Document and Entity Information
Document and Entity Information Document - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Aug. 13, 2018 | Dec. 31, 2017 | |
Entity Information [Line Items] | |||
Entity Registrant Name | KOSS CORP | ||
Entity Central Index Key | 56,701 | ||
Current Fiscal Year End Date | --06-30 | ||
Entity Filer Category | Smaller Reporting Company | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2018 | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 7,382,706 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 8,010,893 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Net sales | $ 23,515,441 | $ 24,054,281 |
Cost of goods sold | 16,933,431 | 17,158,977 |
Gross profit | 6,582,010 | 6,895,304 |
Operating expenses: | ||
Selling, general and administrative expenses | 6,938,921 | 7,599,882 |
Unauthorized transaction related (recoveries) costs, net | (18,765) | 67,548 |
Other expense (income): | ||
Interest expense | 5,218 | 964 |
(Loss) before income tax provision | (343,364) | (773,090) |
Income tax provision | 3,042,696 | 190,546 |
Net (loss) | $ (3,386,060) | $ (963,636) |
(Loss) per common share: | ||
Basic | $ (0.46) | $ (0.13) |
Diluted | $ (0.46) | $ (0.13) |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 1,081,533 | $ 432,283 |
Accounts receivable, less allowance for doubtful accounts of $51,854 and $55,872, respectively | 4,709,745 | 3,931,541 |
Inventories | 6,138,679 | 8,345,343 |
Prepaid expenses and other current assets | 206,776 | 206,395 |
Income taxes receivable | 32,375 | 32,814 |
Total current assets | 12,169,108 | 12,948,376 |
Equipment and leasehold improvements, net | 1,132,105 | 1,408,091 |
Other assets: | ||
Deferred income taxes | 0 | 3,042,257 |
Cash surrender value of life insurance | 6,374,372 | 6,024,929 |
Total other assets | 6,374,372 | 9,067,186 |
Total assets | 19,675,585 | 23,423,653 |
Current liabilities: | ||
Accounts payable | 1,429,491 | 2,243,110 |
Accrued liabilities | 1,178,571 | 1,149,395 |
Total current liabilities | 2,608,062 | 3,392,505 |
Long-term liabilities: | ||
Deferred compensation | 2,394,009 | 2,294,418 |
Other liabilities | 155,702 | 164,418 |
Total long-term liabilities | 2,549,711 | 2,458,836 |
Total liabilities | 5,157,773 | 5,851,341 |
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 | 5,752,270 | 5,420,710 |
Retained earnings | 8,728,628 | 12,114,688 |
Total stockholders' equity | 14,517,812 | 17,572,312 |
Total liabilities and stockholders' equity | $ 19,675,585 | $ 23,423,653 |
CONSOLIDATED BALANCE SHEETS (PA
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Allowance for doubtful accounts | $ 51,854 | $ 55,872 |
Common stock, par value | $ 0.005 | $ 0.005 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 7,382,706 | 7,382,706 |
Common stock, shares outstanding | 7,382,706 | 7,382,706 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Net (loss) | $ (3,386,060) | $ (963,636) |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
(Recovery of) provision for doubtful accounts | (4,874) | (1,872) |
Loss on disposal of equipment and leasehold improvements | 343 | 6,230 |
Depreciation of equipment and leasehold improvements | 526,261 | 503,585 |
Stock-based compensation expense | 331,560 | 349,754 |
Deferred income taxes | 3,042,257 | 170,299 |
Change in cash surrender value of life insurance | 218,224 | 223,896 |
Change in deferred compensation accrual | 249,591 | 256,704 |
Deferred compensation paid | 150,000 | 150,000 |
Net changes in operating assets and liabilities (see note 14) | 640,233 | 287,084 |
Cash provided by operating activities | 1,031,087 | 234,252 |
Investing activities: | ||
Life insurance premiums paid | (131,219) | (133,928) |
Purchase of equipment and leasehold improvements | (250,618) | (403,434) |
Cash (used in) investing activities | (381,837) | (537,362) |
Financing activities: | ||
Net increase (decrease) in cash and cash equivalents | 649,250 | (303,110) |
Cash and cash equivalents at beginning of year | 432,283 | 735,393 |
Cash and cash equivalents at end of year | $ 1,081,533 | $ 432,283 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Total | Common Stock | Common Stock | Paid in Capital | Retained Earnings |
Shares outstanding at period start (in shares) at Jun. 30, 2016 | 7,382,706 | ||||
Stockholders' equity at period start at Jun. 30, 2016 | $ 18,186,194 | $ 36,914 | $ 5,070,956 | $ 13,078,324 | |
Increase (decrease) in stockholders' equity [Roll Forward] | |||||
Net (loss) | (963,636) | (963,636) | |||
Stock-based compensation expense | 349,754 | 349,754 | |||
Shares outstanding at period end (in shares) at Jun. 30, 2017 | 7,382,706 | ||||
Stockholders' equity at period end at Jun. 30, 2017 | 17,572,312 | 36,914 | 5,420,710 | 12,114,688 | |
Increase (decrease) in stockholders' equity [Roll Forward] | |||||
Net (loss) | (3,386,060) | (3,386,060) | |||
Stock-based compensation expense | 331,560 | 331,560 | |||
Shares outstanding at period end (in shares) at Jun. 30, 2018 | 7,382,706 | ||||
Stockholders' equity at period end at Jun. 30, 2018 | $ 14,517,812 | $ 36,914 | $ 5,752,270 | $ 8,728,628 |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | NATURE OF BUSINESS — Koss Corporation ("Koss"), a Delaware corporation, and its 100% -owned subsidiary (collectively the "Company"), reports its finances as a single reporting segment, as the Company’s principal business line is the design, manufacture and sale of stereo headphones and related accessories. The Company leases its plant and office in Milwaukee, Wisconsin. The domestic market is served by domestic sales representatives and independent manufacturers' representatives working directly with certain retailers, distributors, and original equipment manufacturers. International markets are served by domestic sales representatives and sales personnel in the Netherlands and Russia which utilize independent distributors in several foreign countries. The Company has one subsidiary, Koss U.K. Limited ("Koss UK"), which was formed to comply with certain European Union ("EU") requirements. Koss UK is non-operating and holds no assets. BASIS OF CONSOLIDATION — The consolidated financial statements include the accounts of Koss and its subsidiary, Koss UK, which is a 100% -owned subsidiary. All significant intercompany accounts and transactions have been eliminated. REVENUE RECOGNITION — The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; shipment and delivery have occurred; the seller’s price to the buyer is fixed and determinable; and collectibility is reasonably assured. When these criteria are generally satisfied, the Company recognizes revenue. The Company also offers certain customers the right to return products that do not meet the standards agreed on with the customer. The Company continuously monitors such product returns and cannot guarantee that they will continue to experience the same return rates that they have experienced in the past. The Company records a provision for estimated returns based on prior product rates of return. Any significant increase in product quality failure rates and the resulting credit returns could have a material adverse impact on the Company’s operating results for the period or periods in which such returns materialize. The Company provides for certain sales incentives. The Company records a provision for estimated incentives based upon the incentives offered to customers on product related sales in the same period as the related revenues are recorded. The provision is recorded as a reduction of sales. The Company also records a provision for estimated sales returns and allowances on product related sales in the same period as the related revenues are recorded. These estimates are based on historical sales returns, analysis of credit memo data and other known factors. If the historical data the Company uses to calculate these estimates does not properly reflect future returns, adjustments may be required in future periods. SHIPPING AND HANDLING FEES AND COSTS — Shipping and handling costs charged to customers have been included in net sales. Shipping and handling costs incurred by the Company have been included in cost of goods sold. RESEARCH AND DEVELOPMENT — Research and development activities charged to operations as a component of selling, general and administrative expenses in the accompanying Consolidated Statements of Operations amounted to $427,009 and $213,653 in 2018 and 2017 , respectively. ADVERTISING COSTS — Advertising costs included within selling, general and administrative expenses in the accompanying Consolidated Statements of Operations were $65,279 in 2018 and $147,797 in 2017 . Such costs are expensed as incurred. INCOME TAXES — The Company operates as a C Corporation under the Internal Revenue Code of 1986, as amended (the "Code"). Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred income tax assets and liabilities are adjusted through the provision for income taxes. The differences relate principally to different methods used for depreciation and amortization for income tax purposes, net operating losses, capitalization requirements of the Code, allowances for doubtful accounts, provisions for excess and obsolete inventory, stock-based compensation, warranty reserves, and other income tax related carryforwards. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE — (Loss) per common and common stock equivalent share is calculated under the provisions of Topic 260 in the Accounting Standards Codification ("ASC") which provides for calculation of “basic” and “diluted” (loss) per share. Basic (loss) per common and common stock equivalent share includes no dilution and is computed by dividing net (loss) by the weighted average common shares outstanding for the period. Diluted (loss) per common and common stock equivalent share reflects the potential dilution of securities that could share in the earnings of an entity. See Note 11 for additional information on (loss) per common and common stock equivalent share. CASH AND CASH EQUIVALENTS — The Company considers depository accounts and investments with a maturity at the date of acquisition and expected usage of three months or less to be cash and cash equivalents. The Company maintains its cash on deposit at a commercial bank located in the United States of America. The Company periodically has cash balances in excess of insured amounts. The Company has not experienced and does not expect to incur any losses on these deposits. ACCOUNTS RECEIVABLE — Accounts receivable consists of unsecured trade receivables due from customers. