Wmcmanus

My first reaction was - meh, just the lawyers trying to get themselves (oops, I mean as many minority shareholders as they can put together as clients) a piece of the pie (if there is any left after settling the company's debts). So no big surprise there. But in the disclosures below the story, it indicates that they're not a law firm and provide information as a public service. Hmmm... "Foundation" implies that they're not-for-profit, but they don't make that claim directly. Color me suspicious. This does bring up an interesting point. I had mentioned earlier in this thread that chances are the outside directors and non-family officers of Koss will be "well" covered with D&O insurance. But for a company this size I'd imagine it would be for $10 million or so of coverage (perhaps less)* because they wouldn't have ever contemplated that there would be high transactional risks. In other words, sure Koss has to pay suppliers and such, but probably doesn't ordinarily enter into multi-million dollar single transactions. With D&O insurance being so expensive these days, and with Koss not typically doing high dollar transactions, I'd bet anything that they'll be underinsured. Plus, I can't imagine that they'll be able to convince their insurance company that all of this was a single occurrence! Ha! Fat chance. So the outside directors are probably shopping for fresh undies about now. Of course, normal protocol is to have the company stand responsible (in way of indemnity clauses) for any judgments handed down against individual directors. Thus if, a) Koss does appear to have the financial ability to emerge from this mess in tact, and then there is a successful shareholder derivative suit against the company -- which essentially involves a judge agreeing with a well represented group of minority shareholders that the company should be forced to sue the directors for their negligence, and c) the company then, in turn, must stand behind the directors (thus sued) to indemnify them for any personal liability they might stand to suffer... The end result might be that Koss would need to use it's own funds (whatever is left to begin with) to pay the minority shareholders for the damages that they've suffered. This would, in turn, bring on another round of litigation expenses to attempt to measure the minority shareholder losses. Not a straightforward process since Koss' stock price has slumped so much in recent years to begin with, part of which may well be attributable to the fraud that has been going on. Without adequate D&O insurance, I doubt that Koss will come out alive in this mess. Perhaps the only saving grace will be that 73% of those losses won't need to be indemnified by the company (that representing the family's ownership of the company). So if $31 million is the total loss, and if only $10 million of that is insured (just a guess), then it's a $21 uninsured loss that they might be held accountable for, which translates to less than $6 million of losses to the minority shareholders (assuming the worst case that there is a successful lawsuit by minority shareholders). Of course, their money damages could be measured differently, such as the loss in the value of their stock directly or indirectly related to the fraud, but that would be much harder for them to prove. All speculation as to what might happen, but suffice it to say, if Koss does appear to be emerging as an ongoing entity, it would for sure have some serious legal fees to deal with (not to mention all of the costs of this ongoing investigation), and there would also be a strong possibility of having to stand in the shoes of their directors as well to indemnify them against any shareholder actions. Like any such situations, it becomes a case of bad news piled upon more bad news. * Regarding the escalating costs of D&O insurance, I'm one of 4 outside directors for a company that has a market cap of about $150 million. The annual premium for D&O insurance to cover the 4 of us for $10 million per transaction this year was quoted at $82k ($119k for $15 million of coverage, $139k for $20 million of coverage). That was the best quote by far. One insurance company wanted more than double those figures. It's not cheap, to say the least. Now, given that, and given the attitude that I can see with Koss (e.g., not wanting to pay Grant Thornton to do an internal controls audit), plus the fact that their normal transaction profile is undoubtedly regarded as low risk, I just can't imagine that they'll have $30 million of D&O insurance coverage.

I agree(d). The trick in these situations is in trying to gather as much 'intelligence' as you possibly can about the mood and the environment in the workplace at Koss these days. Not insider information as such (you can't trade on that), but sort of the near-inside scoop in the 'talk of the town' sense. If you know people who know those who likely know more about what the future is likely to hold for Koss, you might want to make a calculated bet and make a substantial investment. But, even then, not more than you're willing to lose!

That's excellent! You're getting a great price and you'll absolutely love reading with this device. I've been somewhat tempted to buy a DX to keep at home and use my Kindle 2 when traveling, just because I think it would be fun to have the larger screen, the horizontal view option, etc. Just not sure I'd make enough use of it to justify having two of them lying around.

Ball, chains, and cage? I might not be very good at this...

