Core Insights - The wireless audio device market is thriving, with a notable presence of both premium brands like Apple and lower-priced competitors [2] Industry Overview - Apple maintains a stronghold in the premium segment, while numerous lower-priced competitors are emerging, focusing on price and sound quality [2] - The increasing necessity of wireless audio devices suggests resilience against potential consumer spending pressures [2] Company Analysis: AXIL Brands, Inc. (AXIL) - AXIL Brands specializes in hearing enhancement and protection products, accounting for 94% of sales, with a recent shift towards a wholesale business model to enhance sales while managing operating expenses [3][4] - The company has established a relationship with Costco, which is expected to drive topline growth [5] - In the quarter ending August 31, 2025, AXIL reported a 17.2% sales increase to $6.9 million and a 291% year-over-year growth in adjusted EBITDA to $0.7 million [5] Company Analysis: Koss Corporation (KOSS) - Koss Corporation focuses on stereo headphones, with 84% of sales from music listening headphones and 16% from other applications [6] - The company reported a 27.1% sales increase to $4.1 million in FY Q1, with gross margin improving by 340 basis points to 40% and positive EPS of $0.03 compared to a loss of $0.05 in the previous year [7] - Despite these improvements, Koss is rated as UNDERPERFORM due to reliance on a one-time order in the education sector and softness in the European market [7] - The company faces tariff risks from sourcing primarily in China and Taiwan, which could negatively impact gross margins [8]

Core Insights - Koss Corporation's shares have declined 5.7% since the earnings report for the quarter ended September 30, 2025, underperforming the S&P 500 index, which saw a 0.4% decline [1] - The company reported a return to profitability with earnings per share (EPS) of 3 cents, compared to a loss of 5 cents per share a year earlier, driven by better cost discipline and higher-margin sales [2] - Net sales increased by 27.1% to $4.1 million from $3.2 million in the same quarter last year, indicating strong demand dynamics [2] Financial Performance - Gross profit rose to $1.6 million from $1.2 million a year ago, with gross margin expanding by 340 basis points to 40% from 36.6%, attributed to a favorable customer and market mix [3] - Selling, general and administrative (SG&A) expenses decreased to $1.7 million from $1.8 million, contributing to a significant reduction in operating losses, which narrowed to $0.05 million from $0.6 million [4] - Interest income improved to $0.3 million from $0.2 million, further enhancing overall profitability [4] Management Insights - Chairman and CEO Michael J. Koss attributed revenue growth to a large order from the Education sector and a 22.5% increase in direct-to-consumer (DTC) sales, supported by new product launches [5] - Despite a decline in European sales due to delayed orders, strong performance in Asian markets helped mitigate losses [5] - The company faces margin pressure from high tariffs on goods produced in China, specifically a 145% tariff rate, although this was partially offset by improved absorption of fixed manufacturing costs [6] Strategic Focus - The recovery in profitability is linked to a strategic focus on expanding the DTC segment, which has improved both top-line growth and gross margin structure [7] - Operational efficiencies, including reductions in SG&A expenses, have enhanced cost control [7] - Ongoing monitoring of the U.S.-China tariff environment is crucial, as it significantly impacts operations due to sourcing dependencies [8] Leadership Changes - Koss Corporation promoted Michael J. Koss, Jr. to executive vice president, expanding his role to include oversight of sourcing and logistics, emphasizing the company's focus on product innovation and operational execution [9][10]

Financial Performance - Net sales for the three months ended September 30, 2025, increased to $4,070,778, a 27.1% increase from $3,201,868 in the same period of 2024[11]. - Gross profit for the same period was $1,628,692, up from $1,172,926, reflecting a gross margin improvement[11]. - Net income for the three months ended September 30, 2025, was $243,729 compared to a net loss of $419,535 in the prior year[11]. - The Company reported a basic income per share of $0.03 for the three months ended September 30, 2025, compared to a loss per share of $(0.05) in the prior year[11]. - Gross profit margin improved to 40.0%, up from 36.6% in the prior year, representing a 340 basis point increase[59]. - Selling, general, and administrative expenses decreased by 7.5% to $1,674,732 from $1,810,059 in the same period last year[67]. - Direct-to-consumer (DTC) sales increased by $170,000, or 22.5%, contributing to overall sales growth[61]. - Sales to the Asia market saw a notable increase of 243% year-over-year, although export sales were down 27.6% compared to the previous year[61][62]. Assets and Liabilities - Total current assets as of September 30, 2025, were $22,669,666, slightly up from $22,604,105 as of June 30, 2025[10]. - Total assets increased to $37,663,395 as of September 30, 2025, compared to $37,184,609 as of June 30, 2025[10]. - Total liabilities rose to $6,808,157 as of September 30, 2025, from $6,574,574 as of June 30, 2025[10]. - Stockholders' equity increased to $30,855,238 as of September 30, 2025, compared to $30,610,035 as of June 30, 2025[10]. - Total segment assets increased to $37,663,395 from $37,184,609 in the previous quarter[47]. Cash Flow - Net cash provided by operating activities for the three months ended September 30, 2025, was $762,617, significantly higher than $201,554 in the same period of 2024[13]. - Cash and cash equivalents at the end of the period were $2,515,913, down from $2,807,797 at the beginning of the period[13]. - The Company experienced a net decrease in cash and cash equivalents of $291,884 for the three months ended September 30, 2025, compared to a decrease of $86,349 in the same period of 2024[84]. - Cash