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due item and general economic conditions. See Note 3 for additional information on accounts receivable. INVENTORIES — The Company’s inventory is valued at the lower of last-in, first-out ("LIFO") cost or market. The carrying value of inventory is reviewed for impairment on at least a quarterly basis or more frequently if warranted due to changes in market conditions. See Note 4 for additional information on inventory. EQUIPMENT AND LEASEHOLD IMPROVEMENTS — Equipment and leasehold improvements are stated at cost. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Major expenditures for property and equipment and significant renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation and amortization are removed from the accounts and any resulting gains or losses are included in operations. See Note 5 for additional information on equipment and leasehold improvements. LIFE INSURANCE POLICIES — Life insurance policies are stated at cash surrender value or at the amount the Company would receive in the case of split-dollar arrangements. Increases in cash surrender value are included in selling, general and administrative expenses in the Consolidated Statements of Operations, which is where the annual premiums are recorded. PRODUCT WARRANTY OBLIGATIONS — Estimated future warranty costs related to products are charged to cost of goods sold during the period the related revenue is recognized. The product warranty liability reflects the Company’s best estimate of probable obligations under those warranties. See Note 9 for additional information on product warranty obligations. DEFERRED COMPENSATION — The Company’s deferred compensation liabilities are for a current and former officer and are calculated based on compensation, years of service and mortality tables. The related expense is calculated using the net present value of the expected payments and is included in selling, general and administrative expenses in the Consolidated Statements of Operations. See Note 10 for additional information on deferred compensation. FAIR VALUE OF FINANCIAL INSTRUMENTS — Cash equivalents, accounts receivable and accounts payable approximate fair value based on the short maturity of these instruments. IMPAIRMENT OF LONG-LIVED ASSETS — The Company evaluates the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company evaluates the recoverability of equipment and leasehold improvements annually or more frequently if events or circumstances indicate that an asset might be impaired. If an asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Management determines fair value using an undiscounted future cash flow analysis or other accepted valuation techniques. No impairments of the Company's long-lived assets were recorded in the years ended June 30, 2018 and 2017 . LEGAL COSTS — All legal costs related to litigation are charged to operations as incurred, except settlements, which are expensed when a claim is probable and can be estimated. Recoveries of legal costs are recorded when the amount and items to be paid are confirmed by the insurance company. Proceeds from the settlement of legal disputes are recorded in income when the amounts are determinable and the collection is certain. STOCK-BASED COMPENSATION — The Company has a stock-based employee compensation plan, which is described more fully in Note 12 . The Company accounts for stock-based compensation in accordance with ASC 718 "Compensation - Stock Compensation". Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. NEW ACCOUNTING PRONOUNCEMENTS — In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 (Topic 606), Revenue from Contracts with Customers. This new standard supersedes nearly all existing revenue recognition guidance and provides a five-step analysis to determine when and how revenue is recognized. The underlying principle is to recognize revenue when promised goods or services transfer to the customer. The amount of revenue recognized is to reflect the consideration expected to be received for those goods or services. The Company performed a detailed assessment of the new standard through review of customer contracts and identification of performance obligations that exist. Based on our evaluation, we will adopt the new standard using the full retrospective transition method. The Company will recast prior period consolidated financial statements to reflect full retrospective adoption beginning with the Quarterly Report on Form 10-Q for the first fiscal quarter ending September 30, 2018. The impact of adopting the new standard on the Company's net sales and net loss for the year ended June 30, 2018 is not material. The immaterial impact of adopting Topic 606 primarily relates to the deferral of revenue for those sales with a lifetime warranty. Under Topic 606, the lifetime warranty is a performance obligation, which is different than the Company's current practice. The Company expects the standard to have a material impact on the consolidated balance sheet as the result of an adjustment to deferred revenues, accrued liabilities, and retained earnings as of July 1, 2017 to reflect the cumulative change. In February 2016, the FASB issued ASU 2016-02 (Topic 842), Leases. This new standard revises existing lease guidance and requires all leases to be recorded on a company's balance sheet as right-of-use assets and lease liabilities. The new guidance also requires additional disclosures about leases. The Company plans to early adopt and reflect the new standard in the Quarterly Report on Form 10-Q for the fiscal quarter ending September 30, 2018. The Company has completed the assessment of the new lease standard through review of lease contracts and calculation of the required adjustments. The result of our assessment is that the Company expects an immaterial impact on its consolidated statements of operations and a material impact as a result of recording the right-of-use asset and corresponding lease liability on the Company's consolidated balance sheets. USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. RECLASSIFICATIONS — Certain amounts previously reported have been reclassified to conform to the current presentation. |
UNAUTHORIZED TRANSACTION RELATE
UNAUTHORIZED TRANSACTION RELATED RECOVERIES (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Unauthorized Transactions, Costs and Related Recoveries, Net [Abstract] | |
Unauthorized Transaction Related Costs and Recoveries | In December 2009, the Company learned of significant unauthorized transactions as previously reported. The Company has ongoing costs and recoveries associated with the unauthorized transactions. For the fiscal years ended June 30, 2018 and 2017 , the costs incurred were for legal fees related to claims initiated against third parties (see Note 18 ). For the fiscal years ended June 30, 2018 and 2017 , the costs and recoveries were as follows: 2018 2017 Legal fees incurred $ — $ 77,500 Proceeds from asset forfeitures (18,765 ) (9,952 ) Unauthorized transaction related (recoveries) costs, net $ (18,765 ) $ 67,548 |
ACCOUNTS RECEIVABLE (Notes)
ACCOUNTS RECEIVABLE (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts receivable includes unsecured trade receivables due from customers. The Company performs credit evaluations of its customers and does not require collateral to establish an account receivable. Accounts receivable from the Company's largest customer as of June 30, 2018 and June 30, 2017 , represented approximately 34% and 31% of trade account receivables, respectively. The Company evaluates collectibility of accounts receivable based on a number of factors. Accounts receivable are considered to be past due if unpaid one day after their due date. An allowance for doubtful accounts is recorded for past due receivable balances based on a review of the past due item and general economic conditions. The Company writes off accounts receivable when they become uncollectible. Changes in the allowance for doubtful accounts, including amounts written off, provision charged to expense, and recoveries of previously written-off accounts, were as follows: Fiscal Year Ended Balance, Net (decrease) increase Balance, 2018 $ 55,872 (4,018 ) $ 51,854 2017 $ 55,175 697 $ 55,872 The majority of international customers, outside of Canada, purchase products on a cash against documents or cash in advance basis. Approximately 26% and 15% of the Company's trade accounts receivable at June 30, 2018 and 2017 , were foreign receivables denominated in U.S. dollars. |
INVENTORIES (Notes)
INVENTORIES (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | As of June 30, 2018 and 2017 , the Company’s inventory was valued using the lower of last-in, first-out (“LIFO”) cost or market. If the first-in, first-out (“FIFO”) method of inventory accounting had been used by the Company for inventories valued at LIFO there would be no change in the value of inventory at June 30, 2018 and 2017 . The components of inventories at June 30, 2018 and 2017 were as follows: 2018 2017 Raw materials $ 2,717,862 $ 2,900,499 Finished goods 6,057,703 7,895,561 8,775,565 10,796,060 Reserve for obsolete inventory (2,636,886 ) (2,450,717 ) Total inventories $ 6,138,679 $ 8,345,343 |
EQUIPMENT AND LEASEHOLD IMPROVE
EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment, Net [Abstract] | |