I think either of these would be great. The MaxGuard looks remarkably similar to the case I have, but with the nice improvement of using two magnets to close the case (which eliminates the need for an awkward strap). My only concern would be their complaints about the smell. Mine doesn't have that issue.

Ya, that's it. She's aw'right. I could do worse. Have done, in fact. She's due in mid April. Already talking about "all of those cords" that will be "in the way"... To which I say, "In the way of what?!? Pick the kid up, already, and try walking behind the speakers, not right through the soundstage!"

Yes, definitely seems worth it. The extended warranty is pretty important for the DX since they tend to crack quite easily. Read the low rated reviews at Amazon and you'll see that it's important not to ever use any of the cases that connect the DX to the case via the two little metal tabs. Unless, of course, you don't ever expect to travel with it and thus are not likely to accidentally apply too much pressure at these points (as can happen when the DX gets loaded into a bag with other stuff that gets piled on top of it). Problem is, it seems to be hit or miss -- even with the extended warranty -- as to whether they'll replace it under those above described circumstances. (Although having the extended warranty and huffing and puffing a bit surely couldn't hurt.) It seems that they've been trained to say no and blame it on the customer for misuse of the product which is complete and utter BS given that it happens so frequently and often with not all that much pressure applied at those two attachment points (i.e., a clear design flaw if there ever was one). Same problem occurs with the regular Kindle but since the screen isn't nearly as big, it seems to take a bit more pressure at the leverage points to cause the screen to crack.

Todd told me that Beyer won't allow authorized US retailers to sell the T1 for less than $995, so that's where all of the usual suspects are pricing them at. Of course, this could change at some point in the future. Plus, it's anyone's guess as to what "Beyer won't allow" really means and how important it is to them to enforce their wishes. Who knows? There may be some fringe Beyer retailer who'll be willing to challenge it and start selling them for $900. But the minute one of the other authorized retailers gets wind of it and reports it, I'd bet anything the discount retailer will never get another shipment of T1s.

Remember to order two pairs, kiddies. It's always more fun when there's someone to share the experience with.

As a practical matter, yes. See my reply above for more details, but in a Chapter 7, chances are pretty good that product owners would get shafted completely. Yes, again, to all of the above. In a reorganization, the judge could void (or more likely modify) existing warranties. The reason I say more likely modify is that in reorgs, it's always a give and take process to get all of the various creditor classes to agree to the "plan". The more classes there are, and the more stubborn the senior note holders (i.e., banks) and other secured creditors are, the more difficult it becomes to get a plan approved. It all comes down to how badly everyone wants to get the job done to ensure that 1) the company can somehow survive, and 2) that everyone comes away with something. If the higher priority classes decide that warranty claimants (and other unsecured creditors) should get absolutely nothing, then they would be sabotaging any hopes that they might have had to get a plan approved. If just one class of creditors won't approve the plan (in this case because they are being offered nothing at all) then they can vote against the plan and kill the whole deal. Thus, for a Chapter 11 to work, the warranty claims would have to be honored at least to a certain extent, if the judge even allows them to be represented in the creditor meetings/negotiations as a separate class to begin with. So there are a zillion "what ifs" involved. You can be sure that if we were talking about GM (rather than Koss), and if they were in Chapter 11 (as regulated by a federal bankruptcy court and not "The Man" Obama) then the significance of warranty claims and the undue hardship imposed upon present car owners if their claims were not to be honored, would ensure that they are adequately represented. Why? Bigger dollar claims potentially involved and a much broader audience, as well as the political risk of not honoring those claims (to any extent). But with a small company like Koss and (for the most part) very inexpensive products and thus insubstantial warranty claims that are likely to occur, and no political pressure to ensure that their rights are being represented, sure, a judge might throw them out as a potential creditor class altogether just to simplify the overall process.