provided by operating activities was $762,617 for the three months ended September 30, 2025, primarily due to an IRS refund of $512,000 related to prior payroll tax overpayments[85]. - The Company incurred cash used in investing activities of $1,052,130 for the three months ended September 30, 2025, mainly due to the purchase of a new U.S. Treasury security[86]. Taxation - The effective tax rate for the three months ended September 30, 2025, was 1.1%, up from 0.7% in 2024, primarily due to the utilization of net operating loss carryforwards[36]. - The Company's tax loss carryforward as of September 30, 2025, was approximately $34,500,000, with future utilization expected to be uncertain[27]. - The effective tax rate for the quarter was 1.1%, compared to 0.7% in the prior year, due to net operating loss carryforwards[68]. Inventory and Receivables - Total inventories as of September 30, 2025, were $4,647,319, down from $4,885,067 as of June 30, 2025, reflecting a decrease in both raw materials and finished goods[34]. - Four customers represented over 10% of total accounts receivable as of September 30, 2025, accounting for approximately 61% of total accounts receivable[43]. Operational Insights - The Company operates in a single reportable segment focused on the design, manufacture, and sale of headphones and related accessories[44]. - The Company increased its deferral rates for domestic sales from 2.4% to 3% effective July 1, 2023, while decreasing the rate for export sales from 10% to 8%[39]. - The Company is monitoring the impact of ongoing macroeconomic conditions, including elevated inflation and supply chain disruptions, on its business performance[73]. - The Company anticipates higher costs for commodities and packaging materials due to recently enacted tariffs, which may affect pricing strategies in the upcoming quarter[78]. Legal and Compliance - The Company resolved a patent infringement matter with One-E-Way at a cost of $22,200, which was fully accrued in the financial statements as of June 30, 2025[101]. - There have been no changes in the Company's internal control over financial reporting that materially affected its financial reporting during the most recent fiscal quarter[98]. - The Company has no off-balance sheet transactions, obligations, or relationships as of September 30, 2025[94]. Stock and Financing - The Company has a stock repurchase program with a maximum authorization of $45,500,000, of which $43,360,247 had been expended through September 30, 2025[105]. - The Company had no outstanding borrowings on its $5,000,000 revolving secured credit facility as of September 30, 2025[38]. - The Company had no outstanding borrowings on its bank line of credit facility as of September 30, 2025[88]. - The Company has a lease for its 126,000 square foot facility at a fixed rate of $380,000 per year, renewed for five years ending June 30, 2028[92].

Financial Performance - For the first quarter ended September 30, 2025, net sales were $4,070,778, an increase of $868,910 or 27.1% compared to $3,201,868 in the same period last year[3] - Net income for the quarter was $243,729, a significant improvement from a net loss of $419,535 in the first quarter of the prior fiscal year[3] - Gross margins improved by 340 basis points, rising from 36.6% to 40.0%, primarily due to a favorable customer and market mix[4] Sales and Market Trends - Direct-to-consumer (DTC) sales grew by 22.5%, contributing to overall sales success despite a decline in European sales[4] - The company faced challenges with gross margins due to a 145% tariff on China-produced goods but managed to offset some impacts through better fixed cost absorption[5] Expenses and Income - Selling, general and administrative expenses for the quarter were $1,674,732, down from $1,810,059 in the prior year[10] - Interest income increased to $293,128 from $220,358 in the same quarter last year[10] Shareholder Information - The weighted-average number of basic shares outstanding increased to 9,456,438 from 9,310,002 year-over-year[10] Management and Strategy - The company continues to monitor the tariff landscape closely to mitigate potential negative impacts on operations[5] - Michael J. Koss, Jr. was promoted to Executive Vice President, reflecting his contributions to product development and DTC growth[6]

Core Insights - Koss Corporation reported a significant increase in net sales and a turnaround in net income for the first quarter ended September 30, 2025, with net sales reaching $4,070,778, a 27.1% increase from $3,201,868 in the same period last year, and net income of $243,729 compared to a net loss of $419,535 in the prior year [2][3]. Financial Performance - Net sales for the quarter were $4,070,778, up by $868,910 or 27.1% from the previous year [2]. - The company achieved a net income of $243,729, contrasting with a net loss of $419,535 in the first quarter of the prior fiscal year [2]. - Basic and diluted net income per share were both $0.03, compared to a loss of $0.05 per share in the same quarter last year [2]. Sales Growth Drivers - A significant sale to the largest Education market customer and a 22.5% growth in direct-to-consumer (DTC) sales contributed to the sales success [3]. - Sales to European markets declined year-over-year, primarily due to distributors delaying re-orders, while Asian market sales remained strong [3]. - DTC sales benefited from new product launches and new colorways introduced in the previous fiscal year [3]. Margin Improvement - Gross margins improved by 340 basis points, increasing from 36.6% to 40.0% compared to the same period last year, driven by a favorable customer and market mix [3]. - The company faced challenges with gross margins due to high tariffs on China-produced goods but managed to offset some impacts through better absorption of fixed manufacturing costs and reduced reserves for excess inventory [4]. Leadership Changes - Michael J. Koss, Jr. was promoted to Executive Vice President, recognizing his contributions to product development and growth in the DTC segment [5].