Equipment and Leasehold Improvements | The major categories of equipment and leasehold improvements at June 30, 2018 and 2017 are summarized as follows: Estimated useful lives 2018 2017 Machinery and equipment 5-10 years $ 593,595 $ 593,595 Furniture and office equipment 5-10 years 357,351 359,041 Tooling 5 years 4,308,967 4,646,749 Display booths 5 years — 253,680 Computer equipment 3-5 years 758,820 758,820 Leasehold improvements 3-15 years 2,457,006 2,317,263 Assets in progress N/A 19,500 188,342 8,495,239 9,117,490 Less: accumulated depreciation and amortization 7,363,134 7,709,399 Equipment and leasehold improvements, net $ 1,132,105 $ 1,408,091 |
INCOME TAXES (Notes)
INCOME TAXES (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company utilizes the liability method of accounting for income taxes. The liability method measures the expected income tax impact of future taxable income and deductions implicit in the Consolidated Balance Sheets. The income tax provision in 2018 and 2017 consisted of the following: Year Ended June 30, 2018 2017 Current: Federal $ 414 $ 19,822 State 25 425 Deferred 3,042,257 170,299 Total income tax provision $ 3,042,696 $ 190,546 On December 22, 2017, the Tax Cut and Jobs Act (TCJA) was enacted. The TCJA makes broad and complex changes to the U.S. tax code including, among other things, reducing the U.S. Federal Corporate tax rate from 35% to 21% effective January 1, 2018. In the second quarter of the fiscal year ended June 30, 2018 , the Company recorded $713,826 of non-cash tax expense for the write-down of deferred income taxes due to the change in federal statutory tax rate. The 2018 and 2017 tax results in an effective rate different than the federal statutory rate because of the following: Year Ended June 30, 2018 2017 Federal income tax (benefit) at statutory rate $ (94,425 ) $ (262,851 ) State income tax (benefit), net of federal income tax benefit (8,736 ) (32,287 ) Increase in valuation allowance 2,338,590 444,000 Stock-based compensation 91,179 51,197 Remeasurement of deferred income taxes 713,826 — Other 2,262 (9,513 ) Total income tax provision $ 3,042,696 $ 190,546 Temporary differences which give rise to deferred income tax assets and liabilities at June 30, 2018 and June 30, 2017 include: 2018 2017 Deferred income tax assets: Deferred compensation $ 636,002 $ 904,435 Stock-based compensation 420,247 621,966 Accrued expenses and reserves 896,428 1,280,181 Federal and state net operating loss carryforwards 659,680 751,021 Equipment and leasehold improvements 26,580 — Valuation allowance (2,638,589 ) (444,409 ) Total deferred income tax assets 348 3,113,194 Deferred income tax liabilities: Equipment and leasehold improvements — (67,675 ) Other (348 ) (3,262 ) Net deferred income tax assets $ — $ 3,042,257 Deferred income tax balances reflect the effects of temporary differences between the tax bases of assets and liabilities and their carrying amounts. These differences are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. The recognition of these deferred tax balances will be realized through normal recurring operations and, as such, the Company has recorded the value of such expected benefits. The Company has federal net operating loss carryforwards totaling $370,857 which expire in fiscal year 2037 . The Company has net operating loss carryforwards in the state of Wisconsin totaling $6,145,535 which expire in fiscal years 2030 through 2037 . In addition, the Company has operating loss carryforwards in other states totaling $413,252 , which expire in fiscal years 2026 through 2037 . ASC Topic 740 "Income Taxes" prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. There were no additional significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return that have been recorded on the Company’s consolidated financial statements for the year ended June 30, 2018 . Additionally, ASC Topic 740 provides guidance on the recognition of interest and penalties related to income taxes. No interest or penalties related to income taxes has been accrued or recognized as of and for the years ended June 30, 2018 and 2017 . The Company records interest related to unrecognized tax benefits in interest expense. The Company does not believe it has any unrecognized tax benefits as of June 30, 2018 and 2017 . Any changes to the Company's unrecognized tax benefits during the fiscal years ended June 30, 2018 and 2017 would impact the effective tax rate. The Company files income tax returns in the United States federal jurisdiction and in several state jurisdictions. The Company’s federal tax returns for tax years beginning July 1, 2014 or later are open. For states in which the Company files state income tax returns, the statute of limitations is generally open for tax years ended June 30, 2014 and forward. During the year ended June 30, 2018 , the valuation allowance was increased to include all net deferred tax assets due to uncertainty of the realizability of the net deferred tax assets. The following are the changes in the valuation allowance, which are net of the impact for the remeasurement due to the TCJA: Year Ended June 30, Balance, beginning of year (Increase) Balance, end of year 2018 $ (444,409 ) (2,194,180 ) $ (2,638,589 ) 2017 $ (409 ) (444,000 ) $ (444,409 ) |
CREDIT FACILITY (Notes)
CREDIT FACILITY (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Credit Facility | On May 12, 2010, the Company entered into a secured credit facility ("Credit Agreement") with JPMorgan Chase Bank, N.A. (“Lender”). The Credit Agreement provided for an $8,000,000 revolving secured credit facility with interest rates either ranging from 0.0% to 0.75% over the Lender’s most recently publicly announced prime rate or 2.0% to 3.0% over LIBOR, depending on the Company’s leverage ratio. The Company pays a fee of 0.3% to 0.45% for unused amounts committed in the credit facility. On June 29, 2017, the Credit Agreement was amended to reduce the facility to $4,000,000 and to eliminate the financial covenants. On May 9, 2018, the Credit Agreement was amended to extend the expiration to July 31, 2019. In addition to the revolving loans, the Credit Agreement also provides that the Company may, from time to time, request the Lender to issue letters of credit for the benefit of the Company up to a sublimit of $2,000,000 and subject to certain other limitations. The loans may be used only for general corporate purposes of the Company. The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type. The negative covenants include restrictions on other indebtedness, liens, fundamental changes, certain investments, asset sales, sale and leaseback transactions and transactions with affiliates, among other restrictions. The Company and the Lender also entered into the Pledge and Security Agreement dated May 12, 2010, under which the Company granted the Lender a security interest in substantially all of the Company’s assets in connection with the Company’s obligations under the Credit Agreement. As of June 30, 2018 and 2017 , there were no outstanding borrowings on the facility. The Company incurs interest expense primarily related to its secured credit facility. Interest expense was $5,218 and $964 for the years ended June 30, 2018 and 2017 , respectively. |
ACCRUED LIABILITIES (Notes)
ACCRUED LIABILITIES (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Accrued Liabilities, Current [Abstract] | |
Accrued Liabilities | Accrued liabilities for the years ended June 30, 2018 and 2017 were as follows: 2018 2017 Cooperative advertising and promotion allowances $ 364,527 $ 415,050 Product warranty obligations 220,398 220,541 Customer credit balances 53,365 21,175 Current deferred compensation 150,000 150,000 Accrued returns 97,558 53,915 Employee benefits 60,739 54,074 Legal and professional fees 81,000 86,500 Profit-sharing 17,975 — Sales commissions and bonuses 74,078 83,654 Other 58,931 64,486 $ 1,178,571 $ 1,149,395 |
PRODUCT WARRANTY OBLIGATIONS (N
PRODUCT WARRANTY OBLIGATIONS (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Standard Product Warranty Disclosure [Abstract] | |
Product Warranty Obligations | The Company records a liability for product warranty obligations at the time of sale based upon historical warranty experience. The majority of the Company’s products carry a lifetime warranty. The Company also records a liability for specific warranty matters when they become known and are reasonably estimated. However, the Company is continuously releasing new, more complex and technologically advanced products. Even though some of these products have a shorter warranty period, it is at least reasonably possible that products could be released with certain unknown quality or design problems resulting in higher than expected warranty and related costs. These costs could have a materially adverse effect on the Company's results of operations and financial condition in the near term. The Company’s current and non-current product warranty obligations are included in accrued liabilities and other liabilities, respectively, in the Consolidated Balance Sheets. Changes to the product warranty obligations for the years ended June 30, 2018 and 2017 were as follows: Year Ended June 30, Balance, beginning of year Provision charged to expense Warranty expenses incurred Balance, end of year 2018 $ 384,959 180,753 (189,612 ) $ 376,100 2017 $ 483,530 159,990 (258,561 ) $ 384,959 |
DEFERRED COMPENSATION (Notes)
DEFERRED COMPENSATION (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Deferred Compensation Arrangements [Abstract] | |