Even in a Chapter 7, there is a chance that the warranty claims would be paid. But that would only occur if 1) the company has enough money to first pay off all claims in higher priority classes, and 2) if the judge approved a plan to set aside a reserve fund to administer future warranty claims, which wouldn't necessarily need to be court administered, but would likely require that they set up a separate entity to deal with such claims. Thus, Koss itself wouldn't necessarily need to continue to exist (although some of their people would probably need to be involved). The problem is #1 above. If they go Chapter 7, it's unlikely that unsecured creditors -- which all future but as yet unknown warranty claimants would most likely be considered -- will most likely not receive much, if anything because there simply won't be enough funds. At least that's typically the case in a Chapter 7 liquidation. For it to get there, the company is already bust. Thus, there is a theoretical possibility that a new entity could be set up to administer warranty claims, but it would be highly unlikely from a practical point of view. At the moment, the company's stock is still halted. Trading is unlikely to resume until, as you say, the forensic audits are complete and amended financials are publicly available. At that point, nobody has any particular trading advantage. As others have said, it is a very thinly traded security, so there's no telling what could happen. There may be a lot of panic sellers which would create a very brief buying opportunity for those who think the company will be able to survive (i.e., not to bankrupt).

The G3 engine is a 1.6L GM Ecotec. It's highly reliable and easy to service. My Atom has a 2.0L Ecotec, so I'm familiar with it. You might be surprised there as well. The interior of the G3 is nothing special, but it's not too bad either (quite functional with no major frills, but not ugly by any means, and comes standard with a decent 6 speaker audio system, and the tilt wheel is nice for big lugs like me). EDIT: Missed Ric's post that he was no longer considering the G3.

Oh, there's definitely more to the story. Here's a pic of her (my "daughter" who is getting married this summer). She's so humble and down to Earth. I have no idea where she got it from!

What you're saying may well be true if what we have here is a case of theft only (not combined with fraudulent financial reporting), such that the financial statements themselves can still be relied upon as a true (or at least fair) reflection of the company's financial position. In other words, yes, money is missing, but the accounts fully reflect this fact and are therefore accurate. In that assumed scenario, all of the funds that were embezzled over time would have been treated as expenses of doing business. Thus, they would have come out of the reported profits. Thus, what was reported could be relied upon as being accurate. Problem is, that's not likely to be the case. Otherwise, they wouldn't have filed the 8K (non-reliance on prior financial statements) with the SEC. So it's fair to say that we won't know what their current financial position is (cash and other assets, as well as liabilities) until amended financials are filed and publicly disclosed. Because of their 8k non-reliance filing, I'm led to believe that we'll soon be learning of falsified asset values (chiefly cash). Of course, I could be wrong about this, but that's the way it's looking.

Similar to my point above that these kinds of payments might not have occurred in the early years. Maybe they only started to happen when she became far too emboldened by her own geniusness.

Great point, Carl. At first, the designer clothes thing made sense to me, but that's when they were talking about $4.5 million and had evidence of at least $2 million of payments to 3 different boutiques. I figured she had blown the rest of it traveling, fancy restaurants, and the like. My mind being focused on how she got the money out the door via wire transfers to supposed "vendors" (as opposed to her own accounts). But you're right. This thing is much larger than that. Payments like the one she got busted for might have been part of phase two, which may not have started until she got bored with sending money to her own accounts. Given the incompetent auditors and overly relaxed senior managers, anything is possible.

You are indeed, correct. I omitted you! Ha!!! Should have said Mike or Matt. Don't forgive me if you don't want to, but you do throw good Florida meets. Great ones, in fact. If this is all happening the same weekend, I'd be happy to drive the big party wagon to Jacksonville and back. It could probably hold most of the crew.

Oh, hell ya! As I like to say, I dated her for 6 years. She dated me for about 2 or 3, and then used me for the rest. Two different people. I love her daughter dearly, just as if she were my own. She was 17 when I met her mom and is 30 now. She has a "real" father and he'll be at her wedding. Yet, she's asked me to walk her down the aisle. Although that means the world to me, I've declined because I could never show someone up like that. I convinced her that it should either be him or her mother or her brother. She eventually decided upon her brother. Her mom, on the other hand... is actually a very nice person, deep down. She's just a self-first survivor type who has never learned how to truly love anyone other than her kids. But at least she does that well; oh, and her makeup, shoes, hair, and nails are always done right.

Normally I catch big games like this at a sport's bar, but tonight was the College's graduation so I was driving home wearing an academic gown with a suit and tie underneath right about as the first half would have been coming to a close. So I couldn't bother to stop, but now wish that I would have.

N'er mind, Google has already spoken to me.

Who won? I gave up TV in 1988, my first year of law school. No longer have one in the house.

The falsified expenses are hidden in either Cost of Goods Sold, or Selling, General and Administrative Expense -- most likely in both.

Actually, the progression so far has been to charge her for $4.5 million of losses (it seems this was for 2009 alone), then make an 8K non-reliance filing for all financial statements dating back to June 30, 2006 (at an estimated total loss of $20 million), and now the non-reliance goes back to 2005 (and the losses are now estimated at $31 million). What this pattern suggests to me is that they're not done yet! The numbers will get bigger the further back they go until they figure out when she started all of this. She's been with Koss since 1992, but may not have been in charge until the late 90's or early 00's (I'm just guessing). In any case, we don't know at this point if the estimated losses will grow but I doubt that they will shrink. If her activities go back far enough, it may well turn out to be a case of a company that simply didn't know how successful they really were. The Koss family may have simply followed the financial results from quarter to quarter and year to year and assumed all was well so long as there was a slow and steady growth. In other words, they would have been lulled into a false impression as to what their cost structure was. I doubt that she could have hidden revenues from them and I don't see anything in the news reports suggesting that this was the case (i.e., having cash receipts diverted directly to her accounts). Had she diverted revenues such that they were never reported in the Koss books, it would have been easy to spot differences between production volume (which they would know from other records not maintained by her) and reported sales volume. Thus, my guess is that the primary illusion that she created was that there were more costs involved in running the business than there really were, and thus profit margins appeared to be slimmer than they really were. Again, it goes back to Michael Koss making the mistake of assuming both the CEO and CFO roles. As a "true" CFO, he should have been reviewing all company bank statements for unusual transactions. They were big numbers (payments of $600k and more) and would have been easy to spot, had he only looked... ever. Or had they hired Grant Thornton to do a review of the internal controls over financial reporting... ever.

About 11 years ago as best I recall, I had to buy a pair of crutches and use them for several weeks because of a severely sprained ankle. Fast forward to tonight when I was on Skype chatting with my former fiancee's daughter who is getting married this summer and has been pestering me of late to "sponsor" one thing or another in connection to her wedding (someone is sponsoring her bridal shower, someone else her flowers at the wedding, someone else the photographer, etc.) and suddenly I've been more like her real dad than the man himself. I told her that I'd sponsor the green beans, but she claims they're not included on the menu. I'll probably get stuck with the entire food bill, but no matter, I love her dearly and she knows it. Ah, but that's a side issue. So as we were chatting, I told her about the trouble I've been having with my knee, and into the room her mother walks. The conversation then went like this, "You know, I've been looking all over the house for those crutches. Did you lend them to somebody way back when and never get them back?" To which she replied, "Have you looked in the attic? I think I put them up there along with a bunch of other junk that you had laying around that you never used!" Now you can imagine my surprise, even after having figured out long ago what a fool she was/is, that she would put a single man's crutches up in his attic! When do you suppose he might need them again? Maybe the next time he can't walk, let alone climb those steep and narrow pull-down attic stairs?!?! So I got off the phone with her and called my neighbor for his assistance. No way I'd be able to get up there in the shape my knee is in. He knocks on the door and I direct him to the attic stairs. Up he goes. A minute later he yells down, "What are all of these CDs doing up here?" to which I respond, "What CDs?" His answer was, "Oh, about 200 or so, maybe more. All kinds of stuff." To which I say, "WTF?!?! You've got to be kidding me! Bring it all down." So I'm standing under the attic stairs and this guy is now handing me two large portfolio boxes (the kind used in offices to store old files) with lids on them. No markings whatsoever as to their contents. There are easily 300 CDs, not 200. I'm still sifting through them. Mostly jazz, blues and classical and all of it is out of my collection. (For years, I've operated under the assumption that her son had borrowed/stolen them.) I haven't seen this stuff for at least 8 years. Apparently, she boxed up whatever piles of my stuff (in my house where she never officially lived) that was in her way while I was off-Island and she never bothered to tell me about it. I've also now found the long lost remote control to my Audio Aero Prima CD player, an electric tooth brush that I used to quite enjoy, 4 or 5 bottles of cologne, and several pairs of fresh looking boxer shorts (but I'll wash them anyway). I can't wait to get up there again myself to see what other treasures lie in store for me. The thing is, I'm up there at least once per year for one reason or another, but purposefully she hid all of this stuff from me behind one of the air handlers for the a/c system. My neighbor said, "Oh, you would definitely have to be looking for it!" The two big portfolio boxes were, of course, right next to the crutches.

When is anorexia meeting in Jacksonville again?