What changed in this filing

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Item 1. Financial Statements

2025-10-31 compared with 2025-05-09 · 141 added, 81 removed, 216 unchanged (51% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

March 31, 2025

September 30, 2025

June 30, 2025

2 unchanged sentences

Short term investments

Accounts receivable, less allowance for credit losses of $ 2,043 and $ 1,922 at March 31, 2025 and June 30, 2024, respectively

Accounts receivable, less allowance for credit losses of $ 2,043 at September 30, 2025 and June 30, 2025, respectively

Prepaid expenses and other current assets

5 unchanged sentences

Long term investments

Finance lease right-of-use asset

Operating lease right-of-use asset

6 unchanged sentences

Deferred revenue

Finance lease liability

Operating lease liability

4 unchanged sentences

Deferred revenue

Finance lease liability

Operating lease liability

3 unchanged sentences

Common stock, $ 0.005 par value, authorized 20,000,000 shares;

issued and outstanding 9,375,795 at March 31, 2025 and 9,299,795 at June 30, 2024, respectively

issued and outstanding 9,456,438 at September 30, 2025 and June 30, 2025, respectively

Paid in capital

6 unchanged sentences

Three Months Ended

Nine Months Ended

Cost of goods sold

1 unchanged sentence

Loss from operations

( 1,297,923 )

( 1,554,396 )

Other income (expense):

Interest income

Loss before income tax provision (benefit)

Income tax provision (benefit)

Loss per common share:

Interest expense

Total other income, net

Income (loss) before income tax provision

Income tax provision

Net income (loss)

Income (loss) per common share:

Weighted-average number of shares:

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended

Three Months Ended

Operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Provision for (recovery of) credit losses

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation of equipment and leasehold improvements

Net accretion of (discount)/premium on treasury securities

Net amortization of discount on treasury securities

Amortization of finance lease right-of-use asset

Noncash operating lease expense

11 unchanged sentences

Deferred revenue

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Investing activities:

4 unchanged sentences

( 4,999,003 )

( 13,985,921 )

Net cash used in investing activities

( 1,052,130 )

Financing activities:

Proceeds from exercise of stock options

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Principal payments on finance lease obligations

Net cash (used in) provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED (Unaudited)

Three Months Ended

Supplemental cash flow information:

Cash paid for income taxes

Right of use assets obtained in exchange for finance lease liabilities

Cash paid for interest on finance lease liability

Acquisition of fixed asset through assumption of a liability

Cash paid, net of refunds, for income taxes:

State of New York

State of Texas

State of Massachusetts

State of New Jersey

State of California

State of North Carolina

Total cash paid, net of refunds for income taxes

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

Nine Months Ended March 31, 2025

Three Months Ended September 30, 2025

Balance, June 30, 2025

Stock-based compensation expense

Stock option exercises

Balance, March 31, 2025

Nine Months Ended March 31, 2024

Balance, September 30, 2025

Three Months Ended September 30, 2024

Balance, June 30, 2024

1 unchanged sentence

Stock option exercises

Balance, March 31, 2024

Three Months Ended March 31, 2025

Balance, December 31, 2024

Stock-based compensation expense

Stock option exercises

Balance, March 31, 2025

Three Months Ended March 31, 2024

Balance, December 31, 2023

Stock-based compensation expense

Balance, March 31, 2024

Balance, September 30, 2024

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

September 30, 2025

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) BASIS OF PRESENTATION

The condensed consolidated balance sheets as of March 31, 2025 and June 30, 2024, the condensed consolidated statements of operations for the three and nine months ended March 31, 2025 and 2024, the condensed consolidated statements of cash flows for the nine months ended March 31, 2025 and 2024, and the condensed consolidated statements of stockholders' equity for the three and nine months ended March 31, 2025 and 2024, have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“U.S.