Deferred Compensation | The Company has deferred compensation agreements with a former and current officer. The related expense is calculated using the net present value of the expected payments and is included in selling, general and administrative expenses in the Consolidated Statements of Operations. The Company's current and non-current deferred compensation obligations are included in accrued liabilities and deferred compensation, respectively, in the Consolidated Balance Sheets. The net present value was calculated for the former officer using a discount factor of 2.60% and 2.60% as of June 30, 2018 and 2017 , respectively. The net present value was calculated for the current officer using a discount factor of 4.80% and 4.80% at June 30, 2018 and 2017 , respectively. The Board of Directors entered into an agreement to continue the 1991 base salary of the former chairman for the remainder of his life. These payments began in the fiscal year ended June 30, 2015, and payments of $150,000 were made under this arrangement for the years ended June 30, 2018 and 2017 . The Company has a deferred compensation liability of $672,884 and $720,591 recorded as of June 30, 2018 and 2017 , respectively. Deferred compensation expense of $102,293 and $98,565 was recognized under this arrangement in 2018 and 2017 , respectively. The Board of Directors has approved a supplemental retirement plan with an officer that calls for annual cash compensation following retirement from the Company in an amount equal to 2% of base salary, as defined in the agreement, multiplied by the number of years of service to the Company. The retirement payments are to be paid monthly to the officer until his death and then to his surviving spouse monthly until her death. The Company has a deferred compensation liability of $1,871,125 and $1,723,827 recorded as of June 30, 2018 and 2017 , respectively. Deferred compensation expense of $147,298 and $158,139 was recognized under this arrangement in 2018 and 2017 , respectively. The Company uses life insurance policies to provide funds to meet its deferred compensation obligations. |
INCOME (LOSS) PER COMMON AND CO
INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Income Per Common and Common Stock Equivalent Share | Basic (loss) per share is computed based on the weighted-average number of common shares outstanding. The weighted-average number of common shares outstanding was 7,382,706 for the years ended June 30, 2018 and 2017 . When dilutive, stock options are included in (loss) per share as share equivalents using the treasury stock method. For the years ended June 30, 2018 and 2017 there were no common stock equivalents related to stock option grants that were included in the computation of the weighted-average number of shares outstanding for diluted (loss) per share. Shares issuable upon the exercise of outstanding options of 2,405,000 and 2,180,000 were excluded from the diluted weighted average common shares outstanding for the years ended June 30, 2018 and 2017 , respectively, as they would be anti-dilutive. |
STOCK OPTIONS (Notes)
STOCK OPTIONS (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options | In 2012, pursuant to the recommendation of the Board of Directors, the stockholders ratified the creation of the Company’s 2012 Omnibus Incentive Plan (the “2012 Plan”), which superseded the 1990 Flexible Incentive Plan (the "1990 Plan"). The 2012 Plan is administered by a committee of the Board of Directors and provides for granting of various stock-based awards including stock options to eligible participants, primarily officers and certain key employees. A total of 2,000,000 shares of common stock were available under the terms of the 2012 Plan plus shares outstanding under the 1990 Plan which expire or are otherwise forfeited, canceled or terminated after July 25, 2012, the Effective Date of the 2012 Plan. As of June 30, 2018 , there were 1,109,308 options available for future grants. Options vest over a three to five year period from the date of grant, with a maximum term of five to ten years. The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. The expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the expected term and vesting schedules. The expected volatility is determined based on the Company’s historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based on historical data. As of June 30, 2018 , there was $894,826 of total unrecognized compensation cost related to stock options granted under the 2012 Plan and 1990 Plan. This cost is expected to be recognized over a weighted average period of 2.60 years. Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures. The Company recognized stock-based compensation expense of $331,560 and $349,754 in 2018 and 2017 , respectively. These expenses were included in selling, general and administrative expenses. There was no cash received from stock option exercises during 2018 or 2017 . Options are granted at a price equal to or greater than the market value of the common stock on the date of grant. The per share weighted average fair value of the stock options granted during the years ended June 30, 2018 and 2017 were $0.85 and $1.07 , respectively. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. For the options granted in 2018 and 2017 , the Company used the following weighted-average assumptions: 2018 2017 Expected stock price volatility 54 % 54 % Risk free interest rate 1.91 % 1.17 % Expected dividend yield — % — % Expected forfeitures 24.40 % 15.31 % Expected life of options 5.6 years 5.9 years The following table identifies options granted, exercised, canceled, or available for exercise pursuant to the 1990 Plan and the 2012 Plan: Number of Stock Weighted Weighted Aggregate 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 $ — Granted 510,000 $1.77 - $1.95 $ 1.89 Exercised — — $ — Expired (285,000 ) $5.47 - $7.76 $ 5.55 Forfeited — — $ — Shares under option at June 30, 2018 2,405,000 $1.77 - $6.28 $ 3.31 3.61 $ 270,230 Exercisable as of June 30, 2017 1,105,166 $2.05 - $7.76 $ 4.88 2.28 $ — Exercisable as of June 30, 2018 1,215,082 $2.05 - $6.28 $ 4.27 2.31 $ 10,750 The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of the Company's stock on June 30, 2018 and the exercise price, multiplied by the number of in-the-money outstanding and exercisable stock options. A summary of intrinsic value and cash received from stock option exercises and fair value of vested stock options for the fiscal years ended June 30, 2018 and 2017 is as follows: 2018 2017 Total intrinsic value of stock options exercised $ — $ — Cash received from stock option exercises $ — $ — Total fair value of stock options vested $ 399,595 $ 461,720 |
STOCK REPURCHASE PROGRAM (Notes
STOCK REPURCHASE PROGRAM (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Stock Purchase Agreement Disclosure [Abstract] | |
Stock Purchase Agreements | The Company has an agreement with the former chairman, in the event of his death, at the request of the executor of his estate, to repurchase his Company common stock from his estate. The Company does not have the right to require the estate to sell stock to the Company. As such, this arrangement is accounted for as a written put option with the fair value of the put option recorded as a derivative liability. As of June 30, 2018 , the estate of the former chairman does not hold a material amount of Company stock. As such, there is no exposure that the executor of the former chairman's estate may require the Company to repurchase a material amount of stock in the event of his death. The repurchase price is 95% of the fair market value of the common stock on the date that notice to repurchase is provided to the Company. The total number of shares to be repurchased will 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 may elect to pay the purchase price in cash or may elect to pay cash equal to 25% of the total amount due and to execute a promissory note at the prime rate of interest for the balance payable over four years. The Company maintains a $1,150,000 life insurance policy to fund a substantial portion of this obligation. In April 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. Subsequently, the Board of Directors periodically has approved increases in the amount authorized for repurchase under the program. As of June 30, 2018 , the Board had authorized the repurchase of an aggregate of $45,500,000 of common stock under the stock repurchase program, of which $43,360,247 had been expended. No shares were repurchased in 2018 or 2017 . |
ADDITIONAL CASH FLOW INFORMATIO
ADDITIONAL CASH FLOW INFORMATION (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Supplemental Cash Flow Elements [Abstract] | |
Additional Cash Flow Information | The net changes in cash as a result of changes in operating assets and liabilities consist of the following: 2018 2017 Accounts receivable $ (773,330 ) $ (398,815 ) Inventories 2,206,664 250,142 Income taxes receivable 439 550,693 Prepaid expenses and other current assets (381 ) 74,704 Accounts payable (813,619 ) 276,454 Accrued liabilities 29,176 (452,257 ) Other liabilities (8,716 ) (13,837 ) Net change $ 640,233 $ 287,084 Net cash paid (refunded) during the year for: Income taxes $ 3,182 $ (523,342 ) Interest $ 5,218 $ 964 |
EMPLOYEE BENEFIT PLANS (Notes)
EMPLOYEE BENEFIT PLANS (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | Substantially all domestic employees are participants in the Koss Employee Stock Ownership Trust ("KESOT") under which an annual contribution in either cash or common stock may be made at the discretion of the Board of Directors. No contributions were made for the fiscal years 2018 or 2017 . The Company maintains a retirement savings plan under Section 401(k) of the Internal Revenue Code. This plan covers all employees of the Company who have completed one full fiscal quarter of service. Matching contributions can be made at the discretion of the Board of Directors. For fiscal years 2018 and 2017 , the matching contribution was 75% and 75% of employee contributions to the plan, respectively. Vesting of Company contributions occurs immediately. Company contributions were $276,217 and $303,950 during 2018 and 2017 , respectively. |
FOREIGN SALES AND SIGNIFICANT C
FOREIGN SALES AND SIGNIFICANT CUSTOMERS (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Foreign Sales and Significant Customers [Abstract] | |
