Document_and_Entity_Informatio
Document and Entity Information Document (USD $) | 9 Months Ended | ||
Mar. 31, 2014 | 9-May-14 | Dec. 31, 2012 | |
Document and Entity Information [Abstract] | ' | ' | ' |
Entity Registrant Name | 'KOSS CORP | ' | ' |
Entity Central Index Key | '0000056701 | ' | ' |
Current Fiscal Year End Date | '--06-30 | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Document Type | '10-Q | ' | ' |
Document Period End Date | 31-Mar-14 | ' | ' |
Document Fiscal Year Focus | '2014 | ' | ' |
Document Fiscal Period Focus | 'Q3 | ' | ' |
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 | ' | ' | $12,824,625 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Net sales | $4,300,373 | $8,302,113 | $17,648,927 | $25,859,006 |
Cost of goods sold | 3,206,738 | 4,998,121 | 12,321,111 | 16,546,236 |
Impairment of capitalized software, inventory and related items | 0 | 0 | 4,535,747 | 0 |
Gross profit | 1,093,635 | 3,303,992 | 792,069 | 9,312,770 |
Operating expenses: | ' | ' | ' | ' |
Selling, general and administrative expenses | 2,354,337 | 3,111,919 | 7,925,186 | 9,134,158 |
Unauthorized transaction related costs and recoveries, net | -231,162 | 152,001 | -827,707 | -1,043,070 |
Total operating expenses | 2,123,175 | 3,263,920 | 7,097,479 | 8,091,088 |
Income (loss) from operations | -1,029,540 | 40,072 | -6,305,410 | 1,221,682 |
Other income (expense): | ' | ' | ' | ' |
Interest expense | 65,536 | 16,786 | 49,737 | -39,719 |
Income (loss) before income tax provision (benefit) | -964,004 | 56,858 | -6,255,673 | 1,181,963 |
Income tax provision (benefit) | -938,883 | -58,583 | -2,857,113 | 361,681 |
Net income (loss) | ($25,121) | $115,441 | ($3,398,560) | $820,282 |
Income (loss) per common share: | ' | ' | ' | ' |
Basic (in dollars per share) | $0 | $0.02 | ($0.46) | $0.11 |
Diluted (in dollars per share) | $0 | $0.02 | ($0.46) | $0.11 |
Dividends declared per common share (in dollars per share) | $0.06 | $0.06 | $0.18 | $0.18 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Jun. 30, 2013 |
Current assets: | ' | ' |
Cash and cash equivalents | $2,749,204 | $859,636 |
Accounts receivable, less allowance for doubtful accounts of $60,815 and $43,405, respectively | 2,349,391 | 12,185,162 |
Inventories | 9,667,701 | 10,501,172 |
Prepaid expenses and other current assets | 339,795 | 465,589 |
Deferred income taxes | 1,646,931 | 1,171,453 |
Total current assets | 16,753,022 | 25,183,012 |
Equipment and leasehold improvements, net | 2,045,669 | 2,337,982 |
Other assets: | ' | ' |
Product software development expenditures, net | 0 | 2,673,291 |
Deferred income taxes | 2,391,158 | 419,530 |
Cash surrender value of life insurance | 4,942,627 | 4,612,842 |
Total other assets | 7,333,785 | 7,705,663 |
Total assets | 26,132,476 | 35,226,657 |
Current liabilities: | ' | ' |
Accounts payable | 2,044,806 | 2,685,748 |
Accrued liabilities | 3,547,273 | 4,705,454 |
Dividends payable | 442,962 | 442,962 |
Income taxes payable | 284,585 | 2,732,524 |
Total current liabilities | 6,319,626 | 10,566,688 |
Long-term liabilities: | ' | ' |
Deferred compensation | 2,172,372 | 2,375,550 |
Derivative liability | 0 | 154,745 |
Other liabilities | 448,990 | 740,000 |
Total long-term liabilities | 2,621,362 | 3,270,295 |
Total liabilities | 8,940,988 | 13,836,983 |
Stockholders' equity: | ' | ' |
Common stock, $0.005 par value, authorized 20,000,000 shares; issued and outstanding 7,382,706 shares | 36,914 | 36,914 |
Paid in capital | 3,792,869 | 3,263,608 |
Retained earnings | 13,361,705 | 18,089,152 |
Total stockholders' equity | 17,191,488 | 21,389,674 |
Total liabilities and stockholders' equity | $26,132,476 | $35,226,657 |
CONDENSED_BALANCE_SHEETS_PAREN
CONDENSED BALANCE SHEETS (PARENTHETICAL) (USD $) | Mar. 31, 2014 | Jun. 30, 2013 |
Allowance for doubtful accounts | $60,815 | $43,405 |
Common stock, par value | $0.01 | $0.01 |
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 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Operating activities: | ' | ' |
Net income (loss) | ($3,398,560) | $820,282 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ' | ' |
Recoveries of previously written off accounts | -102,567 | -632 |
Loss on disposals of fixed assets | 0 | -124,480 |
Impairment of capitalized software, inventory & related items | 4,535,747 | 0 |
Depreciation of equipment and leasehold improvements | 569,027 | 628,110 |
Amortization of product software development expenditures | 364,539 | 1,160,392 |
Stock-based compensation expense | 516,829 | 440,533 |
Provision for (benefit from) deferred income taxes | -2,434,674 | 410,656 |
Change in cash surrender value of life insurance | -86,486 | -15,604 |
