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Koss fraud. Wow, not good.


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Ok, just as a cautionary note: guys, this is not how you get established on head-case. Please reread your welcome pm.

I did read it, and most of the forum before registering. I'm not an audio or electronics whiz, but sometimes I get strongly opinionated about people like this - not sure what was particularly wrong about my first statement, it probably did take a disproportionate amount of time to undo the tags on the clothing compared to just buying more - I wasn't agreeing with the 'mental' treatment by offering a more likely point of view. The second statement was mostly about how her mug matched up with her behaviour - overly made up, overly 'layered,' white collar criminal. Sometimes people look the part, sometimes people don't.

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Jesus, I am really sad to hear this. I don't have an encylcopedic knowledge of Koss, but (even before my 950s) I've always liked Koss as a company and felt like they were a rarity in this day and age. A million years of doing things right would all mean nothing in the end if they had to close up shop now, which makes it even more so of a tragedy. No shit, I would literally donate to support them if I could and it would help.

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meh, 20 million.

I know the Monkey man was just joking when he said this, but $20 million was just under half of the company's market capitalization at the time the stock was halted shortly after the news broke.

KOSS stock quote - Koss Corporation stock price - NASDAQ.com

No telling what the market will have to say when trading resumes, especially given how thinly traded a small cap company like Koss normally is. Presumably trading will resume after the SEC's fact finding mission is over and public disclosures are made as to exactly what we're dealing with here. That may take quite some time, given that they issued a non reliance 8k (for financials dating back to June 30, 2006) right away, and they may well uncover evidence that the fraud predates that time period. Fun times for forensic auditors in Milwaukee these days.

Summary of KOSS CORP - Yahoo! Finance

The following news article is dated but includes details that I hadn't seen last time I did a search.

Koss now says embezzlement could exceed earnings during same period

For example, the Koss family holds 73% of the stock in the company. Ouch! I'd also missed the fact that Michael Koss is President, CEO and CFO. Not a good idea to combine the CEO and CFO roles, even (as in this case), if it's only for "official" reporting purposes. In reality, she was for all intents and purposes acting as the CFO, so it probably wouldn't have made a difference if she was the person who was signing off as the CFO. But at least the formality of designating her as CFO would have put her through the paces of one more round of questionnaires and interviews with the auditors each year.

But sheez!, Grant Thornton wasn't even assessing the company's effectiveness of internal controls over financial reporting! In a way, I can understand this, especially for small publicly traded companies that have been increasingly bombarded by the cost, time, and hassle of dealing with more and more regulation and reporting requirements. Then you get in good with your auditors and lawyers and convince them to cut any corners they possibly can to keep your costs down...

Also, I just love that last paragraph of the article! It pretty much confirms my suspicions that she was preparing to set up her own boutique at some point in time. Imagine a start up boutique with $2 million of inventory from day one? I'd imagine she could have done quite well in her little retirement job!

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Also, I just love that last paragraph of the article! It pretty much confirms my suspicions that she was preparing to set up her own boutique at some point in time. Imagine a start up boutique with $2 million of inventory from day one? I'd imagine she could have done quite well in her little retirement job!
So does that stuff become the property of Koss? Is there a chance in hell of any of that shit getting auctioned off to compensate them? Fashion trends tend to move much more quickly than that, I do honestly believe that they are all going to be devalued somewhat (even tainted by the scandal itself -- although from a charity perspective, their value might also get inflated, so I think those two cancel each other out, leaving only "time" as the primary devaluing factor), but not completely, only partially.
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I know the Monkey man was just joking when he said this, but $20 million was just under half of the company's market capitalization at the time the stock was halted shortly after the news broke.

KOSS stock quote - Koss Corporation stock price - NASDAQ.com

No telling what the market will have to say when trading resumes, especially given how thinly traded a small cap company like Koss normally is. Presumably trading will resume after the SEC's fact finding mission is over and public disclosures are made as to exactly what we're dealing with here. That may take quite some time, given that they issued a non reliance 8k (for financials dating back to June 30, 2006) right away, and they may well uncover evidence that the fraud predates that time period. Fun times for forensic auditors in Milwaukee these days.</snip>

I called my broker last week and told him to sell as soon as I saw this thread, but he told me it had already stopped trading. No doubt, many others will try to sell, too, regardless of the results from the SEC. It sounds like the halt in trading is only delaying the inevitable - perhaps a run to zero share price. I doubt that any of us will recoup anything. :(

It's hard for me to say this, but in a philosophical sense - no company should be allowed to survive in the face of that kind of management negligence.