Foreign Sales and Significant Customers | The Company’s net foreign sales amounted to $6,950,517 during 2018 and $8,089,122 during 2017 . The Company’s sales by country were as follows: 2018 2017 United States $ 16,564,924 $ 15,965,159 People's Republic of China 1,602,588 2,332,704 Sweden 1,436,561 1,056,746 Czech Republic 1,298,220 1,107,555 Malaysia 543,093 647,707 Russian Federation 491,649 522,080 Canada 414,350 547,745 All other countries 1,164,056 1,874,585 Net sales $ 23,515,441 $ 24,054,281 Sales during 2018 and 2017 to the Company's five largest customers, which are generally large national retailers or foreign distributors and original equipment manufacturers, represented approximately 47% and 45% of the Company's net sales, respectively. Included in these percentages were net sales to a single United States customer which represented approximately 20% and 14% of the Company's net sales during 2018 and 2017 , respectively. |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | The Company leases its facility in Milwaukee, Wisconsin from Koss Holdings, LLC, which is wholly-owned by the former chairman. On January 5, 2017 , the lease was renewed for a period of five years, ending June 30, 2023 , and is being accounted for as an operating lease. The lease extension maintained the rent at a fixed rate of $380,000 per year. The Company is responsible for all property maintenance, insurance, taxes and other normal expenses related to ownership. Total rent expense was $380,000 in both 2018 and 2017 . |
LEGAL MATTERS (Notes)
LEGAL MATTERS (Notes) | 12 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Matters | As of June 30, 2018 , the Company is party to the following matter related to the unauthorized transactions described below: • 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. On December 12, 2017, the Court of Appeals issued its decision that affirmed the Circuit Court’s judgment dismissing the Company’s claim against Park Bank. The Company filed a Petition for Review of that decision before the Supreme Court of Wisconsin. On March 14, 2018, the Court granted the Petition. The case is currently pending before the Wisconsin Supreme Court. • In addition, on or around July 13, 2018, the Company was served with a lawsuit by a former celebrity endorser of certain products alleging that the Company used her name and image to market and sell the products after the termination of their agreement without her consent. On August 10, 2018, the Company filed a Motion to Dismiss the complaint. This case remains pending. The ultimate resolution of these matters is not determinable unless otherwise noted. We also are subject to a variety of other claims and suits that arise from time to time in the ordinary course of our business. Although management currently believes that resolving these claims against us, individually or in aggregate, will not have a material adverse impact on our consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. |
SIGNIFICANT ACCOUNTING POLICI25
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Consolidation | BASIS OF CONSOLIDATION — The consolidated financial statements include the accounts of Koss and its subsidiary, Koss UK, which is a 100% -owned subsidiary. All significant intercompany accounts and transactions have been eliminated. |
Revenue Recognition | REVENUE RECOGNITION — The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; shipment and delivery have occurred; the seller’s price to the buyer is fixed and determinable; and collectibility is reasonably assured. When these criteria are generally satisfied, the Company recognizes revenue. The Company also offers certain customers the right to return products that do not meet the standards agreed on with the customer. The Company continuously monitors such product returns and cannot guarantee that they will continue to experience the same return rates that they have experienced in the past. The Company records a provision for estimated returns based on prior product rates of return. Any significant increase in product quality failure rates and the resulting credit returns could have a material adverse impact on the Company’s operating results for the period or periods in which such returns materialize. The Company provides for certain sales incentives. The Company records a provision for estimated incentives based upon the incentives offered to customers on product related sales in the same period as the related revenues are recorded. The provision is recorded as a reduction of sales. The Company also records a provision for estimated sales returns and allowances on product related sales in the same period as the related revenues are recorded. These estimates are based on historical sales returns, analysis of credit memo data and other known factors. If the historical data the Company uses to calculate these estimates does not properly reflect future returns, adjustments may be required in future periods. |
Shipping and Handling Fees and Costs | SHIPPING AND HANDLING FEES AND COSTS — Shipping and handling costs charged to customers have been included in net sales. Shipping and handling costs incurred by the Company have been included in cost of goods sold. |
Research and Development | RESEARCH AND DEVELOPMENT — Research and development activities charged to operations as a component of selling, general and administrative expenses in the accompanying Consolidated Statements of Operations amounted to $427,009 and $213,653 in 2018 and 2017 , respectively. |
Advertising Costs | ADVERTISING COSTS — Advertising costs included within selling, general and administrative expenses in the accompanying Consolidated Statements of Operations were $65,279 in 2018 and $147,797 in 2017 . Such costs are expensed as incurred. |
Income Taxes | INCOME TAXES — The Company operates as a C Corporation under the Internal Revenue Code of 1986, as amended (the "Code"). Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred income tax assets and liabilities are adjusted through the provision for income taxes. The differences relate principally to different methods used for depreciation and amortization for income tax purposes, net operating losses, capitalization requirements of the Code, allowances for doubtful accounts, provisions for excess and obsolete inventory, stock-based compensation, warranty reserves, and other income tax related carryforwards. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. |
(Loss) Income Per Common and Common Stock Equivalent Share | (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE — (Loss) per common and common stock equivalent share is calculated under the provisions of Topic 260 in the Accounting Standards Codification ("ASC") which provides for calculation of “basic” and “diluted” (loss) per share. Basic (loss) per common and common stock equivalent share includes no dilution and is computed by dividing net (loss) by the weighted average common shares outstanding for the period. Diluted (loss) per common and common stock equivalent share reflects the potential dilution of securities that could share in the earnings of an entity. See Note 11 for additional information on (loss) per common and common stock equivalent share. |
Cash and Cash Equivalents | CASH AND CASH EQUIVALENTS — The Company considers depository accounts and investments with a maturity at the date of acquisition and expected usage of three months or less to be cash and cash equivalents. The Company maintains its cash on deposit at a commercial bank located in the United States of America. The Company periodically has cash balances in excess of insured amounts. The Company has not experienced and does not expect to incur any losses on these deposits. |
Accounts Receivable | ACCOUNTS RECEIVABLE — Accounts receivable consists of unsecured trade receivables due from customers. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due item and general economic conditions. See Note 3 for additional information on accounts receivable. |
Inventories | INVENTORIES — The Company’s inventory is valued at the lower of last-in, first-out ("LIFO") cost or market. The carrying value of inventory is reviewed for impairment on at least a quarterly basis or more frequently if warranted due to changes in market conditions. See Note 4 for additional information on inventory. |
Equipment and Leasehold Improvements | EQUIPMENT AND LEASEHOLD IMPROVEMENTS — Equipment and leasehold improvements are stated at cost. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Major expenditures for property and equipment and significant renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation and amortization are removed from the accounts and any resulting gains or losses are included in operations. See Note 5 for additional information on equipment and leasehold improvements. |
Life Insurance Policies | LIFE INSURANCE POLICIES — Life insurance policies are stated at cash surrender value or at the amount the Company would receive in the case of split-dollar arrangements. Increases in cash surrender value are included in selling, general and administrative expenses in the Consolidated Statements of Operations, which is where the annual premiums are recorded. |
Product Warranty Obligations | PRODUCT WARRANTY OBLIGATIONS — Estimated future warranty costs related to products are charged to cost of goods sold during the period the related revenue is recognized. The product warranty liability reflects the Company’s best estimate of probable obligations under those warranties. See Note 9 for additional information on product warranty obligations. |
Deferred Compensation | DEFERRED COMPENSATION — The Company’s deferred compensation liabilities are for a current and former officer and are calculated based on compensation, years of service and mortality tables. The related expense is calculated using the net present value of the expected payments and is included in selling, general and administrative expenses in the Consolidated Statements of Operations. See Note 10 for additional information on deferred compensation. |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS — Cash equivalents, accounts receivable and accounts payable approximate fair value based on the short maturity of these instruments. |