The condensed consolidated balance sheets as of September 30, 2025 and June 30, 2025, the condensed consolidated statements of operations for the three months ended September 30, 2025 and 2024, the condensed consolidated statements of cash flows for the three months ended September 30, 2025 and 2024, and the condensed consolidated statements of stockholders' equity for the three months ended September 30, 2025 and 2024, have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“U.S.

GAAP”) and have not been audited.

8 unchanged sentences

Actual results could differ from the Company's estimates.

Beginning with the first quarter of fiscal year 2024, the Company reclassified certain amounts on its June 30, 2024 balance sheet to enhance clarity and consistency in financial statement reporting.

Specifically, short-term deferred revenue liabilities related to estimated volume incentive rebates and sales returns were reclassified to accrued liabilities to reflect that revenue was already recognized on the sales related to these liabilities.

To conform with current period presentation, the Company reclassified $ 60,511 to accrued liabilities at June 30, 2024.

This reclassification does not affect the total assets, total liabilities, or equity of the Company.

B) INVESTMENTS

2 unchanged sentences

The amortized cost of debt securities is adjusted for amortization of premium and accretion of discounts to maturity.

Such amortization or accretion is included in interest income, along with other interest on cash and cash equivalents.

Such amortization or accretion is included in interest income, along with other interest income earned on cash and cash equivalents.

Accrued interest receivable on held-to-maturity debt securities is shown separately on the condensed consolidated balance sheets and is not included in any estimate for credit losses.

No allowance for credit losses on held-to-maturity U.S.

13 unchanged sentences

Additionally, discrete items are treated separately from the effective rate analysis and are recorded separately as an income tax provision or benefit at the time they are recognized.

A minimal federal income tax provision was recorded during the three and nine months ended March 31, 2025 as the result of taxes due on the fiscal year 2022 after an amended tax return was filed to properly reflect employer payroll taxes inappropriately paid in that year related to the gains from the disqualifying dispositions of incentive stock options.

During the three- and nine-month periods ended March 31, 2024, a federal tax benefit of $ 82,652 was recorded as a result of the Return-to-Provision (“RTP”) adjustment.

State tax expense of $ 5,203 and $ 10,724 , respectively, was booked for the three and nine months ended March 31, 2025 for the required minimum state tax payments.

State income tax provisions of $ 1,522 and $ 5,281 , respectively, were recorded for the three and nine months ended March 31, 2024 for minimum state required tax payments only as there was no taxable income after application of available net operating loss carryforwards (“NOLs”).

NOLs arising in tax years beginning after December 31, 2017 are limited to 80 percent of taxable income per the Tax Cuts and Jobs Act (“TCJA”).

An income tax provision of $ 2,760 was recorded during the three months ended September 30, 2025 and 2024 for minimum state required tax payments only and there were no federal income tax provisions recorded due to net operating loss carryforwards (“NOLs”) available to offset taxable income.

Application of available NOLs to potential future taxable income would minimize any tax payment requirements.

NOLs arising in tax years beginning after December 31, 2017 are limited to 80 percent of taxable income

per the Tax Cuts and Jobs Act (“TCJA”).

As such, the future utilization of all federal NOLs available to the Company is limited to 80 percent of the resulting taxable income.

The effective tax rate for the three months ended March 31, 2025 and 2024 was 1.9 % and 20.5 %, respectively.

For the nine months ended March 31, 2025 and 2024, the effective tax rate was 1.8 % and 8.4 %, respectively.

It is anticipated that the effective rate in future years will continue to be reduced by utilization of a portion or all of the available federal and state net operating loss (NOL) carryforwards that existed as of June 30, 2024.

The Company's taxable loss generated during the first nine months of fiscal year 2025 increased the tax loss carryforward as of March 31, 2025 to approximately $ 33,600,000 .

The Company's tax loss carryforward as of September 30, 2025 was approximately $ 34,500,000 .

Given the cumulative taxable losses for the last three years, excluding one-time items, the expectation for utilization of the estimated tax loss carryforward is not likely, and as such, the future realization of this continues to be uncertain.

