Wmcmanus

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?

Never trust a woman! About Carl's thought that she might be the "fall guy" in a bigger cover up. I'd highly doubt that. She may have had other people involved with her (on her accounting team), but for there to be something larger occurring here, it would have to be insurance fraud involving Michael Koss (and perhaps other family members). They'll be able to check that possibility out with reasonable accuracy as it would involve first a) creating false revenues and then creating false losses to offset those false revenues (in the hopes of getting an unrealistic insurance indemnity). Problem with that is there would need to be legitimate evidence that the supposed revenue took place to begin with, which would mean that there would have to be evidence of cash receipts and deposits to bank accounts. The trick to look out for there is the creation of an appearance of deposits by making a number of transfers from one bank account to another (some of which could be held outside of the company such that when those funds are redeposited it looks like fresh revenues). Per the article attached by Dreadhead, it seems to still be at the "internal investigation" stage. So if the Koss family is somehow involved in a grand insurance fraud scheme of some sort (again, highly unlikely), of course their internal investigation wouldn't turn up anything of the sort. It would then be incumbent upon the insurance company to hire their own team of forensic auditors to search the Koss records for this type of evidence before paying the claim. My guess is about the only insurance they'll have to cover any such losses would be standard business interruption insurance (won't help too much) and possibly something that might cover fraud by key employees. But that's quite rare as well. More likely, they'll have director's liability insurance, but since the Koss family owns 73% of the stock, they're the ones suffering the most. The independent directors, however, should come out of this pretty clean (other than their shareholdings suffering). Long post, but unless we see something about a large insurance settlement in the works, there would be no reason to suspect that the Koss family was involved. Chances are they've been pretty comfortable for a long, long time and that goes as far as any explanation as to why her actions were not detected. If you don't really need the money, you don't get so concerned when profits start to slip a bit. Plus, she was at least wise enough to trickle the money out bit by bit (big bits to be sure, but never enough to create quarterly losses).

Either way, they'll have to wholesale most of it (after the liquidators did the best job they could to move as much as possible through retail public sales). It's sad, because NONE of it will ever be sold for more than 50 cents on the retail dollar. Then eventually, they'll end up selling everything that is left to one of the large liquidation houses for 10 to 15 cents of the dollar. They, in turn, will reposition the merchandise and make significant money on it since they're in business to move such goods. The court appointed liquidators don't have that kind of expertise so they can only sell as much as the local market supports (at reasonable prices). Everything that is left gets dumped for a song.

I've driven by their main facility in the Milwaukee area, and from the Interstate it looks like a fairly large facility. I'd imagine that they would have a hard time managing all of that overhead if their strategy was simply to scale back. So I was thinking along these same lines. They'll now be a prime takeover target, IMO. I'd imagine that it will be a difficult decision for the Koss family members. Since they own 73% of the stock, it'll be their decision to make entirely. I'm not an expert in bankruptcy law, but this is something that would normally be taken into account in the company's listed debts (which they then seek relief from). Depending on the extent of the estimated warranty liability, the complexity of the work that is likely to be involved to provide such services, and the hardship it would impose upon existing product owners if those expected future claims were not met, the bankruptcy judge would need to make rulings on, a) whether to allow contingent claims such as these at all (most likely, yes, since most of the amounts involved could be reasonably estimated based on past experience with similar warranty claims), where those warranty claims will fall in the list of priorities (i.e., which "class" they will fall into). If they're treated as unsecured creditors, which is (sadly) the most likely case, then chances are their claims would never be met because whatever funds are available for distribution to creditors would go to those in higher classes (secured creditors, like banks and such). Although Koss is a rather mature company, so perhaps they don't have a lot of long term debt on their balance sheet.

Both ideas sound good to me. The only problem I'll have is getting the time. This is just a week before final exams for the Winter quarter so my students will be hounding me with questions and such.

My system is all MBL at this point, other than the analog front end which is a VPI-HRX with a Lyra Titan cart and RSA XR-10B phono preamp. I bought the MBL stuff in 3 stages as I could afford it. First the 101E speakers, then a pair of 9008A monoblocks and 6010D preamp, and then finally the digital front end (1622 SACD transport and 1611F dac) which I think outperforms that VPI is some respects. Uhhh... let me get back to you in a couple of months on that note.

Don't let morbid curiosity get the best of you! It's a train wreck you don't need to see! Ok, so 5 (subpart 2), 11, and 55 (the levee thing) were my favorites, although it's not like I read all 98 of them.

Indeed, I sit corrected. I've updated my knowledge in this matter by reference to the Urban dictionary, which offers some rather entertaining entries from John Q. Public's very best.

Leftover Santa candy.

I thought only women had taint.

It would look good with sweat socks.