Impairment of Long-Lived Assets | IMPAIRMENT OF LONG-LIVED ASSETS — The Company evaluates the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company evaluates the recoverability of equipment and leasehold improvements annually or more frequently if events or circumstances indicate that an asset might be impaired. If an asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Management determines fair value using an undiscounted future cash flow analysis or other accepted valuation techniques. No impairments of the Company's long-lived assets were recorded in the years ended June 30, 2018 and 2017 . |
Legal Costs | LEGAL COSTS — All legal costs related to litigation are charged to operations as incurred, except settlements, which are expensed when a claim is probable and can be estimated. Recoveries of legal costs are recorded when the amount and items to be paid are confirmed by the insurance company. Proceeds from the settlement of legal disputes are recorded in income when the amounts are determinable and the collection is certain. |
Stock-Based Compensation | STOCK-BASED COMPENSATION — The Company has a stock-based employee compensation plan, which is described more fully in Note 12 . The Company accounts for stock-based compensation in accordance with ASC 718 "Compensation - Stock Compensation". Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. |
New Accounting Pronouncements | NEW ACCOUNTING PRONOUNCEMENTS — In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 (Topic 606), Revenue from Contracts with Customers. This new standard supersedes nearly all existing revenue recognition guidance and provides a five-step analysis to determine when and how revenue is recognized. The underlying principle is to recognize revenue when promised goods or services transfer to the customer. The amount of revenue recognized is to reflect the consideration expected to be received for those goods or services. The Company performed a detailed assessment of the new standard through review of customer contracts and identification of performance obligations that exist. Based on our evaluation, we will adopt the new standard using the full retrospective transition method. The Company will recast prior period consolidated financial statements to reflect full retrospective adoption beginning with the Quarterly Report on Form 10-Q for the first fiscal quarter ending September 30, 2018. The impact of adopting the new standard on the Company's net sales and net loss for the year ended June 30, 2018 is not material. The immaterial impact of adopting Topic 606 primarily relates to the deferral of revenue for those sales with a lifetime warranty. Under Topic 606, the lifetime warranty is a performance obligation, which is different than the Company's current practice. The Company expects the standard to have a material impact on the consolidated balance sheet as the result of an adjustment to deferred revenues, accrued liabilities, and retained earnings as of July 1, 2017 to reflect the cumulative change. In February 2016, the FASB issued ASU 2016-02 (Topic 842), Leases. This new standard revises existing lease guidance and requires all leases to be recorded on a company's balance sheet as right-of-use assets and lease liabilities. The new guidance also requires additional disclosures about leases. The Company plans to early adopt and reflect the new standard in the Quarterly Report on Form 10-Q for the fiscal quarter ending September 30, 2018. The Company has completed the assessment of the new lease standard through review of lease contracts and calculation of the required adjustments. The result of our assessment is that the Company expects an immaterial impact on its consolidated statements of operations and a material impact as a result of recording the right-of-use asset and corresponding lease liability on the Company's consolidated balance sheets. |
Use of Estimates | USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. |
Reclassifications | RECLASSIFICATIONS — Certain amounts previously reported have been reclassified to conform to the current presentation. |
UNAUTHORIZED TRANSACTION RELA26
UNAUTHORIZED TRANSACTION RELATED RECOVERIES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Unauthorized Transactions, Costs and Related Recoveries, Net [Abstract] | |
Unauthorized Transaction Related Costs and Recoveries | For the fiscal years ended June 30, 2018 and 2017 , the costs and recoveries were as follows: 2018 2017 Legal fees incurred $ — $ 77,500 Proceeds from asset forfeitures (18,765 ) (9,952 ) Unauthorized transaction related (recoveries) costs, net $ (18,765 ) $ 67,548 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Receivables [Abstract] | |
Change in the Allowance for Doubtful Accounts | Changes in the allowance for doubtful accounts, including amounts written off, provision charged to expense, and recoveries of previously written-off accounts, were as follows: Fiscal Year Ended Balance, Net (decrease) increase Balance, 2018 $ 55,872 (4,018 ) $ 51,854 2017 $ 55,175 697 $ 55,872 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory, Current | The components of inventories at June 30, 2018 and 2017 were as follows: 2018 2017 Raw materials $ 2,717,862 $ 2,900,499 Finished goods 6,057,703 7,895,561 8,775,565 10,796,060 Reserve for obsolete inventory (2,636,886 ) (2,450,717 ) Total inventories $ 6,138,679 $ 8,345,343 |
EQUIPMENT AND LEASEHOLD IMPRO29
EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment, Net [Abstract] | |
Property, Plant and Equipment | The major categories of equipment and leasehold improvements at June 30, 2018 and 2017 are summarized as follows: Estimated useful lives 2018 2017 Machinery and equipment 5-10 years $ 593,595 $ 593,595 Furniture and office equipment 5-10 years 357,351 359,041 Tooling 5 years 4,308,967 4,646,749 Display booths 5 years — 253,680 Computer equipment 3-5 years 758,820 758,820 Leasehold improvements 3-15 years 2,457,006 2,317,263 Assets in progress N/A 19,500 188,342 8,495,239 9,117,490 Less: accumulated depreciation and amortization 7,363,134 7,709,399 Equipment and leasehold improvements, net $ 1,132,105 $ 1,408,091 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense (Benefit) | The income tax provision in 2018 and 2017 consisted of the following: Year Ended June 30, 2018 2017 Current: Federal $ 414 $ 19,822 State 25 425 Deferred 3,042,257 170,299 Total income tax provision $ 3,042,696 $ 190,546 |
Schedule of Effective Income Tax Rate Reconciliation | The 2018 and 2017 tax results in an effective rate different than the federal statutory rate because of the following: Year Ended June 30, 2018 2017 Federal income tax (benefit) at statutory rate $ (94,425 ) $ (262,851 ) State income tax (benefit), net of federal income tax benefit (8,736 ) (32,287 ) Increase in valuation allowance 2,338,590 444,000 Stock-based compensation 91,179 51,197 Remeasurement of deferred income taxes 713,826 — Other 2,262 (9,513 ) Total income tax provision $ 3,042,696 $ 190,546 |
Schedule of Deferred Tax Assets and Liabilities | Temporary differences which give rise to deferred income tax assets and liabilities at June 30, 2018 and June 30, 2017 include: 2018 2017 Deferred income tax assets: Deferred compensation $ 636,002 $ 904,435 Stock-based compensation 420,247 621,966 Accrued expenses and reserves 896,428 1,280,181 Federal and state net operating loss carryforwards 659,680 751,021 Equipment and leasehold improvements 26,580 — Valuation allowance (2,638,589 ) (444,409 ) Total deferred income tax assets 348 3,113,194 Deferred income tax liabilities: Equipment and leasehold improvements — (67,675 ) Other (348 ) (3,262 ) Net deferred income tax assets $ — $ 3,042,257 |
Summary of Valuation Allowance | The following are the changes in the valuation allowance, which are net of the impact for the remeasurement due to the TCJA: Year Ended June 30, Balance, beginning of year (Increase) Balance, end of year 2018 $ (444,409 ) (2,194,180 ) $ (2,638,589 ) 2017 $ (409 ) (444,000 ) $ (444,409 ) |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Accrued Liabilities, Current [Abstract] | |
Schedule of Accrued Liabilities | Accrued liabilities for the years ended June 30, 2018 and 2017 were as follows: 2018 2017 Cooperative advertising and promotion allowances $ 364,527 $ 415,050 Product warranty obligations 220,398 220,541 Customer credit balances 53,365 21,175 Current deferred compensation 150,000 150,000 Accrued returns 97,558 53,915 Employee benefits 60,739 54,074 Legal and professional fees 81,000 86,500 Profit-sharing 17,975 — Sales commissions and bonuses 74,078 83,654 Other 58,931 64,486 $ 1,178,571 $ 1,149,395 |
PRODUCT WARRANTY OBLIGATIONS (T
PRODUCT WARRANTY OBLIGATIONS (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Standard Product Warranty Disclosure [Abstract] | |
Schedule of Product Warranty Liability | Changes to the product warranty obligations for the years ended June 30, 2018 and 2017 were as follows: Year Ended June 30, Balance, beginning of year Provision charged to expense Warranty expenses incurred Balance, end of year 2018 $ 384,959 180,753 (189,612 ) $ 376,100 2017 $ 483,530 159,990 (258,561 ) $ 384,959 |
STOCK OPTIONS (Tables)
STOCK OPTIONS (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | For the options granted in 2018 and 2017 , the Company used the following weighted-average assumptions: 2018 2017 Expected stock price volatility 54 % 54 % Risk free interest rate 1.91 % 1.17 % Expected dividend yield — % — % Expected forfeitures 24.40 % 15.31 % Expected life of options 5.6 years 5.9 years |
Schedule of Share-based Compensation - Options Granted, Exercised, Cancelled, or Available for Exercise | The following table identifies options granted, exercised, canceled, or available for exercise pursuant to the 1990 Plan and the 2012 Plan: Number of Stock Weighted Weighted Aggregate 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 $ — Granted 510,000 $1.77 - $1.95 $ 1.89 Exercised — — $ — Expired (285,000 ) $5.47 - $7.76 $ 5.55 Forfeited — — $ — Shares under option at June 30, 2018 2,405,000 $1.77 - $6.28 $ 3.31 3.61 $ 270,230 Exercisable as of June 30, 2017 1,105,166 $2.05 - $7.76 $ 4.88 2.28 $ — Exercisable as of June 30, 2018 1,215,082 $2.05 - $6.28 $ 4.27 2.31 $ 10,750 |