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So Wayne, if you had to offer a guess, what do you think will happen to Koss? I know info is limited, but do you think survival is likely?

Going by their 10-Q and how much cash they have on hand, if they can't raise funds through either an equity or bond offering, or secure some sort of bridge loan, they're going to go Chapter 11. They literally will not have the cash on hand to pay their employees and meet their operating expenses.

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So does that stuff become the property of Koss? Is there a chance in hell of any of that shit getting auctioned off to compensate them? Fashion trends tend to move much more quickly than that, I do honestly believe that they are all going to be devalued somewhat (even tainted by the scandal itself -- although from a charity perspective, their value might also get inflated, so I think those two cancel each other out, leaving only "time" as the primary devaluing factor), but not completely, only partially.

I'm not sure what the answer to that is. The stuff will be seized as evidence initially in support of the criminal actions against her, which will obviously be quite easy to prove but will still take time. I'd imagine there will be a civil suit filed by Koss against her as well which should eventually allow them to recoup most of the assets found in her possession at the time of her arrest, since she obviously won't have $20 million in cash to pay a judgement. I'd imagine she'll go to jail and will also declare personal bankruptcy to protect whatever she can (house and such).

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Not to mention the civil suits filed against Koss by any non-family shareholders. And if I were Koss, I'd start thinking about potential claims against the various credit card companies whose risk/fraud departments didn't pick this up until just now.

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The saddest thing is that the people who have the most to lose in this are Koss' employees. They won't get a moment's attention in court, in the press or about anyway else, short of this forum.

A bunch of loyal customers will get hosed, too. Nobody will notice or care about that either. I still have a burn about Chainsaw Al Dunlap destroying Scott Paper because I used some of their products in a hobby at the time.

Of course, this is a little different because this doer was stealing FROM a corporation instead of FOR one - a point I'm sure her defense will raise. In my experience though - even before the public outrage over white collar crime - that argument's a non-starter with a jury.

Even though this is an insane crime by definition - getting caught eventually is guaranteed - there isn't a snowball's chance she will flunk her psych exams badly enough to get anywhere with an insanity defense. (As Vicki pointed out) More often than not, I've seen clearly crazy people who one would think should warrant some sympathy take hard falls. And who's going to have a shred of sympathy for this person?

And yes, Reuters quoting an unnamed person on Yelp truly took my breath away. Who the fuck was editing that story? (Rhetorical question, the editor's name was in the shirttail on the Reuters site, but my god! ......)

Edited by CarlSeibert
bad typing
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Going by their 10-Q and how much cash they have on hand, if they can't raise funds through either an equity or bond offering, or secure some sort of bridge loan, they're going to go Chapter 11. They literally will not have the cash on hand to pay their employees and meet their operating expenses.

I smell an opportunity! Let's buy Koss! We've got enough PE, law, accounting, engineering experience here to put together a nice little package to help them out of this little hole. Then we run the show, and start R&D on the stat to slay all stats. Then we win.

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I smell an opportunity! Let's buy Koss! We've got enough PE, law, accounting, engineering experience here to put together a nice little package to help them out of this little hole. Then we run the show, and start R&D on the stat to slay all stats. Then we win.

I'm sure the LPs will be real happy when the entire first batch is given away to friends and family and it is then discovered there is no market for the second run except the freaks, who all have two free pairs already. :)

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I smell an opportunity! Let's buy Koss! We've got enough PE, law, accounting, engineering experience here to put together a nice little package to help them out of this little hole. Then we run the show, and start R&D on the stat to slay all stats. Then we profit.
Win.
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Still super fucking pissed about this.

I feel for the employees on this one. Working hard and in the end

one person destroys all their efforts. I can only hope they pull through

this ok. I'd hate to see some investment group snatch them up and

kill off what's left of them. The stats will be the first thing to go.

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