Koss Corp. (KOSS, Financial) filed Amended Quarterly Report for the period ended 2009-09-30.
Koss Corp. has a market cap of $38.8 million; its shares were traded at around $5.26 with a P/E ratio of 23.9 and P/S ratio of 1. The dividend yield of Koss Corp. stocks is 4.5%.KOSS is in the portfolios of Chuck Royce of Royce& Associates.
In the three months ended September 30, 2009, the Company had an operating loss, including the unauthorized transactions as expense, of $2,413,490 compared to operating income, including the unauthorized transactions as expense, of $1,239,529 in the three months ended September 30, 2008. The decrease in operating income was primarily the result of lower volume and increased unauthorized transactions. Operating income, excluding the unauthorized transactions, was $2,910,674 in the three months ended September 30, 2009 or 25.1% of net sales compared to $2,928,581 or 23.4% of net sales in the three months ended September 30, 2008.
During the three months ended September 30, 2009, cash used in operations was $3,567,033 and during the three months ended September 30, 2008, cash provided by operations was $1,769,787. Working capital was $1,915,198 at September 30, 2009 and $6,308,239 at June 30, 2009. The net decrease in working capital of $4,393,041 from June 30, 2009 represents primarily the decrease in cash, increased accounts payable and line of credit borrowings to fund the net loss. These were partially offset by an increase in accounts receivable because of the increase in sales in the three months ended September 30, 2009 compared to the three months ended June 30, 2009. As of September 30, 2009 the Company had open commitments of approximately $824,000 for software and new product development.
Net cash provided by financing activities was $2,891,517 in the three months ended September 30, 2009 compared to a use of $480,395 in the three months ended September 30, 2008. In the three months ended September 30, 2009, the Company received $2,750,000 from borrowing on its line of credit offset by a $479,876 dividend payment. In the three months ended September 30, 2008, there was a dividend payment of $480,395. The Company intends to continue its regular quarterly dividends for the foreseeable future.
· Wire transfers and cashiers checks. Approximately $30,900,000 or 98.1% of the total $31,500,000 of unauthorized transactions from fiscal year 2005 through December 2009 was misappropriated by circumventing the Companys internal controls and other operating procedures for the payment of Company expenditures by using wire transfers or cashiers checks from the Companys bank accounts to pay for personal expenditures. Of the $30,900,000, approximately $8,500,000 and $5,100,000 was misappropriated by use of these means during fiscal years 2009 and 2008, respectively. These unauthorized transactions were processed by circumventing the Companys policy that all invoices over $5,000 were required to be submitted and approved by Michael Koss as the CEO, and all accounts payable checks generated from the Companys accounts payable system were signed by the CEO. Moreover, wire transfers were to be used only for authorized transactions including certain inventory purchases and transfers of funds between the Companys bank accounts. Wire transfers for inventory purchases and the recurring expense items required the approval by several employees including authorized Vice Presidents, while the wire transfers between the Companys bank accounts were processed and approved by Ms. Sachdeva and one of the other terminated employees in the accounting department. Ms. Sachdeva, by herself and/or by directing other employees in the accounting department, ordered cashiers checks from the Companys bank accounts to pay for personal expenditures directly, thereby circumventing the internal controls and procedures as described above so that these payments would not be submitted through the Companys normal accounts payable system. Ms. Sachdeva, by herself and/or by directing others in the accounting department, processed wire transfers from the Companys bank accounts to pay for personal expenditures directly, thereby circumventing the internal controls and procedures as described above so that these payments would not be submitted through the Companys normal accounts payable system. This has been remediated by: (1) disallowing the use of any cashiers checks; (2) enforcing that all wire transfers are initiated within the financial function and electronically approved by the CEO; and (3) performing an enhanced review, reconciliation and reporting of cash activities.
· Petty cash, manual checks and travelers checks. The remaining misappropriations of approximately $600,000 or 1.9% from the total amount of $31,500,000 from fiscal year 2005 through December 2009 were carried out by circumventing the Companys internal controls and other standard operating procedures involving the Companys petty cash system, manual check system and policy for using travelers checks. In doing so, the Companys policy requiring that all expense reports be submitted and approved by the CEO was circumvented. Out of the estimated $600,000 of these types of transactions, approximately $83,000 and $110,000 occurred during fiscal years 2009 and 2008, respectively. Approximately $107,000 of misappropriations involving the use of the Companys petty cash system, manual check system and travelers checks policy occurred during fiscal year 2010. Remediation of these issues has been accomplished by: (1) eliminating the petty cash fund so all reimbursements run through normal controlled accounts payable channels; (2) eliminating the use of manual checks so all check
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Koss Corp. has a market cap of $38.8 million; its shares were traded at around $5.26 with a P/E ratio of 23.9 and P/S ratio of 1. The dividend yield of Koss Corp. stocks is 4.5%.KOSS is in the portfolios of Chuck Royce of Royce& Associates.