3 unchanged sentences

The related expense is calculated using the net present value of the expected payments and is included in selling, general and administrative expenses in the condensed consolidated statements of operations.

The deferred compensation liability recorded at March 31, 2025 and June 30, 2024 is $ 2,241,804 and $ 2,093,124 , respectively.

Compensation expense of $ 148,680 was recorded during the nine months ended March 31, 2025 as a result of the increase in the deferred compensation liability for the current officer, due mainly to the annual increase in the future payments earned under the arrangement due to completing an additional year of service, partially offset by a slight increase in the discount factor.

The discount factor used to calculate the net present value of the liability was stable at 5.62 % at March 31, 2025 compared to 5.55 % at June 30, 2024.

For the three months ended March 31, 2025 and 2024, compensation expense of $ 14,016 and $ 50,132 , respectively, was recorded under this arrangement.

Compensation expense of $ 113,387 was recorded for the nine months ended March 31, 2024.

The following tables summarize the unrealized positions for the held-to-maturity debt securities as of March 31, 2025 and June 30, 2024:

March 31, 2025

The deferred compensation liability recorded at September 30, 2025 and June 30, 2025 is $ 2,387,338 and $ 2,226,454 , respectively.

Compensation expense of $ 160,884 was recorded during the three months ended September 30, 2025 as a result of the increase in the deferred compensation liability for the current officer, due mainly to the annual increase in the future payments earned under the arrangement due to completing an additional year of service, as well as a slight decrease in the discount factor.

The discount factor used to calculate the net present value of the liability was 5.81 % at June 30, 2025 and declined to 5.53 % at September 30, 2025.

For the three months ended September 30, 2024, compensation expense of $ 197,374 was recorded under this arrangement.

F) RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid and requires consistent categories and greater disaggregation of information in the rate reconciliation, income taxes paid disaggregated by jurisdiction and certain other amendments.

The new guidance was adopted prospectively as of July 1, 2025 and ASU 2023-09 does not mandate retrospective disclosure.

Given the ASU relates solely to disclosure requirements, adoption does not have a material impact on the Company’s financial position, results of operations or cash flows.

See Note 4 for further information.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2024, FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 40):

Disaggregation of Certain Income Statement Expenses, which was subsequently amended by ASU 2025-01 in January 2025 to clarify and refine certain requirements.

The ASU requires public business entities to disclose in the notes to the financial statements the amounts of employee compensation, depreciation, amortization, and inventory costs included in each relevant income statement line item.

The guidance also requires disclosure of other expense categories if they are significant to an understanding of the entity’s financial performance.

The amendments are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027 and entities are required to apply the amendments retrospectively.

Early adoption is permitted.

The Company will evaluate the impact of the standards on its Consolidated Financial Statements and related disclosures.

While the adoption of ASU 2024-03 and ASU 2025-01 will not affect the Company’s recognition, measurement or presentation of expenses on the face of the Consolidated Statements of Operations, it is expected to result in expanded disclosures in the notes to the Consolidated Financial Statements.

The Company has not yet determined whether it will early adopt the guidance.

The following tables summarize the unrealized positions for the held-to-maturity debt securities as of September 30, 2025 and June 30, 2025:

September 30, 2025

Amortized cost basis

7 unchanged sentences

US Treasury securities

The following tables summarize the fair value and amortized cost basis of the held-to-maturity debt securities by contractual maturity as of March 31, 2025 and June 30, 2024:

March 31, 2025

The following tables summarize the fair value and amortized cost basis of the held-to-maturity debt securities by contractual maturity as of September 30, 2025 and June 30, 2025:

September 30, 2025

Amortized Cost Basis

6 unchanged sentences

The components of inventories were as follows:

March 31, 2025

September 30, 2025

June 30, 2025

6 unchanged sentences

Inventories, net

The Company utilizes the liability method of accounting for income taxes.