Deferred compensation | -357,923 | 181,873 |
Net changes in operating assets and liabilities (see note 13) | 4,336,319 | -1,206,136 |
Cash provided by operating activities | 3,942,251 | 2,543,954 |
Investing activities: | ' | ' |
Life insurance premiums paid | -243,299 | -258,638 |
Purchase of equipment and leasehold improvements | -480,497 | -432,750 |
Product software development expenditures | 0 | -67,738 |
Cash used in investing activities | -723,796 | -759,126 |
Financing activities: | ' | ' |
Dividends paid to stockholders | -1,328,887 | -1,328,887 |
Cash used in financing activities | -1,328,887 | -1,328,887 |
Net increase in cash and cash equivalents | 1,889,568 | 455,941 |
Cash and cash equivalents at beginning of period | 859,636 | 50,027 |
Cash and cash equivalents at end of period | $2,749,204 | $505,968 |
CONDENSED_CONSOLIDATED_FINANCI
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Notes) | 9 Months Ended |
Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Condensed Consolidated Financial Statements | ' |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | |
The condensed consolidated balance sheet of Koss Corporation (the "Company") as of June 30, 2013 has been derived from audited financial statements. The unaudited condensed consolidated financial statements presented herein are based on interim amounts. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The operating results for the nine months ended March 31, 2014 are not necessarily indicative of the operating results that may be experienced for the full fiscal year ending June 30, 2014. | |
In the three months ended December 31, 2013, the Company formed Koss U.K. Limited to comply with certain European Union (EU) requirements. The entity is non-operating and holds no assets. | |
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013. |
UNAUTHORIZED_TRANSACTION_RELAT
UNAUTHORIZED TRANSACTION RELATED COSTS AND RECOVERIES (Notes) | 9 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Unauthorized Transactions, Related Recoveries, Net [Abstract] | ' | ||||||||||||||||
Unauthorized Transaction Related Costs and Recoveries | ' | ||||||||||||||||
UNAUTHORIZED TRANSACTION RELATED COSTS AND RECOVERIES | |||||||||||||||||
In 2009, the Company learned of significant unauthorized transactions, details of which have been disclosed in depth in the Company's previous periodic reports filed with the SEC. The unauthorized transaction related recoveries, net line in the Condensed Consolidated Statements of Operations is comprised of legal defense costs, legal fees related to certain claims against third parties (see Note 15), and recoveries related to the unauthorized transactions which are summarized below. For the three and nine months ended March 31, 2014 and 2013, these costs and recoveries were as follows: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
31-Mar | 31-Mar | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Legal fees incurred | $ | 86,391 | $ | 180,295 | $ | 306,375 | $ | 332,608 | |||||||||
Recoveries: | |||||||||||||||||
Insurance proceeds | — | (692 | ) | — | (15,014 | ) | |||||||||||
Proceeds from asset forfeitures | (317,553 | ) | (27,602 | ) | (1,134,082 | ) | (1,360,664 | ) | |||||||||
Total recoveries | (317,553 | ) | (28,294 | ) | (1,134,082 | ) | (1,375,678 | ) | |||||||||
Unauthorized transaction related cost and recoveries, net | $ | (231,162 | ) | $ | 152,001 | $ | (827,707 | ) | $ | (1,043,070 | ) | ||||||
IMPAIRMENT_OF_CAPITALIZED_SOFT
IMPAIRMENT OF CAPITALIZED SOFTWARE, INVENTORY AND RELATED ITEMS (Notes) | 9 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Impairment of Capitalized Software, Inventory and Related Items [Abstract] | ' | ||||||||
Impairment of Capitalized Software, Inventory and Related Items | ' | ||||||||
IMPAIRMENT OF CAPITALIZED SOFTWARE, INVENTORY AND RELATED ITEMS | |||||||||
The Company recorded an impairment to the condensed consolidated statement of operations line item titled "Impairment of capitalized software, inventory and related items" in the three months ended December 31, 2013. The impairment is detailed in the following table: | |||||||||
Three Months Ended | Nine Months Ended | ||||||||
March 31, 2014 | 31-Mar-14 | ||||||||
Product software development expenditures | $ | — | $ | 2,308,752 | |||||
Inventories | — | 1,759,710 | |||||||
Product design costs and assumed liabilities | — | 263,503 | |||||||
Tooling | — | 203,782 | |||||||
Impairment of capitalized software, inventory and related items | $ | — | $ | 4,535,747 | |||||
