORATION
|
|
||
|
|
||
By:
|
/s/ Michael J. Koss
|
|
August 25, 2017
|
|
Michael J. Koss
|
|
|
|
Chairman
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ David D. Smith
|
|
August 25, 2017
|
|
David D. Smith
|
|
|
|
Chief Financial Officer
|
|
|
|
Principal Accounting Officer
|
|
|
/s/ Michael J. Koss
|
|
/s/ Thomas L. Doerr
|
Michael J. Koss, Director
|
|
Thomas L. Doerr, Director
|
|
|
|
|
|
|
/s/ Steven A. Leveen
|
|
/s/ Theodore H. Nixon
|
Steven A. Leveen, Director
|
|
Theodore H. Nixon, Director
|
|
|
|
|
|
|
/s/ William J. Sweasy
|
|
|
William J. Sweasy, Director
|
|
|
Exhibit No.
|
Exhibit Description
|
|
|
3.1
|
|
|
|
3.2
|
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.
|
|
|
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
|
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. *
|
|
|
10.6
|
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. *
|
|
|
10.7
|
|
|
|
10.8
|
|
|
|
10.9
|
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). *
|
|
|
10.10
|
|
|
|
10.11
|
|
|
|
10.12
|
|
|
|
10.13
|
|
|
10.14
|
|
|
|
10.15
|
|
|
|
14
|
|
|
|
23.1
|
Consent of Baker Tilly Virchow Krause, LLP. **
|
|
|
31.1
|
Rule 13a -14(a)/15d-14(a) Certification of Chief Executive Officer. **
|
|
|
31.2
|
Rule 13a -14(a)/15d-14(a) Certification of Chief Financial Officer. **
|
|
|
32.1
|
Section 1350 Certification of Chief Executive Officer. ***
|
|
|
32.2
|
Section 1350 Certification of Chief Financial Officer. ***
|
|
|
101
|
The following financial information from Koss Corporation's Annual Report on Form 10-K for the year ended June 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2017 and 2016, (ii) Consolidated Statements of Operations for the years ended June 30, 2017 and 2016, (iii) Consolidated Statements of Cash Flows for the years ended June 30, 2017 and 2016, (iv) Consolidated Statements of Stockholders' Equity for the years ended June 30, 2017 and 2016 and (v) the Notes to Consolidated Financial Statements.
|
*
|
|
Denotes a management contract or compensatory plan or arrangement
|
**
|
|
Filed herewith
|
***
|
|
Furnished herewith
|
a.
|
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.
|
b.
|
Section 1.01 (Defined Terms) shall be amended as follows:
|
a.
|
The definition of “Availability” set forth therein shall be revised to read as follows:
|
b.
|
The definition of “Borrowing Base” set forth therein shall be deleted in its entirety.
|
c.
|
The definition of “Borrowing Base Certificate” set forth therein shall be deleted in its entirety.
|
d.
|
The definition of “CSV” set forth therein shall be deleted in its entirety.
|
e.
|
The definition of “Debt Service Coverage Ratio” set forth therein shall be deleted in its entirety.
|
f.
|
The definition of “Eligible Accounts” set forth therein shall be deleted in its entirety.
|
g.
|
The definition of “Eligible Finished Goods” set forth therein shall be deleted in its entirety.
|
h.
|
The definition of “Eligible Inventory” set forth therein shall be deleted in its entirety.
|
i.
|
The definition of “Eligible Life Insurance Policy” set forth therein shall be deleted in its entirety.
|
j.
|
The definition of “Revolving Commitment” set forth therein shall be revised to read as follows:
|
k.
|
The definition of “Tangible Net Worth” set forth therein shall be deleted in its entirety.
|
l.
|
A new definition shall be added to Section 1.01 in appropriate alphabetical order as follows:
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
August 25, 2017
|
|
|
|
/s/ Michael J. Koss
|
|
Michael J. Koss
|
|
Chief Executive Officer and President
|
|
|
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
August 25, 2017
|
|
|
|
/s/ David D. Smith
|
|
David D. Smith
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
|
|
/s/ Michael J. Koss
|
|
Michael J. Koss
|
|
Chief Executive Officer and President
|
|
August 25, 2017
|
|
/s/ David D. Smith
|
|
David D. Smith
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
|
August 25, 2017
|