The liability method measures the expected income tax impact of future taxable income and deductions implicit in the condensed consolidated balance sheets.

The Company’s income tax expense for the three months ended September 30, 2025 and 2024 consisted of the following:

Three Months Ended September 30,

Total income tax provision

All income is derived from domestic operations.

For the three months ended September 30, 2025 and 2024, respectively, the effective tax rate was 1.1 % and 0.7 %, respectively.

The effective tax rate for the current quarter differs from the U.S.

federal statutory rate of 21 % primarily due to:

 State income taxes, net of federal benefit

 Officer life insurance

 Non-deductible meals and entertainment expense

 Research and development tax credits

 Nondeductible stock options expense

 Changes in valuation allowances on deferred tax assets

‎ The Company will provide the enhanced annual disclosures required by ASU 2023-09, including the detailed rate reconciliation and jurisdictional income taxes paid, in its Form 10-K for the year ending June 30, 2026.

No material changes in uncertain tax positions or valuation allowances were recorded during the three-month period ended September 30, 2025.

CREDIT FACILITY

7 unchanged sentences

The negative covenants include restrictions on other indebtedness, liens, fundamental changes, certain investments, disposition of assets, mergers and liquidations, among other restrictions.

As of March 31, 2025, the Company was in compliance with all covenants related to the Credit Agreement.

As of March 31, 2025 and June 30, 2024, there were no outstanding borrowings on the facility.

As of September 30, 2025, the Company was in compliance with all covenants related to the Credit Agreement.

As of September 30, 2025 and June 30, 2025, there were no outstanding borrowings on the facility.

REVENUE RECOGNITION

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

United States

2 unchanged sentences

Effective July 1, 2023, the Company increased its deferral rates from 2.4 % to 3 % for domestic sales and decreased its deferral rate from 10 % to 8 % for export sales to reflect recent warranty experience.

In the nine months ended March 31, 2025 and 2024, the Company recognized revenue, which was included in the deferred

revenue liability at the beginning of those periods of $ 192,592 and $ 264,719 , respectively, for performance obligations related to consumer and customer warranties.

In the three months ended September 30, 2025 and 2024, the Company recognized revenue, which was included in the deferred revenue liability at the beginning of those periods of $ 51,396 and $ 77,103 , respectively, for performance obligations related to consumer and customer warranties.

The Company estimates that the deferred revenue performance obligations are satisfied within one year to three years and therefore uses that same timeframe for recognition of the deferred revenue.

LOSS PER COMMON AND COMMON STOCK EQUIVALENT SHARE

Basic loss per common share is computed based on the weighted-average number of common shares outstanding.

Diluted loss per common share is calculated assuming the exercise of stock options except where the result would be anti-dilutive.

The following table reconciles the numerator and denominator used to calculate basic and diluted loss per share:

Three Months Ended March 31,

Nine Months Ended March 31,

INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE

Basic income (loss) per common share is computed based on the weighted-average number of common shares outstanding.

Diluted income (loss) per common share is calculated assuming the exercise of stock options except where the result would be anti-dilutive.

The following table reconciles the numerator and denominator used to calculate basic and diluted income (loss) per share:

Three Months Ended September 30,

Net income (loss)

Weighted average shares, basic

1 unchanged sentence

Diluted shares

Net loss attributable to common shareholders per share:

(1) Excludes 354,000 and 401,883 , respectively, weighted average stock options during the three and nine months ended March 31, 2025 as the impact of such awards was anti-dilutive.

Weighted average stock options excluded during the three and nine months ended March 31, 2024 due to anti-dilution were 700,911 and 729,384 , respectively.

Net income (loss) attributable to common shareholders per share:

(1) Excludes 477,043 weighted average stock options during the three months ended September 30, 2024 as the impact of such awards was anti-dilutive.

For the three months ended September 30, 2025, no stock options were anti-dilutive.