The Company determined that the capitalized software will be replaced by a new architecture being developed, which began in the three months ended December 31, 2013. As a result, the remaining value was expensed as of December 31, 2013. In conjunction with the review of the capitalized software, it was determined that certain inventory items were obsolete or the Company had quantities that are not expected to be used over the product forecast period. These inventory items are included net of expected recoveries. Product design costs and assumed liabilities to wrap up the current architecture design were expensed. The Company will incur future costs for the continued development, software code and product launch of the WiFi-based products. Tooling related to products that are no longer expected to be launched was expensed. |
INVENTORIES_Notes
INVENTORIES (Notes) | 9 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventories | ' | ||||||||
INVENTORIES | |||||||||
The components of inventories at March 31, 2014 and June 30, 2013 were as follows: | |||||||||
March 31, 2014 | June 30, 2013 | ||||||||
Raw materials | $ | 5,985,289 | $ | 5,019,597 | |||||
Work-in process | 68,755 | — | |||||||
Finished goods | 6,631,929 | 6,690,301 | |||||||
12,685,973 | 11,709,898 | ||||||||
Allowance for obsolete inventory | (3,018,272 | ) | (1,208,726 | ) | |||||
Total inventories | $ | 9,667,701 | $ | 10,501,172 | |||||
PRODUCT_SOFTWARE_DEVELOPMENT_E
PRODUCT SOFTWARE DEVELOPMENT EXPENDITURES (Notes) | 9 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Capitalized Computer Software, Net [Abstract] | ' | ||||||||||||||||
Product Software Development Expenditures | ' | ||||||||||||||||
PRODUCT SOFTWARE DEVELOPMENT EXPENDITURES | |||||||||||||||||
The Company follows the guidance of ASC 985-20 “Costs of Software to be Sold, Leased, or Marketed” when capitalizing software development costs associated with software embedded in or to be incorporated into its products. The cost of purchased software technology is capitalized and stated at the lower of unamortized cost or expected net realizable value. Software is subject to rapid technological obsolescence and future revenue estimates supporting the capitalized software cost can be negatively affected based upon competitive products, services and pricing. Such adverse developments could reduce the estimated net realizable value of our product software development costs and could result in impairment or a shorter estimated life. Such events would require us to take a charge in the period in which the event occurs or to increase the amortization expense in future periods and would have a negative effect on our results of operations. At a minimum, we review for impairment on a quarterly basis. The Company launched a new product offering utilizing this software in the fourth quarter of fiscal year 2012 and began amortizing the related capitalized software costs. | |||||||||||||||||
In the quarter ended December 31, 2013, management determined that the existing product software technology will be superseded. As such, the product software development expenditures were fully impaired in the quarter ended December 31, 2013. The remaining asset value of $2,308,752 was charged to the Condensed Consolidated Statement of Operations line item titled "Impairment of capitalized software, inventory and related items." The following table reflects capitalized software amortization and impairment related expense for the three and nine months ended March 31, 2014 and 2013. | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
31-Mar | 31-Mar | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Product software development expenditures charged to: | |||||||||||||||||
Cost of goods sold | $ | — | $ | 397,926 | $ | 364,539 | $ | 1,160,392 | |||||||||
Impairment of capitalized software, inventory and related items | — | — | 2,308,752 | — | |||||||||||||
Total software expense | $ | — | $ | 397,926 | $ | 2,673,291 | $ | 1,160,392 | |||||||||
Accumulated amortization and impairment as of March 31, 2014 totaled $4,374,477. Accumulated amortization as of June 30, 2013 totaled $1,701,185. | |||||||||||||||||
Software development costs expended to supersede the previous product software technology will be expensed as incurred and charged to research and development. |
INCOME_TAXES_Notes
INCOME TAXES (Notes) | 9 Months Ended |
Mar. 31, 2014 | |
Income Tax Disclosure [Abstract] | ' |
Income Taxes | ' |
INCOME TAXES | |