Highlight of Business Operations:
Net sales for the three months ended September 30, 2009 totaled $11,614,645, compared with $12,498,036 in the three months ended September 30, 2008. This $883,391 decrease in net sales was driven by soft retail sales in the United States. The sales decline in the United States was largely due to a decline in sales of approximately $650,000 at a large U.S. retailer.In the three months ended September 30, 2009, the Company had an operating loss, including the unauthorized transactions as expense, of $2,413,490 compared to operating income, including the unauthorized transactions as expense, of $1,239,529 in the three months ended September 30, 2008. The decrease in operating income was primarily the result of lower volume and increased unauthorized transactions. Operating income, excluding the unauthorized transactions, was $2,910,674 in the three months ended September 30, 2009 or 25.1% of net sales compared to $2,928,581 or 23.4% of net sales in the three months ended September 30, 2008.
During the three months ended September 30, 2009, cash used in operations was $3,567,033 and during the three months ended September 30, 2008, cash provided by operations was $1,769,787. Working capital was $1,915,198 at September 30, 2009 and $6,308,239 at June 30, 2009. The net decrease in working capital of $4,393,041 from June 30, 2009 represents primarily the decrease in cash, increased accounts payable and line of credit borrowings to fund the net loss. These were partially offset by an increase in accounts receivable because of the increase in sales in the three months ended September 30, 2009 compared to the three months ended June 30, 2009. As of September 30, 2009 the Company had open commitments of approximately $824,000 for software and new product development.
Net cash provided by financing activities was $2,891,517 in the three months ended September 30, 2009 compared to a use of $480,395 in the three months ended September 30, 2008. In the three months ended September 30, 2009, the Company received $2,750,000 from borrowing on its line of credit offset by a $479,876 dividend payment. In the three months ended September 30, 2008, there was a dividend payment of $480,395. The Company intends to continue its regular quarterly dividends for the foreseeable future.
· Wire transfers and cashiers checks. Approximately $30,900,000 or 98.1% of the total $31,500,000 of unauthorized transactions from fiscal year 2005 through December 2009 was misappropriated by circumventing the Companys internal controls and other operating procedures for the payment of Company expenditures by using wire transfers or cashiers checks from the Companys bank accounts to pay for personal expenditures. Of the $30,900,000, approximately $8,500,000 and $5,100,000 was misappropriated by use of these means during fiscal years 2009 and 2008, respectively. These unauthorized transactions were processed by circumventing the Companys policy that all invoices over $5,000 were required to be submitted and approved by Michael Koss as the CEO, and all accounts payable checks generated from the Companys accounts payable system were signed by the CEO. Moreover, wire transfers were to be used only for authorized transactions including certain inventory purchases and transfers of funds between the Companys bank accounts. Wire transfers for inventory purchases and the recurring expense items required the approval by several employees including authorized Vice Presidents, while the wire transfers between the Companys bank accounts were processed and approved by Ms. Sachdeva and one of the other terminated employees in the accounting department. Ms. Sachdeva, by herself and/or by directing other employees in the accounting department, ordered cashiers checks from the Companys bank accounts to pay for personal expenditures directly, thereby circumventing the internal controls and procedures as described above so that these payments would not be submitted through the Companys normal accounts payable system. Ms. Sachdeva, by herself and/or by directing others in the accounting department, processed wire transfers from the Companys bank accounts to pay for personal expenditures directly, thereby circumventing the internal controls and procedures as described above so that these payments would not be submitted through the Companys normal accounts payable system. This has been remediated by: (1) disallowing the use of any cashiers checks; (2) enforcing that all wire transfers are initiated within the financial function and electronically approved by the CEO; and (3) performing an enhanced review, reconciliation and reporting of cash activities.
· Petty cash, manual checks and travelers checks. The remaining misappropriations of approximately $600,000 or 1.9% from the total amount of $31,500,000 from fiscal year 2005 through December 2009 were carried out by circumventing the Companys internal controls and other standard operating procedures involving the Companys petty cash system, manual check system and policy for using travelers checks. In doing so, the Companys policy requiring that all expense reports be submitted and approved by the CEO was circumvented. Out of the estimated $600,000 of these types of transactions, approximately $83,000 and $110,000 occurred during fiscal years 2009 and 2008, respectively. Approximately $107,000 of misappropriations involving the use of the Companys petty cash system, manual check system and travelers checks policy occurred during fiscal year 2010. Remediation of these issues has been accomplished by: (1) eliminating the petty cash fund so all reimbursements run through normal controlled accounts payable channels; (2) eliminating the use of manual checks so all check
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