Intrinsic Value and Cash Received from Stock Option Exercises and Fair Value of Vested Stock Options | A summary of intrinsic value and cash received from stock option exercises and fair value of vested stock options for the fiscal years ended June 30, 2018 and 2017 is as follows: 2018 2017 Total intrinsic value of stock options exercised $ — $ — Cash received from stock option exercises $ — $ — Total fair value of stock options vested $ 399,595 $ 461,720 |
ADDITIONAL CASH FLOW INFORMAT34
ADDITIONAL CASH FLOW INFORMATION (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Supplemental Cash Flow Elements [Abstract] | |
Schedule of Cash Flow, Supplemental Disclosures | The net changes in cash as a result of changes in operating assets and liabilities consist of the following: 2018 2017 Accounts receivable $ (773,330 ) $ (398,815 ) Inventories 2,206,664 250,142 Income taxes receivable 439 550,693 Prepaid expenses and other current assets (381 ) 74,704 Accounts payable (813,619 ) 276,454 Accrued liabilities 29,176 (452,257 ) Other liabilities (8,716 ) (13,837 ) Net change $ 640,233 $ 287,084 Net cash paid (refunded) during the year for: Income taxes $ 3,182 $ (523,342 ) Interest $ 5,218 $ 964 |
FOREIGN SALES AND SIGNIFICANT35
FOREIGN SALES AND SIGNIFICANT CUSTOMERS (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Foreign Sales and Significant Customers [Abstract] | |
Sales by Country | The Company’s sales by country were as follows: 2018 2017 United States $ 16,564,924 $ 15,965,159 People's Republic of China 1,602,588 2,332,704 Sweden 1,436,561 1,056,746 Czech Republic 1,298,220 1,107,555 Malaysia 543,093 647,707 Russian Federation 491,649 522,080 Canada 414,350 547,745 All other countries 1,164,056 1,874,585 Net sales $ 23,515,441 $ 24,054,281 |
SIGNIFICANT ACCOUNTING POLICI36
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Accounting Policies [Abstract] | ||
Wholly owned former subsidiary, ownership percentage | 100.00% | |
Research and development expensed | $ 427,009 | $ 213,653 |
Advertising costs expensed | $ 65,279 | $ 147,797 |
UNAUTHORIZED TRANSACTION RELA37
UNAUTHORIZED TRANSACTION RELATED RECOVERIES (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Unauthorized Transactions, Costs and Related Recoveries, Net [Abstract] | ||
Legal fees incurred | $ 0 | $ 77,500 |
Proceeds from asset forfeitures | (18,765) | (9,952) |
Unauthorized transaction related (recoveries) costs, net | $ (18,765) | $ 67,548 |
ACCOUNTS RECEIVABLE, CHANGE IN
ACCOUNTS RECEIVABLE, CHANGE IN ALLOWANCE FOR DOUBTFUL ACCOUNTS (Details) - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Receivables [Abstract] | |||
Allowance for doubtful accounts | $ 51,854 | $ 55,872 | $ 55,175 |
Allowance for Doubtful Accounts Receivable, Period Increase (Decrease) | $ (4,018) | $ 697 |
ACCOUNTS RECEIVABLE, NARRATIVE
ACCOUNTS RECEIVABLE, NARRATIVE (Details) | Jun. 30, 2018Rate | Jun. 30, 2017Rate |
Receivables [Abstract] | ||
Trade accounts receivable, two largest customers, percentage | 34.00% | 31.00% |
Foreign trade accounts receivable, denominated in US dollars, percentage | 26.00% | 15.00% |
INVENTORIES, NARRATIVE (Details
INVENTORIES, NARRATIVE (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Inventory Disclosure [Abstract] | ||
LIFO reserve | $ 0 | $ 0 |
INVENTORIES, COMPONENTS OF INVE
INVENTORIES, COMPONENTS OF INVENTORIES (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 2,717,862 | $ 2,900,499 |
Finished goods | 6,057,703 | 7,895,561 |
Gross inventory | 8,775,565 | 10,796,060 |
Reserve for obsolete inventory | (2,636,886) | (2,450,717) |
Total inventories | $ 6,138,679 | $ 8,345,343 |
EQUIPMENT AND LEASEHOLD IMPRO42
EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Property, Plant and Equipment [Line Items] | ||
Equipment and leasehold improvements, gross | $ 8,495,239 | $ 9,117,490 |
Less: accumulated depreciation and amortization | 7,363,134 | 7,709,399 |
Equipment and leasehold improvements, net | 1,132,105 | 1,408,091 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Equipment and leasehold improvements, gross | 593,595 | 593,595 |
Furniture and office equipment | ||
Property, Plant and Equipment [Line Items] | ||
Equipment and leasehold improvements, gross | 357,351 | 359,041 |
Tooling | ||
Property, Plant and Equipment [Line Items] | ||
Equipment and leasehold improvements, gross | 4,308,967 | 4,646,749 |
Display booths | ||
Property, Plant and Equipment [Line Items] | ||
Equipment and leasehold improvements, gross | 0 | 253,680 |
Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Equipment and leasehold improvements, gross | 758,820 | 758,820 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Equipment and leasehold improvements, gross | 2,457,006 | 2,317,263 |
Assets in progress | ||
Property, Plant and Equipment [Line Items] | ||
Equipment and leasehold improvements, gross | $ 19,500 | $ 188,342 |
Minimum [Member] | Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 5 years | |
Minimum [Member] | Furniture and office equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 5 years | |
Minimum [Member] | Tooling | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 5 years | |
Minimum [Member] | Display booths | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 5 years | |
Minimum [Member] | Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 3 years | |
Minimum [Member] | Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 3 years | |
Maximum [Member] | Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 10 years | |
Maximum [Member] | Furniture and office equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 10 years | |
Maximum [Member] | Tooling | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 5 years | |
Maximum [Member] | Display booths | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 5 years | |
Maximum [Member] | Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 5 years | |
Maximum [Member] | Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful life | 15 years |
INCOME TAXES, TAX PROVISION (De
INCOME TAXES, TAX PROVISION (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Federal | $ 414 | $ 19,822 |
State | 25 | 425 |
Deferred | 3,042,257 | 170,299 |
Total income tax provision | $ 3,042,696 | $ 190,546 |
INCOME TAXES, EFFECTIVE TAX RAT
INCOME TAXES, EFFECTIVE TAX RATE RECONCILIATION (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Federal income tax (benefit) at statutory rate | $ (94,425) | $ (262,851) |
State income tax (benefit), net of federal income tax benefit | (8,736) | (32,287) |
Increase in valuation allowance | 2,338,590 | 444,000 |
Stock-based compensation | 91,179 | 51,197 |
Remeasurement of deferred income taxes | 713,826 | 0 |
Other | 2,262 | (9,513) |
Total income tax provision | $ 3,042,696 | $ 190,546 |
INCOME TAXES, TEMPORARY DIFFERE
INCOME TAXES, TEMPORARY DIFFERENCES (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Document Fiscal Year Focus | 2,018 | |
Deferred Income Tax Assets: | ||
Deferred compensation | $ 636,002 | $ 904,435 |
Stock-based compensation | 420,247 | 621,966 |
Accrued expenses and reserves | 896,428 | 1,280,181 |
Federal and state net operating loss carryforwards | 659,680 | 751,021 |
Equipment and leasehold improvements | 26,580 | 0 |
Valuation allowance | (2,638,589) | (444,409) |
Total deferred income tax assets | 348 | 3,113,194 |
Deferred Income Tax Liabilities: | ||
Equipment and leasehold improvements | 0 | (67,675) |
Other | (348) | (3,262) |
Net deferred income tax assets | $ 0 | $ 3,042,257 |
INCOME TAXES, NARRATIVE (Detail
INCOME TAXES, NARRATIVE (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Remeasurement of deferred income taxes | $ 713,826 | $ 0 |
Operating Loss Carryforwards [Line Items] | ||
Unrecognized tax benefits that would impact effective tax rate | 0 | $ 0 |
Internal Revenue Service (IRS) [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards | 370,857 | |
Wisconsin Department of Revenue [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards | 6,145,535 | |
State and Local Jurisdiction [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards | $ 413,252 |
INCOME TAXES, VALUATION ALLOWAN
INCOME TAXES, VALUATION ALLOWANCE (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Valuation Allowance [Line Items] | ||
Document Fiscal Year Focus | 2,018 | |
Movement in Valuation Allowances and Reserves [Roll Forward] | ||
Balance, beginning of year | $ (444,409) | |
Balance, end of year | (2,638,589) | $ (444,409) |
Valuation Allowance of Deferred Tax Assets [Member] | ||
Movement in Valuation Allowances and Reserves [Roll Forward] | ||
Balance, beginning of year | (444,409) | (409) |
(Increase) in valuation allowance | 2,194,180 | 444,000 |
Balance, end of year | $ (2,638,589) | $ (444,409) |
CREDIT FACILITY (Details)
CREDIT FACILITY (Details) - USD ($) | May 12, 2010 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 29, 2017 |
Line of Credit Facility [Line Items] | ||||
Document Period End Date | Jun. 30, 2018 | |||
Line of Credit, Current | $ 0 | $ 0 | ||
Revolving secured credit facility, maximum borrowing available | $ 8,000,000 | $ 4,000,000 | ||
Line of credit sublimit | $ 2,000,000 | |||
Interest Expense | $ 5,218 | $ 964 | ||
Minimum [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Unused capacity, commitment fee percentage | 0.30% | |||
Minimum [Member] | Prime Rate [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Interest rate, percentage spread, depending on Company's leverage ratio | 0.00% | |||
Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Interest rate, percentage spread, depending on Company's leverage ratio | 2.00% | |||
Maximum [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Unused capacity, commitment fee percentage | 0.45% | |||
Maximum [Member] | Prime Rate [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Interest rate, percentage spread, depending on Company's leverage ratio | 0.75% | |||
Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Interest rate, percentage spread, depending on Company's leverage ratio | 3.00% |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Accrued Liabilities, Current [Abstract] | ||
Cooperative advertising and promotion allowances | $ 364,527 | $ 415,050 |
Product warranty obligations | 220,398 | 220,541 |
Customer credit balances | 53,365 | 21,175 |
Current deferred compensation | 150,000 | 150,000 |
Accrued returns | 97,558 | 53,915 |
Employee benefits | 60,739 | 54,074 |
Legal and professional fees | 81,000 | 86,500 |
Profit-sharing | 17,975 | 0 |
Sales commissions and bonuses | 74,078 | 83,654 |
Other | 58,931 | 64,486 |
Total accrued liabilities | $ 1,178,571 | $ 1,149,395 |
PRODUCT WARRANTY OBLIGATIONS (D
PRODUCT WARRANTY OBLIGATIONS (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance, beginning of year | $ 384,959 | $ 483,530 |
Provision charged to expense | 180,753 | 159,990 |
Warranty expenses incurred | (189,612) | (258,561) |
Balance, end of year | $ 376,100 | $ 384,959 |
DEFERRED COMPENSATION (Details)
DEFERRED COMPENSATION (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||
Deferred compensation paid | $ 150,000 | $ 150,000 |
Former Chairman of the Board | ||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||
Discount factor | 2.60% | 2.60% |
Deferred Compensation Liability | $ 672,884 | $ 720,591 |
Expense | $ 102,293 | $ 98,565 |
Officer of Company | ||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||
Discount factor | 4.80% | 4.80% |
Deferred Compensation Liability | $ 1,871,125 | $ 1,723,827 |
Expense | $ 147,298 | $ 158,139 |
Cash compensation - percent of base salary times number of years of service | 2.00% |
INCOME (LOSS) PER COMMON AND 52
INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE (Details) - shares | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Earnings Per Share, Basic and Diluted [Abstract] | ||
Weighted average number of shares outstanding | 7,382,706 | 7,382,706 |
Common stock equivalents related to stock option grants that were included in the computation of the weighted-average number of shares outstanding | 0 | 0 |
Shares under option excluded as anti-dilutive | 2,405,000 | 2,180,000 |
STOCK OPTIONS, NARRATIVE (Detai
STOCK OPTIONS, NARRATIVE (Details) - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jul. 25, 2012 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares of common stock added to stock option plan | 2,000,000 | ||
Options available for future grants | 1,109,308 | ||
Unrecognized compensation costs related to stock options granted | $ 894,826 | ||
Weighted average period over which cost is expected to be recognized | 2 years 7 months 7 days | ||
Stock-based compensation expense | $ 331,560 | $ 349,754 | |
Stock-based compensation expense | 331,560 | 349,754 | |
Cash received from stock option exercises | $ 0 | $ 0 | |
Per share weighted average fair value of the stock options granted | $ 0.85 | $ 1.07 | |
Shares granted | 510,000 | 485,000 | |
Weighted average exercise price of share granted in period | $ 1.89 | $ 2.33 | |
Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Option vesting period | 3 years | ||
Option term | 5 years | ||
Maximum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Option vesting period | 5 years | ||
Option term | 10 years |
STOCK OPTIONS, WEIGHTED AVERAGE
STOCK OPTIONS, WEIGHTED AVERAGE ASSUMPTIONS (Details) | 12 Months Ended | |
Jun. 30, 2018Rate | Jun. 30, 2017Rate | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Expected stock price volatility | 54.00% | 54.00% |
Risk free interest rate | 1.91% | 1.17% |
Expected dividend yield | 0.00% | 0.00% |
Expected forfeitures | 24.40% | 15.31% |
Expected life of options | 5 years 7 months 7 days | 5 years 10 months 18 days |
STOCK OPTIONS, OPTIONS GRANTED,
STOCK OPTIONS, OPTIONS GRANTED, EXERCISED, CANCELLED OR AVAILABLE FOR EXERCISE (Details) - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Options Shares [Roll Forward] | |||
Shares under option, beginning of period | 2,180,000 | 2,140,000 | |
Granted | 510,000 | 485,000 | |
Exercised | 0 | 0 | |
Expired | (285,000) | (372,000) | |
Forfeited | 0 | (73,000) | |
Shares under option, end of period | 2,405,000 | 2,180,000 | 2,140,000 |
Excercisable | 1,215,082 | 1,105,166 | |
Exercise Price Range [Rollforward] | |||
Stock Option Exercise Price Range, Shares under option, Lower Range Limit, Beginning Balance | $ 2.05 | $ 2.05 | |
Stock Option Exercise Price Range, Shares under option, Upper Range Limit, Beginning Balance | 7.76 | 9.74 | |
Stock Option Exercise Price Range, Granted, Lower Range Limit | 1.77 | 2.20 | |
Stock Option Exercise Price Range, Granted, Upper Range Limit | 1.95 | 2.42 | |
Stock Option Exercise Price Range, Exercised, Lower Range Limit | 0 | 0 | |
Stock Option Exercise Price Range, Exercised, Upper Range Limit | 0 | 0 | |
Stock Option Exercise Price Range, Expired, Lower Range Limit | 5.47 | 2.57 | |
Stock Option Exercise Price Range, Expired, Upper Range Limit | 7.76 | 9.74 | |
Stock Option Exercise Price Range, Forfeited, Lower Range Limit | 0 | 2.20 | |
Stock Option Exercise Price Range, Forfeited, Upper Range Limit | 0 | 5.30 | |
Stock Option Exercise Price Range, Shares under option, Lower Range Limit, Ending Balance | 1.77 | 2.05 | $ 2.05 |
Stock Option Exercise Price Range, Shares under option, Upper Range Limit, Ending Balance | 6.28 | 7.76 | 9.74 |
Stock option exercise price range, exercisable, lower range limit | 2.05 | 2.05 | |
Stock option exercise price range, exercisable, upper range limit | 6.28 | 7.76 | |
Weighted average exercise price [Roll Forward] | |||
Shares under option, Weighted Average Exercise Price, Beginning Balance | 3.93 | 4.66 | |
Granted, Weighted Average Exercise Price | 1.89 | 2.33 | |
Exercised, Weighted Average Exercise Price | 0 | 0 | |
Expired, Weighted Average Exercise Price | 5.55 | 6.24 | |
Forfeited, Weighted Average Exercise Price | 0 | 3 | |
Shares under option,Weighted Average Exercise Price, Ending Balance | 3.31 | 3.93 | $ 4.66 |
Exercisable, weighted average exercise price | $ 4.27 | $ 4.88 | |
Weighted average remaining contractual life, shares under option | 3 years 7 months 10 days | 3 years 5 months 20 days | 3 years 6 months 5 days |
Interest Expense [Abstract] | |||
Exercisable, weighted average remaining contractual life | 2 years 3 months 22 days | 2 years 3 months 11 days | |
Aggregate intrinsic value of in-the-money options, shares under option | $ 270,230 | $ 0 | $ 0 |
Exercisable, aggregate intrinsic value of in-the-money options | $ 10,750 | $ 0 |
STOCK OPTIONS, INTRINSIC VALUE
STOCK OPTIONS, INTRINSIC VALUE AND CASH RECEIVED ON EXERCISES, FAIR VALUE OF VESTED OPTIONS (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Total intrinsic value of stock options exercised | $ 0 | $ 0 |
Cash received from stock option exercises | 0 | 0 |
Total fair value of stock options vested | $ 399,595 | $ 461,720 |
STOCK REPURCHASE PROGRAM (Detai
STOCK REPURCHASE PROGRAM (Details) | 12 Months Ended |
Jun. 30, 2018USD ($) | |
Stock Purchase Agreement Disclosure [Abstract] | |
Maximum amount Board will approve per repurchase | $ 2,000,000 |
Authorized amount | 45,500,000 |
Inception to date repurchased | $ 43,360,247 |
ADDITIONAL CASH FLOW INFORMAT58
ADDITIONAL CASH FLOW INFORMATION (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Supplemental Cash Flow Elements [Abstract] | ||
Accounts receivable | $ 773,330 | $ 398,815 |
Inventories | (2,206,664) | (250,142) |
Income taxes receivable | (439) | (550,693) |
Prepaid expenses and other current assets | 381 | (74,704) |
Accounts payable | (813,619) | 276,454 |
Accrued liabilities | 29,176 | (452,257) |
Other liabilities | (8,716) | (13,837) |
Net change | (640,233) | (287,084) |
Net cash paid (refunded) during the year for: | ||
Income taxes | 3,182 | (523,342) |
Interest | $ 5,218 | $ 964 |
EMPLOYEE BENEFIT PLANS, KOSS EM
EMPLOYEE BENEFIT PLANS, KOSS EMPLOYEE STOCK OWNERSHIP TRUST (KESOT) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Retirement Benefits [Abstract] | ||
Koss Employee Stock Ownership Trust (KESOT), cash contributions | $ 0 | $ 0 |
EMPLOYEE BENEFIT PLANS, RETIREM
EMPLOYEE BENEFIT PLANS, RETIREMENT SAVINGS PLAN UNDER SECTION 401(K) (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Retirement Benefits [Abstract] | ||
Company match, percentage | 75.00% | 75.00% |
Company contributions | $ 276,217 | $ 303,950 |
FOREIGN SALES AND SIGNIFICANT61
FOREIGN SALES AND SIGNIFICANT CUSTOMERS, SALES BY COUNTRY (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Document Fiscal Year Focus | 2,018 | |
Net sales | $ 23,515,441 | $ 24,054,281 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 16,564,924 | 15,965,159 |
Non-U.S. Countries [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 6,950,517 | 8,089,122 |
People's Republic of China | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 1,602,588 | 2,332,704 |
Sweden | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 1,436,561 | 1,056,746 |
Czech Republic | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 1,298,220 | 1,107,555 |
Malaysia | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 543,093 | 647,707 |
Russian Federation | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 491,649 | 522,080 |
Canada | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 414,350 | 547,745 |
All other countries | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | $ 1,164,056 | $ 1,874,585 |
FOREIGN SALES AND SIGNIFICANT62
FOREIGN SALES AND SIGNIFICANT CUSTOMERS FOREIGN SALES AND SIGNIFICANT CUSTOMERS, NARRATIVE (Details) - Sales Revenue, Net [Member] - Customer Concentration Risk [Member] | 12 Months Ended | |
Jun. 30, 2018Rate | Jun. 30, 2017Rate | |
Five largest customers [Member] | ||
Concentration Risk [Line Items] | ||
Concentration Risk, Percentage | 47.00% | 45.00% |
Single United States Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration Risk, Percentage | 20.00% | 14.00% |
COMMITMENTS AND CONTINGENCIES63
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Annual lease commitment | $ 380,000 | |
Rent expense | $ 380,000 | $ 380,000 |