For the nine months ended March 31, 2014, the company recorded an income tax benefit of $2,857,113, compared to an income tax expense of $361,681 for the nine months ended March 31, 2013. The decrease in the company's tax expense for the nine months ended March 31, 2014 relative to the prior year resulted primarily from pre-tax book losses and the effective settlement of uncertain tax benefits. The Company files income tax returns in the United States (Federal), Wisconsin (State) and various other state jurisdictions. Tax years open to examination by tax authorities under the statute of limitations include fiscal years 2011 through 2013 for Federal and fiscal years 2010 through 2013 for most state jurisdictions. | |
The Company’s unrecognized tax benefits, excluding interest and penalties, were $150,000 as of March 31, 2014 and $696,113 as of June 30, 2013. All of the Company’s unrecognized tax benefits as of March 31, 2014, if recognized, would impact the effective tax rate. |
CREDIT_FACILITY_Notes
CREDIT FACILITY (Notes) | 9 Months Ended |
Mar. 31, 2014 | |
Debt Disclosure [Abstract] | ' |
Credit Facility | ' |
CREDIT FACILITY | |
On May 12, 2010, the Company entered into a secured credit facility with JPMorgan Chase Bank, N.A. (“Lender”). The Credit Agreement dated May 12, 2010 between the Company and the Lender (“Credit Agreement”) provides 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 July 24, 2013, the Credit Agreement was amended to extend the expiration to July 31, 2015. 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 of 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, negative and financial 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 financial covenants include a minimum current ratio, minimum tangible net worth and maximum leverage ratio requirements. 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. The balance on this facility was $0 as of March 31, 2014 and June 30, 2013. |
INTEREST_EXPENSE_Notes
INTEREST EXPENSE (Notes) | 9 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Interest Expense [Abstract] | ' | ||||||||||||||||
Interest Expense | ' | ||||||||||||||||
INTEREST EXPENSE | |||||||||||||||||
The Company incurs interest expense primarily related to its secured credit facility (see Note 7) and to its liabilities for its tax positions related to the unauthorized transactions. As the tax returns have been settled and statutes have closed, the accrued interest expense on certain items has been reversed. Interest expense detail was as follows for the three and nine months ended March 31, 2014 and 2013, respectively: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
31-Mar | 31-Mar | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Interest benefit (expense) on secured credit facility | $ | — | $ | (4,614 | ) | $ | 587 | $ | (37,249 | ) | |||||||
Interest expense for tax positions related to unauthorized transactions | — | (11,941 | ) | (16,386 | ) | (35,821 | ) | ||||||||||
Interest reversals for tax positions related to unauthorized transactions | 65,536 | 33,742 | 65,536 | 33,742 | |||||||||||||
Other interest expense | — | (401 | ) | — | (391 | ) | |||||||||||
Interest expense | $ | 65,536 | $ | 16,786 | $ | 49,737 | $ | (39,719 | ) | ||||||||
INCOME_LOSS_PER_COMMON_AND_COM
INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE (Notes) | 9 Months Ended |
Mar. 31, 2014 | |
Earnings Per Share, Basic and Diluted [Abstract] | ' |
Income (Loss) Per Common and Common Stock Equivalent Share | ' |
INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE | |
Basic income (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 quarters ended March 31, 2014 and 2013. When dilutive, stock options are included in income (loss) per share as share equivalents using the treasury stock method. For the periods ended March 31, 2014 and 2013, 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 income (loss) per share. Shares issuable upon the exercise of outstanding options of 2,186,000 and 1,944,308 were excluded from the diluted weighted-average common shares outstanding for the periods ended March 31, 2014 and 2013, respectively, as they would be anti-dilutive. |
DIVIDENDS_DECLARED_Notes
DIVIDENDS DECLARED (Notes) | 9 Months Ended |
Mar. 31, 2014 | |
Dividends, Cash [Abstract] | ' |
Dividends Declared | ' |
DIVIDENDS DECLARED | |
On February 13, 2014, the Company declared a quarterly cash dividend of $0.06 per share for the stockholders of record on March 31, 2014, to be paid April 15, 2014. Such dividend payable has been recorded as of March 31, 2014. At the Board of Directors meeting in May 2014, the Board of Directors determined that based on the financial results, the Company would not declare a quarterly cash dividend for the quarter ending June 30, 2014. |
STOCK_OPTIONS_Notes
STOCK OPTIONS (Notes) | 9 Months Ended |
Mar. 31, 2014 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' |
Stock Options | ' |
STOCK OPTIONS | |