Core Insights - Koss Corporation's shares have declined 2.9% following the earnings report for the quarter ended June 30, 2025, contrasting with a -0.2% change in the S&P 500 index during the same period [1] - The company reported a fiscal fourth-quarter 2025 loss per share of 2 cents, which is wider than the 1 cent loss in the same quarter last year [1] Financial Performance - Net sales for the quarter reached $3.1 million, reflecting a 6.6% increase from $2.9 million in the previous year, despite a net loss of $0.2 million, which is wider than the $0.1 million loss from the prior year [2] - For fiscal 2025, revenues increased by 2.9% to $12.6 million from $12.3 million, while the net loss slightly narrowed to $0.9 million from $1 million, and loss per share improved marginally to 9 cents from 10 cents [3] Revenue Drivers - The quarterly revenue increase was largely attributed to a nearly 49% surge in export market sales, with significant order increases from the two largest European distributors, driven by new product introductions [4] - Direct-to-Consumer (DTC) sales rose approximately 18% year over year, supported by enhanced advertising and online engagement, now constituting nearly a quarter of the company's total annual revenues [6] Challenges and Strategic Focus - Domestic sales faced challenges due to excess inventory of non-Koss products among domestic partners and delays in budget approvals affecting the education sector [5] - The company is shifting its focus towards international and DTC markets, with the CEO highlighting the importance of new product launches and targeted online advertising for growth [6] Market Conditions - The CEO noted that gains in Europe and Asia were partly driven by increased traction among new and existing customers, particularly OEMs in Asia, although caution was expressed regarding macroeconomic challenges [7] - Despite improved gross margins due to a favorable product mix and higher-margin new products, the company faces margin pressure from recently imposed tariffs on Chinese imports [8] - Logistics costs remain a concern, but the company is optimistic about stabilizing freight expenses in the upcoming quarter due to a partnership with a dedicated freight provider [9]

PART I [Business Overview](index=5&type=section&id=Item%201.%20Business) Koss Corporation designs, manufactures, and sells stereo headphones globally, with 84% of FY2025 sales from music headphones, actively enforcing its extensive intellectual property rights - Koss Corporation operates as a single reporting segment, focusing on the design, manufacture, and sale of stereo headphones and related personal listening accessories[19](index=19&type=chunk) - Approximately **84% of the Company's fiscal year 2025 sales** were from stereo headphones used for listening to music, with the remaining 16% from headphones for communications, education, and OEM[21](index=21&type=chunk) - As of June 30, 2025, the Company had over **400 trademarks** registered in approximately 88 countries and over **170 patents** in approximately 26 countries, actively enforcing its intellectual property rights[24](index=24&type=chunk)[25](index=25&type=chunk) - The Company's business is **not seasonal**, with net sales for the last three years, including fiscal year 2025, being fairly evenly dispersed throughout the year[26](index=26&type=chunk) Net Sales by Country (Fiscal Years 2025 vs. 2024) | Country/Region | 2025 Sales ($) | 2024 Sales ($) | | :--------------- | :------------- | :------------- | | United States | 8,968,799 | 9,795,438 | | Sweden | 1,247,981 | 993,043 | | Czech Republic | 1,206,827 | 418,004 | | Korea, Republic of | 207,061 | 185,143 | | Malaysia | 156,976 | 41,641 | | Canada | 131,320 | 101,056 | | Japan | 114,438 | 66,682 | | All other countries | 590,768 | 664,062 | | **Net sales** | **12,624,170** | **12,265,069** | [Risk Factors](index=9&type=page&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including macroeconomic downturns, geopolitical tensions, supply chain disruptions, inflationary pressures, operational challenges, and stock price volatility - The Company's sales outside the U.S. represent nearly **30% of total net sales** for fiscal year 2025, and it relies almost exclusively on contract manufacturing facilities in China, making it vulnerable to global economic and political developments[38](index=38&type=chunk) - Geopolitical tensions, including the Russia-Ukraine war and U.S.-China trade relations, pose risks of supply chain disruptions, trade restrictions, and increased costs, with sales to Russia suspended and Ukraine sales impacted[42](index=42&type=chunk)[43](index=43&type=chunk)[45](index=45&type=chunk) - Inflationary pressures, elevated interest rates, and increased costs for commodities, packaging, wages, energy, and transportation could adversely affect the Company's profitability and consumer demand[46](index=46&type=chunk) - Over **90% of the Company's products** are sourced from contract manufacturing facilities in China and Taiwan, creating dependence and risks related to geopolitical tensions, supply chain interruptions, and tariffs[53](index=53&type=chunk) - Direct-to-Consumer (DTC) sales through the Amazon portal accounted for approximately **19% and 17% of net sales** in fiscal years 2025 and 2024, respectively, making the company significantly dependent on this channel[66](index=66&type=chunk) - The market price of the Company's common stock has experienced significant fluctuations and volatility, with a high of **$18.73** and a low of **$4.00** during fiscal year 2025, potentially driven by social media hype[74](index=74&type=chunk)[75](index=75&type=chunk) [Unresolved Staff Comments](index=16&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments applicable to the company [Cybersecurity](index=16&type=section&id=Item%201C.%20Cybersecurity) Koss Corporation integrates robust cybersecurity policies and processes, including continuous monitoring, cloud migration, and third-party assessments, into its overall risk management framework - The Company has integrated cybersecurity risk management into its overall risk processes, including programs for monitoring threats, updating software, and securing corporate systems[80](index=80&type=chunk) - Enhancements to cybersecurity include migrating business-critical systems to Tier-1 cloud service providers, enhanced encryption, two-factor authentication (2FA), and real-time threat monitoring[80](index=80&type=chunk) - Annual vulnerability assessments and penetration testing are performed by third-party service providers, with results shared with the CFO[81](index=81&type=chunk) - The Board of Directors reviews cybersecurity policies and processes annually, with management providing regular updates on programs, training metrics, and risk mitigation strategies[83](index=83&type=chunk) [Properties](index=16&type=section&id=Item%202.%20Properties) Koss Corporation leases its 126,000 square foot Milwaukee facility from a related party, with a renewed lease extending to 2028 and an option to 2033, including a rent increase - The Company leases its **126,000 square foot facility** in Milwaukee, Wisconsin, from Koss Holdings, LLC, which is controlled by beneficiaries of the former chairman's revocable trust and includes current stockholders[84](index=84&type=chunk) - The lease was renewed on May 24, 2022, extending to **June 30, 2028**, with a second extension option to **June 30, 2033**[84](index=84&type=chunk) - Annual rent is **$380,000** for the extended term, increasing to **$397,000** for the second extended term, which will be the first rent increase since 1996[84](index=84&type=chunk) [Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) Koss Corporation is engaged in ongoing patent infringement lawsuits against jLab Audio and Skullcandy, and is investigating a new infringement claim from One-E-Way, Inc - The Company has ongoing patent infringement suits against PEAG, LLC d/b/a jLab Audio and Skullcandy, Inc. related to its wireless headphone technology, filed on July 22, 2020[85](index=85&type=chunk) - A Supplemental Notice of Infringement was sent to the Company on March 18, 2025, by One-E-Way, Inc., alleging infringement by some of Koss's wireless products, which the Company is investigating[86](index=86&type=chunk) [Mine Safety Disclosures](index=17&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=18&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Koss Corporation's common stock trades on Nasdaq (KOSS), with 9.46 million shares outstanding; the company has an authorized stock repurchase program but no recent activity and no plans for future dividends - The Company's common stock is traded on The Nasdaq Capital Market under the trading symbol **KOSS**[89](index=89&type=chunk) - As of August 25, 2025, there were **9,456,438 shares outstanding** of the registrant's common stock[8](index=8&type=chunk) - The Board of Directors has authorized an aggregate of **$45,500,000** for stock repurchases, with **$2,139,753** remaining available as of June 30, 2025; no purchases were made in fiscal years 2025 or 2024[90](index=90&type=chunk) - The Company has not paid dividends on its capital stock since March 2014 and does not anticipate paying cash dividends in the foreseeable future, intending to retain future earnings[91](index=91&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes FY2025 and FY2024 financial performance, noting a 2.9% net sales increase, improved gross profit margin, higher SG&A, and strong liquidity, alongside critical accounting estimates Consolidated Performance Summary (Fiscal Years 2025 vs. 2024) | Metric | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Net sales | $12,624,170 | $12,265,069 | | Net sales increase (decrease) % from prior year | 2.9% | (6.4)% | | Gross profit | $4,773,598 | $4,185,447 | | Gross profit as % of net sales | 37.8% | 34.1% | | Selling, general and administrative expenses | $6,510,721 | $6,057,606 | | Selling, general and administrative expenses as % of net sales | 51.6% | 49.4% | | Interest income | $879,774 | $847,644 | | Loss before income tax provision (benefit) | $(857,349) | $(1,024,515) | | Income tax provision (benefit) | $17,482 | $(73,604) | | Net loss | $(874,831) | $(950,911) | | Basic Loss per common share | $(0.09) | $(0.10) | - Net sales increased by **2.9% in fiscal year 2025** to **$12,624,170**, primarily driven by a **48% increase in sales to European distributors** and a **16.5% increase in Direct-to-Consumer (DTC) sales**[99](index=99&type=chunk)[103](index=103&type=chunk) - Gross profit as a percentage of net sales increased from **34.1% in FY2024 to 37.8% in FY2025**, attributed to a favorable sales mix, higher-margin new product sales to Europe, and reduced impact from higher prior-year freight rates[99](index=99&type=chunk)[106](index=106&type=chunk) - Selling, general and administrative expenses increased by **7.5% ($453,000)** in FY2025, mainly due to new product compliance testing, higher online marketing spend, and legal costs for patent litigation and an ADA lawsuit settlement[99](index=99&type=chunk)[107](index=107&type=chunk) Cash Flows Summary (Fiscal Years 2025 vs. 2024) | Activity | 2025 ($) | 2024 ($) | | :-------------------------------- | :--------- | :--------- | | Operating activities | (214,908) | (190,531) | | Investing activities | (120,284) | (198,425) | | Financing activities | 305,908 | 134,975 | | Net (decrease) in cash and cash equivalents | (29,284) | (253,981) | - As of June 30, 2025, the Company had **$2.8 million in cash and cash equivalents**, **$12.9 million in short-term investments**, and available credit facilities of **$5.0 million**, indicating a strong financial position[113](index=113&type=chunk) [Overview](index=19&type=section&id=Overview) [Fiscal Year 2025 Summary](index=19&type=section&id=Fiscal%20Year%202025%20Summary) [Consolidated Results](index=20&type=section&id=Consolidated%20Results) [2025 Results of Operations Compared with 2024](index=20&type=section&id=2025%20Results%20of%20Operations%20Compared%20with%202024) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) [Cash Flows](index=22&type=section&id=Cash%20Flows) [Operating Activities](index=22&type=section&id=Operating%20Activities) [Investing Activities](index=22&type=section&id=Investing%20Activities) [Financing Activities](index=22&type=section&id=Financing%20Activities) [Short Term Liquidity](index=22&type=section&id=Short%20Term%20Liquidity) [Long Term Liquidity](index=23&type=section&id=Long%20Term%20Liquidity) [Credit Facility](index=23&type=section&id=Credit%20Facility) [Stock Repurchase Program](index=23&type=section&id=Stock%20Repurchase%20Program) [Contractual Obligation](index=23&type=section&id=Contractual%20Obligation) [Critical Accounting Estimates](index=24&type=section&id=Critical%20Accounting%20Estimates) [Revenue Recognition](index=24&type=section&id=Revenue%20Recognition) [Accounts Receivable](index=24&type=section&id=Accounts%20Receivable) [Inventories](index=24&type=section&id=Inventories) [Product Warranty Obligations](index=24&type=section&id=Product%20Warranty%20Obligations) [Deferred Compensation](index=25&type=section&id=Deferred%20Compensation) [Stock-Based Compensation](index=25&type=section&id=Stock-Based%20Compensation) [Income Taxes](index=25&type=section&id=Income%20Taxes) [Quantitative and Qualitative Disclosure About Market Risk](index=26&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) Quantitative and qualitative disclosures about market risk are not applicable to the company [Financial Statements and Supplementary Data](index=26&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the Consolidated Financial Statements and Supplementary Data included elsewhere in the report - The report includes Consolidated Financial Statements: Balance Sheets, Statements of Operations, Cash Flows, and Stockholders' Equity for the years ended June 30, 2025 and 2024, along with Notes to Consolidated Financial Statements[164](index=164&type=chunk) - All financial statement schedules have been omitted because the information is not applicable, not material, or included in the Consolidated Financial Statements or their notes[165](index=165&type=chunk) - An Exhibit Index is attached, detailing other documents filed as part of this report[166](index=166&type=chunk)[271](index=271&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=26&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure [Controls and Procedures](index=26&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2025, with no material changes during the quarter - The Company's disclosure controls and procedures were evaluated and concluded to be effective at the reasonable assurance level as of June 30, 2025[149](index=149&type=chunk) - Management concluded that the Company's internal control over financial reporting was effective as of June 30, 2025[151](index=151&type=chunk) - There were no material changes in the Company's internal control over financial reporting during the three months ended June 30, 2025[152](index=152&type=chunk) [Other Information](index=26&type=section&id=Item%209B.%20Other%20Information) There is no other information to report [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=26&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) There are no disclosures regarding foreign jurisdictions that prevent inspections applicable to the company PART III [Directors, Executive Officers and Corporate Governance](index=27&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance, including the code of ethics, is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement[156](index=156&type=chunk) - The Company has adopted a code of ethics and an Insider Trading and Tipping Policy, publicly available on its website[156](index=156&type=chunk)[157](index=157&type=chunk) [Executive Compensation](index=27&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement[158](index=158&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=27&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners, management, and related stockholder matters is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement[159](index=159&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=27&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement[160](index=160&type=chunk) [Principal Accountant Fees and Services](index=27&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement[161](index=161&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=28&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists consolidated financial statements, schedules, and exhibits, including Balance Sheets, Statements of Operations, Cash Flows, Stockholders' Equity, and Notes - The report includes Consolidated Financial Statements: Balance Sheets, Statements of Operations, Cash Flows, and Stockholders' Equity for the years ended June 30, 2025 and 2024, along with Notes to Consolidated Financial Statements[164](index=164&type=chunk) - All financial statement schedules have been omitted because the information is not applicable, not material, or included in the Consolidated Financial Statements or their notes[165](index=165&type=chunk) - An Exhibit Index is attached, detailing other documents filed as part of this report[166](index=166&type=chunk)[271](index=271&type=chunk)

[Report Overview](index=1&type=section&id=Report%20Overview) [Company Information](index=1&type=section&id=Company%20Information) Koss Corporation, a U.S.-based high-fidelity headphone company, announced its financial results for the fourth quarter and full fiscal year ended June 30, 2025 - **Koss Corporation (NASDAQ: KOSS)** is a U.S.-based high-fidelity headphone company[1](index=1&type=chunk) [Fourth Quarter Fiscal Year 2025 Performance](index=1&type=section&id=Fourth%20Quarter%20Fiscal%20Year%202025%20Performance) For the fourth quarter of fiscal year 2025, Koss Corporation reported a 6.6% increase in sales, primarily driven by significant growth in export markets and Direct-to-Consumer (DTC) sales, despite a higher net loss compared to the prior year Fourth Quarter Financial Highlights (YoY) | Metric | Q4 FY2025 | Q4 FY2024 | Change ($) | Change (%) | | :----------------------- | :---------- | :---------- | :--------- | :--------- | | Net Sales | $3,084,210 | $2,893,401 | $190,809 | 6.6% | | Net Loss | $(232,696) | $(110,369) | $(122,327) | 110.8% | | Basic & Diluted Loss per Share | $(0.02) | $(0.01) | $(0.01) | 100.0% | - Sales increase was fueled by an approximately **49% increase in export markets**, with sales to the two largest European distributors up **over 100%**, mostly led by new product sales[3](index=3&type=chunk) - The Direct-to-Consumer (DTC) market grew approximately **18%** compared to the prior year's fourth quarter, attributed to new product introductions and higher online traffic from enhanced advertising efforts[3](index=3&type=chunk) - Growth was partially offset by declines in orders from domestic distributors (influenced by excess inventory of non-Koss product) and lower e-tailer sales[3](index=3&type=chunk) [Full Year Fiscal Year 2025 Performance](index=1&type=section&id=Full%20Year%20Fiscal%20Year%202025%20Performance) For the full fiscal year 2025, Koss Corporation achieved a 2.9% sales growth, primarily driven by improved international sales and a significant increase in DTC sales, while also reducing its net loss compared to the previous fiscal year Full Year Financial Highlights (YoY) | Metric | FY2025 | FY2024 | Change ($) | Change (%) | | :----------------------- | :---------- | :---------- | :--------- | :--------- | | Net Sales | $12,624,170 | $12,265,069 | $359,101 | 2.9% | | Net Loss | $(874,831) | $(950,911) | $76,080 | -8.0% | | Basic & Diluted Loss per Share | $(0.09) | $(0.10) | $0.01 | -10.0% | - Full fiscal year sales growth was mainly from improved sales to European customers, higher sales to original equipment manufacturers (OEMs) in Asian markets, and various new customers in the region[4](index=4&type=chunk) - DTC sales saw an uptick of **16.5%**, now representing nearly a quarter of the Company's total sales, primarily due to new product launches, increased online advertising, and webpage optimizations[4](index=4&type=chunk) - A favorable sales mix, along with sales of higher margin new products, yielded an improved gross margin in the current fiscal year[4](index=4&type=chunk) - The company anticipates headwinds from newly imposed tariffs on goods from China, which will adversely impact margins as inventory sells through, but expects freight costs to stabilize next quarter[4](index=4&type=chunk) [About Koss Corporation](index=1&type=section&id=About%20Koss%20Corporation) [Product Offerings](index=1&type=section&id=Product%20Offerings) Koss Corporation offers a comprehensive range of high-fidelity audio products, catering to various consumer needs with both wired and wireless solutions - Koss Corporation markets a complete line of high-fidelity headphones, wireless Bluetooth® speakers, computer headsets, telecommunications headsets, active noise canceling headphones, and wireless headphones[5](index=5&type=chunk) [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) [Unaudited Financial Data](index=3&type=section&id=Unaudited%20Financial%20Data) The unaudited condensed consolidated statements of operations provide detailed financial figures for the three and twelve months ended June 30, 2025, compared to the same periods in 2024, outlining net sales, cost of goods sold, gross profit, operating expenses, and net loss Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $3,084,210 | $2,893,401 | $12,624,170 | $12,265,069 | | Cost of goods sold | 1,973,166 | 1,725,607 | 7,850,572 | 8,079,622 | | Gross profit | 1,111,044 | 1,167,794 | 4,773,598 | 4,185,447 | | Selling, general and administrative expenses | 1,550,243 | 1,485,557 | 6,510,721 | 6,057,606 | | Loss from operations | (439,199) | (317,763) | (1,737,123) | (1,872,159) | | Interest income | 212,555 | 211,162 | 879,774 | 847,644 | | Loss before income tax provision (benefit) | (226,644) | (106,601) | (857,349) | (1,024,515) | | Income tax provision (benefit) | 6,052 | 3,768 | 17,482 | (73,604) | | Net loss | $(232,696) | $(110,369) | $(874,831) | $(950,911) | | Loss per common share: Basic | $(0.02) | $(0.01) | $(0.09) | $(0.10) | | Loss per common share: Diluted | $(0.02) | $(0.01) | $(0.09) | $(0.10) | | Weighted-average number of shares: Basic | 9,390,855 | 9,274,987 | 9,363,117 | 9,251,373 | | Weighted-average number of shares: Diluted | 9,390,855 | 9,274,987 | 9,363,117 | 9,251,373 | [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) [Disclaimer and Risk Factors](index=2&type=section&id=Disclaimer%20and%20Risk%20Factors) This section serves as a standard disclaimer, highlighting that statements regarding future events or financial performance are forward-looking and subject to various risks and uncertainties that could cause actual results to differ materially. The company explicitly states it undertakes no obligation to update these statements - Forward-looking statements are based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties, which may cause actual events or results to differ materially[7](index=7&type=chunk) - Key risk factors include fluctuations in economic conditions, ability to develop new products, consumer receptivity to new technologies, competition, foreign manufacturing and sales (including government regulation and trade tensions like U.S.-China tariffs), health crises, geopolitical conflicts, and litigation[7](index=7&type=chunk) - The Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances or new information[7](index=7&type=chunk)

Core Insights - Koss Corporation's shares increased by 14.7% following the earnings report for the quarter ended March 31, 2025, outperforming the S&P 500's 4.5% growth during the same period [1] - The company reported net sales of $2.8 million, a 5.4% increase from $2.6 million in the same quarter last year, despite incurring a net loss of $0.3 million, slightly wider than the previous year's loss [1][2] Financial Performance - Gross profit rose to $1.1 million from $0.8 million year-over-year, with gross margin improving by over 600 basis points due to lower shipping costs [2][8] - Operating expenses increased to $1.6 million from $1.5 million, leading to a narrowed operating loss of $0.5 million compared to $0.6 million in the prior year [3] - Interest income contributed positively, reducing the pre-tax loss to $0.3 million from $0.4 million [3] Management Commentary - The CEO highlighted geographic expansion and new product sales as key growth drivers, particularly in Europe and Asia [4] - Direct-to-consumer sales also supported revenue growth [4] Market Dynamics - Sales to the education sector fell nearly 60% due to a postponed project, impacting overall performance [5] - The decline in domestic distributor sales also weighed on results [5][7] - The rebound in international distributor sales, especially in Europe and Asia, was a significant growth factor [7] Margin Analysis - Margin expansion was attributed to lower inbound freight and transit costs, although some gains were offset by write-offs related to obsolete inventory [6][8]

Financial Performance - For the three months ended March 31, 2025, Koss Corporation reported net sales of $2,781,006, an increase of 5.4% compared to $2,637,606 for the same period in 2024[10]. - Gross profit for the three months ended March 31, 2025, was $1,084,672, representing a gross margin of 39.0%, up from $841,523 and a gross margin of 31.9% in the prior year[10]. - The net loss for the nine months ended March 31, 2025, was $642,135, a decrease from a net loss of $840,542 for the same period in 2024[12]. - The company reported a loss from operations of $519,006 for the three months ended March 31, 2025, an improvement from a loss of $609,724 in the same period of 2024[10]. - The Company recorded a net loss of $316,742 for the three months ended March 31, 2025, compared to a net loss of $313,780 for the same period in 2024[35]. - Loss before income tax provision for the three months ended March 31, 2025, was $(310,831), or (11.2)% of net sales, an improvement from (15.0)% in the prior year[50]. Assets and Liabilities - Total current assets decreased to $19,636,400 as of March 31, 2025, down from $21,917,161 as of June 30, 2024, primarily due to a reduction in short-term investments[9]. - Total liabilities rose to $6,614,743 as of March 31, 2025, compared to $6,052,303 as of June 30, 2024, reflecting an increase in current liabilities[9]. - Stockholders' equity decreased to $30,683,175 as of March 31, 2025, down from $31,147,176 as of June 30, 2024, primarily due to the net loss incurred[9]. - The total net inventories as of March 31, 2025 were $4,396,383, a decrease from $4,473,680 as of June 30, 2024[31]. - The amortized cost basis of held-to-maturity U.S. Treasury securities was $17,111,885 as of March 31, 2025, with a fair value of $17,175,268[29]. - The Company’s deferred compensation liability increased to $2,241,804 as of March 31, 2025, up from $2,093,124 as of June 30, 2024[28]. Cash Flow - Cash and cash equivalents increased to $2,934,892 at the end of the period, compared to $2,837,081 at the beginning of the period[12]. - The company experienced a net cash provided by operating activities of $319,989 for the nine months ended March 31, 2025, compared to a net cash used of $16,558 in the prior year[12]. - Cash provided by operating activities for the nine months ended March 31, 2025, was $319,989, compared to cash used of $16,558 in the same period in 2024[76]. - The Company experienced a net increase in cash and cash equivalents of $97,811 for the nine months ended March 31, 2025, compared to a decrease of $178,383 in the same period in 2024[76]. - Cash used in investing activities for the nine months ended March 31, 2025, was $374,623, primarily for fixed asset expenditures[78]. Taxation - The effective tax rate for the three months ended March 31, 2025 was 1.9%, significantly lower than 20.5% for the same period in 2024[26]. - The effective tax rate for the three and nine months ended March 31, 2025, was 1.9% and 1.8%, respectively, a significant decrease from 20.5% and 8.4% for the same periods in 2024[60]. - The Company has a tax loss carryforward of approximately $33,600,000 as of March 31, 2025, due to cumulative taxable losses over the last three years[27]. - The remaining expected federal tax loss carryforward approximates $33.6 million at the end of the third quarter[61]. Expenses - Selling, general and administrative expenses for the three months ended March 31, 2025, were $1,603,678, accounting for 57.7% of net sales, up from 55.0% in the prior year[50]. - Selling, general and administrative expenses for the three months ended March 31, 2025, increased by $152,000, or 10.5%, to $1,604,000 compared to the same period in the prior year[58]. - For the nine months ended March 31, 2025, selling, general and administrative expenses rose by $388,000, or 8.5%, to $4,960,000 compared to $4,572,000 for the same period in 2024[58]. Sales and Market Performance - Export sales for the nine months ended March 31, 2025, were $3,022,000, a 47.7% increase compared to $2,045,000 for the same period in 2024[53]. - Sales to European distributors increased by 41% over the prior year, driven by new product sales and inventory restocking[53]. - The gross margin for the nine months ended March 31, 2025, was 38.4%, an increase of 620 basis points from 32.2% in the prior year[55]. Legal and Compliance - The Company is involved in ongoing patent infringement lawsuits against PEAG, LLC and Skullcandy, Inc. related to its wireless headphone technology[93]. - A Supplemental Notice of Infringement was served on the Company by One-E-Way, Inc. on March 18, 2025, regarding potential patent infringements[94]. - The company expects to incur approximately $41,000 in costs related to a patent infringement matter, which has been accrued as of March 31, 2025[41]. Management and Governance - The Company's management concluded that the disclosure controls and procedures were effective as of March 31, 2025[90]. - There have been no changes in the Company's internal control over financial reporting that materially affected its effectiveness during the most recent fiscal quarter[91]. Credit Facilities - The Company has a secured credit facility of $5 million with no outstanding borrowings as of March 31, 2025[82]. - The Company’s credit facility remains unused as of March 31, 2025, with a total revolving secured credit facility of $5,000,000[32]. Stock and Shareholder Information - Koss Corporation's weighted-average number of shares for basic loss per share was 9,375,795 for the three months ended March 31, 2025, compared to 9,254,795 for the same period in 2024[10]. - The Company has a stock repurchase program with a maximum authorization of $45.5 million, of which $43.36 million had been expended through March 31, 2025[98].