Koss(KOSS) - 2025 Q1 - Quarterly Report

Financial Performance - Net sales for the three months ended September 30, 2024, were $3,201,868, a decrease of $172,070 or 5.1% from $3,373,938 in the same period last year[46] - Gross profit for the same period was $1,172,926, representing 36.6% of net sales, an improvement of 500 basis points from 31.6% in the prior year[49] - Selling, general and administrative expenses increased by $273,780 or 17.8% from $1,536,279 to $1,810,059, primarily due to increased deferred compensation liability[51] - Domestic net sales decreased by $435,794 or 16.7% to $2,167,364, driven by a non-recurring custom order and a shortfall in U.S. distributor sales[47] - Sales to export markets increased significantly, with an 86% rise in sales to European distributors and a 100% increase to a Georgian distributor compared to the prior year[48] Cash Flow and Investments - Cash provided by operating activities for the three months ended September 30, 2024, was $201,554, compared to cash used of $(713,247) in the same period of 2023[67] - Cash used by investing activities was $(392,773) in Q1 FY 2024, slightly down from $(393,536) in Q1 FY 2023[67] - Cash from financing activities amounted to $104,870 in Q1 FY 2024, with 51,000 shares of common stock issued from stock option exercises[67] - The net decrease in cash and cash equivalents for the three months ended September 30, 2024, was $(86,349), significantly improved from $(1,106,783) in the prior year[67] - The Company received $5,034,000 from the maturity of U.S. Treasury securities and reinvested $5,057,000 in similar securities at a $58,000 discount during Q1 FY 2024[69] - The Company has no outstanding borrowings on its bank line of credit facility as of September 30, 2024[71] - The Company believes its existing cash and cash equivalents will be sufficient to meet anticipated working capital and capital expenditure requirements over the next twelve months[72] Tax and Legal Matters - The remaining expected federal tax loss carryforward approximates $32,800,000 at the end of the first quarter of fiscal 2025[54] - The effective tax rate was less than 1% for both three-month periods ending September 30, 2024, and 2023, with minimal state income tax expense recorded[53] - The Company is currently involved in patent infringement lawsuits against Bose Corporation, PEAG, LLC, and Skullcandy, Inc. related to its wireless headphone technology[81] Macroeconomic Conditions - The company is monitoring ongoing macroeconomic and geopolitical conditions, including inflation and supply chain disruptions, which may impact future performance[57] - The Company suspended sales to Russia due to the humanitarian crisis in Ukraine, but received a sizable order from a Ukrainian distributor in Q1 FY 2024[64] Lease Obligations - The lease for the Company's facility is fixed at $380,000 per year, renewed for five years ending June 30, 2028, with an option to renew for an additional five years[74] Interest Income - Interest income recorded was $220,358, compared to $212,859 in the same period last year, mainly from U.S. Treasury investments[52]