The Company recognizes stock-based compensation expense for options granted under both the 1990 Flexible Incentive Plan and the 2012 Omnibus Incentive Plan. The stock-based compensation relates to stock options granted to employees, non-employee directors and non-employee consultants. In the nine months ended March 31, 2014, options to purchase 445,000 shares were granted under the 2012 Omnibus Incentive Plan at a weighted average exercise price of $5.64. In the nine months ended March 31, 2013, options to purchase 430,000 shares were granted under the 2012 Omnibus Incentive Plan at a weighted average exercise price of $5.29. Stock-based compensation expense during the three and nine months ended March 31, 2014 was $172,477 and $516,829, respectively. Stock-based compensation expense during the three and nine months ended March 31, 2013 was $146,592 and $440,533, respectively. |
STOCK_PURCHASE_AGREEMENTS_Note
STOCK PURCHASE AGREEMENTS (Notes) | 9 Months Ended |
Mar. 31, 2014 | |
Stock Purchase Agreement Disclosure [Abstract] | ' |
Stock Purchase Agreements | ' |
STOCK PURCHASE AGREEMENTS | |
The Company has an agreement with its Chairman, John C. Koss, 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 March 31, 2014, John C. Koss did not hold a material amount of Company stock. As such, there is no exposure that the executor of John C. Koss' estate may require the Company to repurchase a material amount of stock in the event of his death. The fair value of the written put option at March 31, 2014 and June 30, 2013 was $0 and $154,745, respectively. 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 the Chairman’s 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 for the balance, payable over four years, at the prime rate of interest. The Company maintains a $1,150,000 life insurance policy to fund a substantial portion of this obligation. |
ADDITIONAL_CASH_FLOW_INFORMATI
ADDITIONAL CASH FLOW INFORMATION (Notes) | 9 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Supplemental Cash Flow Elements [Abstract] | ' | ||||||||
Additional Cash Flow Information | ' | ||||||||
ADDITIONAL CASH FLOW INFORMATION | |||||||||
The net changes in cash as a result of changes in operating assets and liabilities consist of the following: | |||||||||
Nine Months Ended | |||||||||
31-Mar | |||||||||
2014 | 2013 | ||||||||
Accounts receivable | $ | 9,938,339 | $ | 1,708,703 | |||||
Inventories | (926,239 | ) | (593,051 | ) | |||||
Prepaid expenses and other current assets | 125,794 | (411,807 | ) | ||||||
Income taxes payable | (2,447,939 | ) | — | ||||||
Accounts payable | (904,445 | ) | (1,464,943 | ) | |||||
Accrued liabilities | (1,158,181 | ) | (431,038 | ) | |||||
Other liabilities | (291,010 | ) | (14,000 | ) | |||||
Net change | $ | 4,336,319 | $ | (1,206,136 | ) | ||||
Net cash paid (refunded) during the period for: | |||||||||
Income taxes | $ | 2,029,000 | $ | (40,301 | ) | ||||
Interest | $ | — | $ | 38,691 | |||||
STOCKHOLDERS_EQUITY_Notes
STOCKHOLDERS' EQUITY (Notes) | 9 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Stockholders' Equity Attributable to Parent [Abstract] | ' | ||||||||
Stockholders' Equity | ' | ||||||||
STOCKHOLDERS’ EQUITY | |||||||||
The following table summarizes the changes in stockholders’ equity for the nine months ended March 31, 2014 and 2013: | |||||||||
Nine Months Ended | |||||||||
31-Mar | |||||||||
2014 | 2013 | ||||||||
Net income (loss) | $ | (3,398,560 | ) | $ | 820,282 | ||||
Dividends declared | (1,328,887 | ) | (1,328,887 | ) | |||||
Stock-based compensation expense | 516,829 | 440,533 | |||||||
Income tax benefit from stock-based compensation expense | 12,432 | — | |||||||
Decrease in stockholders’ equity | $ | (4,198,186 | ) | $ | (68,072 | ) |
LEGAL_MATTERS_Notes
LEGAL MATTERS (Notes) | 9 Months Ended | |
Mar. 31, 2014 | ||
Commitments and Contingencies Disclosure [Abstract] | ' | |
Legal Matters | ' | |
LEGAL MATTERS | ||
As of March 31, 2014, the Company is party to the matters related to the unauthorized transactions and the termination of a vendor contract described below: | ||
• | On February 18, 2010, the Company filed an action against American Express Company, American Express Travel Related Services Company, Inc., AMEX Card Services Company, Decision Science, and Pamela S. Hopkins in Superior Court of Maricopa County, Arizona, case no. CV2010-006631. The claims alleged include aiding and abetting breach of fiduciary duty, aiding and abetting fraud, and conversion relating to the unauthorized transactions. The case is proceeding in the Superior Court with respect to those claims. | |
• | On December 17, 2010, the Company filed an action against Park Bank in Circuit Court of Milwaukee County, Wisconsin alleging claims of negligence and breach of fiduciary duty relating to the unauthorized transactions. The Company voluntarily dismissed the negligence claim and the case is proceeding in the Circuit Court. | |
• | On March 6, 2014, the Company filed a replevin action against Red Fusion Studios, Inc. ("Red Fusion") in Circuit Court of Milwaukee County, Wisconsin, Case No. 14CV001885, seeking the return of the Company's property and information following the termination of the agreement that the Company had with Red Fusion for the development of the Company's Striva Technology. Red Fusion filed counterclaims relating to fees that Red Fusion alleges it is owed as a result of the termination. The Company has filed a Motion to Dismiss the counterclaims. A hearing has been scheduled for June 26, 2014 on the Company's Motion to Dismiss. | |
The ultimate resolution of these matters is not determinable unless otherwise noted. |
UNAUTHORIZED_TRANSACTION_RELAT1
UNAUTHORIZED TRANSACTION RELATED COSTS AND RECOVERIES (Tables) | 9 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Unauthorized Transactions, Related Recoveries, Net [Abstract] | ' | ||||||||||||||||
Unauthorized Transaction Related Costs and Recoveries | ' | ||||||||||||||||
For the three and nine months ended March 31, 2014 and 2013, these costs and recoveries were as follows: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
31-Mar | 31-Mar | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Legal fees incurred | $ | 86,391 | $ | 180,295 | $ | 306,375 | $ | 332,608 | |||||||||
Recoveries: | |||||||||||||||||
Insurance proceeds | — | (692 | ) | — | (15,014 | ) | |||||||||||
Proceeds from asset forfeitures | (317,553 | ) | (27,602 | ) | (1,134,082 | ) | (1,360,664 | ) | |||||||||
Total recoveries | (317,553 | ) | (28,294 | ) | (1,134,082 | ) | (1,375,678 | ) | |||||||||
Unauthorized transaction related cost and recoveries, net | $ | (231,162 | ) | $ | 152,001 | $ | (827,707 | ) | $ | (1,043,070 | ) | ||||||
IMPAIRMENT_OF_CAPITALIZED_SOFT1
IMPAIRMENT OF CAPITALIZED SOFTWARE, INVENTORY AND RELATED ITEMS (Tables) | 9 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Impairment of Capitalized Software, Inventory and Related Items [Abstract] | ' | ||||||||
Impairment of Capitalized Software, Inventory and Related Items | ' | ||||||||
The impairment is detailed in the following table: | |||||||||
Three Months Ended | Nine Months Ended | ||||||||
March 31, 2014 | 31-Mar-14 | ||||||||
Product software development expenditures | $ | — | $ | 2,308,752 | |||||
Inventories | — | 1,759,710 | |||||||
Product design costs and assumed liabilities | — | 263,503 | |||||||
Tooling | — | 203,782 | |||||||
Impairment of capitalized software, inventory and related items | $ | — | $ | 4,535,747 | |||||
INVENTORIES_Tables
INVENTORIES (Tables) | 9 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventories | ' | ||||||||
The components of inventories at March 31, 2014 and June 30, 2013 were as follows: | |||||||||
March 31, 2014 | June 30, 2013 | ||||||||
Raw materials | $ | 5,985,289 | $ | 5,019,597 | |||||
Work-in process | 68,755 | — | |||||||
Finished goods | 6,631,929 | 6,690,301 | |||||||
12,685,973 | 11,709,898 | ||||||||
Allowance for obsolete inventory | (3,018,272 | ) | (1,208,726 | ) | |||||
Total inventories | $ | 9,667,701 | $ | 10,501,172 | |||||
PRODUCT_SOFTWARE_DEVELOPMENT_E1
PRODUCT SOFTWARE DEVELOPMENT EXPENDITURES (Tables) | 9 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Capitalized Computer Software, Net [Abstract] | ' | ||||||||||||||||
Product Software Development Expenditures | ' | ||||||||||||||||
The following table reflects capitalized software amortization and impairment related expense for the three and nine months ended March 31, 2014 and 2013. | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
31-Mar | 31-Mar | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Product software development expenditures charged to: | |||||||||||||||||
Cost of goods sold | $ | — | $ | 397,926 | $ | 364,539 | $ | 1,160,392 | |||||||||
Impairment of capitalized software, inventory and related items | — | — | 2,308,752 | — | |||||||||||||
Total software expense | $ | — | $ | 397,926 | $ | 2,673,291 | $ | 1,160,392 | |||||||||
INTEREST_EXPENSE_Tables
INTEREST EXPENSE (Tables) | 9 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Interest Expense [Abstract] | ' | ||||||||||||||||
Interest Expense | ' | ||||||||||||||||
Interest expense detail was as follows for the three and nine months ended March 31, 2014 and 2013, respectively: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