RELATED PARTY TRANSACTIONS

5 unchanged sentences

ACCOUNTS RECEIVABLE CONCENTRATIONS

As of March 31, 2025, the Company’s top accounts receivable customer represented approximately 18 % of trade accounts receivable.

The top three accounts receivable customers as of June 30, 2024, represented approximately 18 %, 15 % and 12 % of trade accounts receivable.

As of September 30, 2025, four of the Company’s customers each represented more than 10% of total accounts receivable, and collectively these customers accounted for approximately 61 % of total accounts receivable ( 23 %, 16 % 11 % and 11 %, respectively).

At June 30, 2025, three customers each represented more than 10% of total accounts receivable ( 16 %, 13 % and 11 %, respectively), comprising approximately 40 % of total trade receivables.

SEGMENT INFORMATION

The Company has a single reportable segment, the design, manufacture and sale of headphones and related accessories, which reflects the manner in which the Company’s Chief Executive Officer, who is the Company’s chief operating decision maker (“CODM”), regularly reviews financial information to manage the business, allocate resources and assess performance.

The headphones are sold through retailers and distributors both domestically and internationally, as well as direct-to-consumer.

The CODM regularly reviews revenue, certain significant expense categories, net income and select balance sheet items in evaluating segment performance.

The significant segment expense categories and other segment items provided to the CODM and included in the measure of segment profit or loss are presented below.

Three Months Ended September 30,

Cost of goods sold

Gross profit margin

Selling, general and administrative expenses:

New product certification and compliance testing

Legal and professional expense

Deferred compensation expense

Other selling, general and administrative expenses

Selling, general and administrative expenses

Net income (loss)

Segment net income (loss) includes interest income, interest expense and income taxes.

The CODM also reviews the following balance sheet items at period-end as part of performance monitoring and resource allocation decisions:

September 30, 2025

June 30, 2025

Cash and cash equivalents

Short term investments

Long term investments

Total segment assets

The Company applied the provisions of ASU 2023-07 retrospectively and has included comparative information for the three months ended September 30, 2024 for statement of operations items.

Because the Company operates as a single reportable segment, the amounts above reconcile directly to the corresponding condensed consolidated financial statement line items.

There was no impact on previously reported consolidated net income, financial position or cash flows.

LEGAL MATTERS

As of March 31, 2025, the Company is involved in the matters described below:

As of September 30, 2025, the Company is involved in the matters described below:

• The Company maintains a program focused on enforcing its intellectual property and, in particular, certain patents in its patent portfolio.

3 unchanged sentences

Depending on the response to and the underlying results of the enforcement program, the Company may continue to litigate its claims, enter into licensing arrangements or reach some other outcome potentially advantageous to its competitive position.

• In early fiscal 2020, the Company was notified by One-E-Way, Inc.

that some of the Company's wireless products may infringe on certain One-E-Way patents.

A Supplemental Notice of Infringement was served on the Company on March 18, 2025.

The Company is investigating the merits of the notice and it is the Company’s hope that the controversy can come to a satisfactory resolution through good faith negotiations.

Depending on the results of the investigation and the defense of these allegations, the ultimate resolution of this matter may have a material effect on the Company's condensed consolidated financial statements.

The Company estimates that this matter will ultimately be resolved at a cost of approximately $ 41,000 and has accrued this amount as of March 31, 2025 and June 30, 2024.

The ultimate resolution of these matters is not determinable unless otherwise noted.

In early fiscal 2020, the Company was notified by One-E-Way, Inc.

(“One-E-Way”) that some of the Company's wireless products may infringe on certain One-E-Way patents.

A Supplemental Notice of Infringement was served on the Company on March 18, 2025 and the complaint was settled in September 2025.

The matter was settled for $ 22,200 and had been adequately accrued for as of June 30, 2025.

The Company is also subject to a variety of other claims and suits that arise from time to time in the ordinary course of its business.

31 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements