Shares of Koss Corporation (KOSS) have gained 6.1% since the company reported its earnings for the quarter ended Dec. 31, 2025. This compares favorably to the S&P 500 index’s 0.1% growth over the same period. Over the past month, the stock has gained 3%, outperforming the S&P 500’s 1.5% increase.Koss incurred a net loss of 6 cents per share for the second quarter of fiscal 2026 against a net income of 1 cent per share in the year-ago period. Net sales of $2.9 million marked a 19.6% decline from $3.6 million ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Exact Name of Registrant as Specified in its Charter) incorporation or organization) DELAWARE 39-1168275 (State or other jurisdiction of (I.R.S. Employer Identification No.) 4129 North Port Washington Avenue, Milwaukee, Wisconsin (Address of principal executive offices) (Zip Code) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended December ...

Financial Performance - Net sales for Q2 2026 were $2,861,379, a decrease of $695,707 or 19.6% from $3,557,086 in Q2 2025[2] - The company reported a net loss of $565,407 for Q2 2026, compared to a net income of $94,142 in Q2 2025, resulting in a basic and diluted net loss per share of $0.06[2] - For the first six months of fiscal year 2026, net sales increased by $173,203 or 2.6% to $6,932,157 compared to $6,758,954 in the same period last year[3] - Selling, general and administrative expenses rose to $1,845,384 in Q2 2026, compared to $1,546,741 in Q2 2025[9] - The loss from operations for Q2 2026 was $1,014,578, significantly higher than the loss of $141,784 in Q2 2025[9] - Total other income for Q2 2026 was $451,931, compared to $238,686 in Q2 2025, contributing to a net loss before tax of $562,647[9] Gross Margin and Costs - The gross margin decreased by 260 basis points from 38.1% in the first half of fiscal year 2025 to 35.5% in the first half of fiscal year 2026, primarily due to high tariffs on products sourced from China[4] - The company anticipates continued challenges due to economic fluctuations and trade tensions, particularly with tariffs affecting product costs[7] Direct-to-Consumer Business - The direct-to-consumer (DTC) business accounted for approximately 25% of total sales and experienced a year-over-year growth of 13%[4] Share Information - The weighted-average number of basic shares outstanding was 9,462,416 for Q2 2026, compared to 9,355,686 for Q2 2025[9]

Core Insights - Koss Corporation reported a significant decline in net sales for the second quarter of fiscal year 2026, with a decrease of 19.6% year-over-year, resulting in net sales of $2,861,379 compared to $3,557,086 in the same quarter of the previous year [2] - The company experienced a net loss of $565,407 for the second quarter, contrasting with a net income of $94,142 in the same period last year, leading to a basic and diluted net loss per share of $0.06 [2] - For the first six months of fiscal year 2026, net sales increased by 2.6% to $6,932,157, while the net loss remained relatively stable at $321,678 compared to $325,393 in the prior year [3] Sales Performance - The company saw strong sales growth in the Education market, but this was offset by a decline in European market sales due to the absence of new product launches that had previously boosted sales [4] - The direct-to-consumer (DTC) segment, which constitutes approximately 25% of total sales, grew by 13% year-over-year [4] Financial Metrics - Gross margins decreased by 260 basis points from 38.1% in the first half of fiscal year 2025 to 35.5% in the same period of fiscal year 2026, primarily due to the impact of high tariffs on products sourced from China [4] - The company reported a loss from operations of $1,014,578 for the three months ended December 31, 2025, compared to a loss of $141,784 in the same period the previous year [8] Operational Highlights - The cost of goods sold for the second quarter was $2,030,573, leading to a gross profit of $830,806, down from $1,404,957 in the same quarter of the previous year [8] - Selling, general, and administrative expenses increased to $1,845,384 for the second quarter, compared to $1,546,741 in the same period last year [8]

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]