31-Mar | 31-Mar | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Interest benefit (expense) on secured credit facility | $ | — | $ | (4,614 | ) | $ | 587 | $ | (37,249 | ) | |||||||
Interest expense for tax positions related to unauthorized transactions | — | (11,941 | ) | (16,386 | ) | (35,821 | ) | ||||||||||
Interest reversals for tax positions related to unauthorized transactions | 65,536 | 33,742 | 65,536 | 33,742 | |||||||||||||
Other interest expense | — | (401 | ) | — | (391 | ) | |||||||||||
Interest expense | $ | 65,536 | $ | 16,786 | $ | 49,737 | $ | (39,719 | ) | ||||||||
ADDITIONAL_CASH_FLOW_INFORMATI1
ADDITIONAL CASH FLOW INFORMATION (Tables) | 9 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
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: | |||||||||
Nine Months Ended | |||||||||
31-Mar | |||||||||
2014 | 2013 | ||||||||
Accounts receivable | $ | 9,938,339 | $ | 1,708,703 | |||||
Inventories | (926,239 | ) | (593,051 | ) | |||||
Prepaid expenses and other current assets | 125,794 | (411,807 | ) | ||||||
Income taxes payable | (2,447,939 | ) | — | ||||||
Accounts payable | (904,445 | ) | (1,464,943 | ) | |||||
Accrued liabilities | (1,158,181 | ) | (431,038 | ) | |||||
Other liabilities | (291,010 | ) | (14,000 | ) | |||||
Net change | $ | 4,336,319 | $ | (1,206,136 | ) | ||||
Net cash paid (refunded) during the period for: | |||||||||
Income taxes | $ | 2,029,000 | $ | (40,301 | ) | ||||
Interest | $ | — | $ | 38,691 | |||||
STOCKHOLDERS_EQUITY_Tables
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Stockholders' Equity Attributable to Parent [Abstract] | ' | ||||||||
Stockholders' Equity | ' | ||||||||
The following table summarizes the changes in stockholders’ equity for the nine months ended March 31, 2014 and 2013: | |||||||||
Nine Months Ended | |||||||||
31-Mar | |||||||||
2014 | 2013 | ||||||||
Net income (loss) | $ | (3,398,560 | ) | $ | 820,282 | ||||
Dividends declared | (1,328,887 | ) | (1,328,887 | ) | |||||
Stock-based compensation expense | 516,829 | 440,533 | |||||||
Income tax benefit from stock-based compensation expense | 12,432 | — | |||||||
Decrease in stockholders’ equity | $ | (4,198,186 | ) | $ | (68,072 | ) |
UNAUTHORIZED_TRANSACTION_RELAT2
UNAUTHORIZED TRANSACTION RELATED COSTS AND RECOVERIES (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Unauthorized Transactions, Related Recoveries, Net [Abstract] | ' | ' | ' | ' |
Legal fees incurred | $86,391 | $180,295 | $306,375 | $332,608 |
Recoveries: | ' | ' | ' | ' |
Insurance proceeds | 0 | -692 | 0 | -15,014 |
Proceeds from asset forfeitures | -317,553 | -27,602 | -1,134,082 | -1,360,664 |
Total recoveries | -317,553 | -28,294 | -1,134,082 | -1,375,678 |
Unauthorized transaction related costs and recoveries, net | ($231,162) | $152,001 | ($827,707) | ($1,043,070) |
IMPAIRMENT_OF_CAPITALIZED_SOFT2
IMPAIRMENT OF CAPITALIZED SOFTWARE, INVENTORY AND RELATED ITEMS (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Impairment of Capitalized Software, Inventory and Related Items [Abstract] | ' | ' | ' | ' |
Product software development expenditures | $0 | $0 | $2,308,752 | $0 |
Inventories | 0 | ' | 1,759,710 | ' |
Product design costs and assumed liabilities | 0 | ' | 263,503 | ' |
Tooling | 0 | ' | 203,782 | ' |
Impairment of capitalized software, inventory and related items | $0 | $0 | $4,535,747 | $0 |
INVENTORIES_Details
INVENTORIES (Details) (USD $) | Mar. 31, 2014 | Jun. 30, 2013 |
Inventory Disclosure [Abstract] | ' | ' |
Raw materials | $5,985,289 | $5,019,597 |
Work-in process | 68,755 | 0 |
Finished goods | 6,631,929 | 6,690,301 |
Gross inventory | 12,685,973 | 11,709,898 |
Allowance for obsolete inventory | -3,018,272 | -1,208,726 |
Total inventories | $9,667,701 | $10,501,172 |
PRODUCT_SOFTWARE_DEVELOPMENT_E2
PRODUCT SOFTWARE DEVELOPMENT EXPENDITURES (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Product software development expenditures charged to: | ' | ' | ' | ' |
Cost of goods sold | $0 | $397,926 | $364,539 | $1,160,392 |
Impairment of capitalized software, inventory and related items | 0 | 0 | 2,308,752 | 0 |
Total software expense | $0 | $397,926 | $2,673,291 | $1,160,392 |
PRODUCT_SOFTWARE_DEVELOPMENT_E3
PRODUCT SOFTWARE DEVELOPMENT EXPENDITURES, NARRATIVE (Details) (USD $) | Mar. 31, 2014 | Sep. 30, 2013 | Jun. 30, 2013 |
Capitalized Computer Software, Net [Abstract] | ' | ' | ' |
Remaining 9/30/13 asset value charged to Statement of Operations line item titled Impairment of capitalized software, inventory and related items | $0 | $2,308,752 | $2,673,291 |
Accumulated amortization and impairment | 4,374,477 | ' | ' |
Accumulated amortization | ' | ' | $1,701,185 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Jun. 30, 2013 | |
Income Tax Disclosure [Abstract] | ' | ' | ' | ' | ' |
Income tax provision (benefit) | ($938,883) | ($58,583) | ($2,857,113) | $361,681 | ' |
Unrecognized tax benefits | 150,000 | ' | 150,000 | ' | 696,113 |
Amount of the Companybs unrecognized tax benefits that if recognized, would impact the effective tax rate | $150,000 | ' | $150,000 | ' | ' |
CREDIT_FACILITY_Details
CREDIT FACILITY (Details) (USD $) | Mar. 31, 2014 | Jun. 30, 2013 | 12-May-10 |
Rate | |||
Debt Disclosure [Abstract] | ' | ' | ' |
Revolving credit maximum | ' | ' | $8,000,000 |
Percent over prime, depending on Company's leverage ratio, minimum | ' | ' | 0.00% |
Percent over prime, depending on Company's leverage ratio, maximum | ' | ' | 0.75% |
Percent over LIBOR, depending on Company's leverage ratio, minimum | ' | ' | 2.00% |
Percent over LIBOR, depending on Company's leverage ratio, maximum | ' | ' | 3.00% |
Unused capacity, commitment fee percentage, minimum | ' | ' | 0.30% |
Unused capacity, commitment fee percentage, maximum | ' | ' | 0.45% |
Letter of credit sublimit | ' | ' | 2,000,000 |
Outstanding balance | $0 | $0 | ' |
INTEREST_EXPENSE_Details
INTEREST EXPENSE (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Interest Expense [Abstract] | ' | ' | ' | ' |
Interest benefit (expense) on secured credit facility | $0 | ($4,614) | $587 | ($37,249) |
Interest expense for tax positions related to unauthorized transactions | 0 | -11,941 | -16,386 | -35,821 |
Interest reversals for tax positions related to unauthorized transactions | 65,536 | 33,742 | 65,536 | 33,742 |
Other interest expense | 0 | -401 | 0 | -391 |
Interest expense | $65,536 | $16,786 | $49,737 | ($39,719) |
INCOME_LOSS_PER_COMMON_AND_COM1
INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE (Details) | 9 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
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 issuable upon the exercise of outstanding options, excluded from the diluted weighted-average common shares outstanding as they would be anti-dilutive | 2,186,000 | 1,944,308 |
DIVIDENDS_DECLARED_Details
DIVIDENDS DECLARED (Details) (USD $) | 0 Months Ended | 3 Months Ended | 9 Months Ended | 0 Months Ended | ||
Feb. 13, 2014 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | 14-May-14 | |
Subsequent Event [Member] | ||||||
Subsequent Event [Line Items] | ' | ' | ' | ' | ' | ' |
Quarterly cash dividend declared | $0.06 | $0.06 | $0.06 | $0.18 | $0.18 | $0 |
Dividend declared but not yet paid | ' | $0.06 | ' | $0.06 | ' | ' |
STOCK_OPTIONS_Details
STOCK OPTIONS (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' | ' | ' |
Granted (in shares) | ' | ' | 445,000 | 430,000 |
Weighted average exercise price of shares granted in period | ' | ' | $5.64 | $5.29 |
Stock-based compensation expense | $172,477 | $146,592 | $516,829 | $440,533 |
STOCK_PURCHASE_AGREEMENTS_Deta
STOCK PURCHASE AGREEMENTS (Details) (USD $) | Mar. 31, 2014 | Jun. 30, 2013 |
Rate | ||
Stock Purchase Agreement Disclosure [Abstract] | ' | ' |
Fair value of written put option | $0 | $154,745 |
Repurchase price, percent of fair market value | 95.00% | ' |
Maximum proceeds from shares to be repurchased | 2,500,000 | ' |
Minimum percent Company may elect to pay in cash upon exercise of put | 25.00% | ' |
Years over which Company may execute a promissory note payable, for the balance, at the prime rate of interest | '4 years | ' |
Death benefit of life insurance policy Company maintains to fund a substantial portion of the liability | $1,150,000 | ' |
ADDITIONAL_CASH_FLOW_INFORMATI2
ADDITIONAL CASH FLOW INFORMATION (Details) (USD $) | 9 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Supplemental Cash Flow Elements [Abstract] | ' | ' |
Accounts receivable | $9,938,339 | $1,708,703 |
Inventories | -926,239 | -593,051 |
Prepaid expenses and other current assets | 125,794 | -411,807 |
Income taxes payable | -2,447,939 | 0 |
Accounts payable | -904,445 | -1,464,943 |
Accrued liabilities | -1,158,181 | -431,038 |
Other liabilities | -291,010 | -14,000 |
Net change | -4,336,319 | 1,206,136 |
Net cash paid (refunded) during the period for: | ' | ' |
Income taxes | 2,029,000 | -40,301 |
Interest | $0 | $38,691 |
STOCKHOLDERS_EQUITY_Details
STOCKHOLDERS' EQUITY (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Stockholders' Equity Attributable to Parent [Abstract] | ' | ' | ' | ' |
Net income (loss) | ($25,121) | $115,441 | ($3,398,560) | $820,282 |
Dividends declared | ' | ' | -1,328,887 | -1,328,887 |
Stock-based compensation expense | 172,477 | 146,592 | 516,829 | 440,533 |
Income tax benefit from stock-based compensation expense | ' | ' | 12,432 | 0 |
Decrease in stockholders' equity | ' | ' | ($4,198,186) | ($68,072) |