What changed in this filing

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Item 1. Financial Statements

2026-01-30 compared with 2025-10-31 · 84 added, 57 removed, 300 unchanged (32% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, 2025

December 31, 2025

June 30, 2025

2 unchanged sentences

Short term investments

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

Accounts receivable, less allowance for credit losses of $ 2,043 at December 31, 2025 and June 30, 2025

Prepaid expenses and other current assets

27 unchanged sentences

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

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

issued and outstanding 9,466,438 at December 31, 2025 and 9,456,438 at June 30, 2025, respectively

Paid in capital

6 unchanged sentences

Three Months Ended

Six Months Ended

Cost of goods sold

1 unchanged sentence

Loss from operations

( 1,014,578 )

( 1,060,618 )

Other income (expense):

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended

Six Months Ended

Operating activities:

Net income (loss)

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

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

Provision for credit losses

Depreciation of equipment and leasehold improvements

Net amortization of discount on treasury securities

Net accretion of discount on treasury securities

Amortization of finance lease right-of-use asset

12 unchanged sentences

Deferred revenue

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Investing activities:

4 unchanged sentences

( 2,996,970 )

Net cash used in investing activities

( 6,998,250 )

Net cash used in investing activities

Financing activities:

1 unchanged sentence

Principal payments on finance lease obligations

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Net decrease in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents at end of period

KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED (Unaudited)

Three Months Ended

Six Months Ended

Supplemental cash flow information:

1 unchanged sentence

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:

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

Three Months Ended September 30, 2025

Six Months Ended December 31, 2025

Balance, June 30, 2025

Stock-based compensation expense

Balance, September 30, 2025

Three Months Ended September 30, 2024

Stock option exercises

Balance, December 31, 2025

Six Months Ended December 31, 2024

Balance, June 30, 2024

1 unchanged sentence

Stock option exercises

Balance, December 31, 2024

Three Months Ended December 31, 2025

Balance, September 30, 2025

Stock-based compensation expense

Stock option exercises

Balance, December 31, 2025

Three Months Ended December 31, 2024

Balance, September 30, 2024

Stock-based compensation expense

Stock option exercises

Balance, December 31, 2024

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025

December 31, 2025

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) BASIS OF PRESENTATION

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.

The condensed consolidated balance sheets as of December 31, 2025 and June 30, 2025, the condensed consolidated statements of operations for the three and six months ended December 31, 2025 and 2024, the condensed consolidated statements of cash flows for the six months ended December 31, 2025 and 2024, and the condensed consolidated statements of stockholders' equity for the three and six months ended December 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.

GAAP”) and have not been audited.

25 unchanged sentences

The fair value is based upon quoted market prices and is disclosed in Note 2.

D) INCOME TAXES

D) LEGAL COSTS

All legal costs related to litigation for which the Company is liable are charged to operations as incurred, except contingent legal fees as described below.

Proceeds from the settlement of legal disputes are recorded in other income when the amounts are determinable, and the collection is certain.

License proceeds are considered functional and as such are recorded at a point in time, based on the underlying agreement.

Related contingent legal fees and expenses are recorded in selling, general and administrative expense at that time.

Changes to the contingent legal fee expenses could have a material impact on the results of operations.

E) OTHER INCOME

In the three and six months ended December 31, 2025, the Company received licensing proceeds of $ 250,000 , which were recorded as other income.

Other income is shown as a separate line on the condensed consolidated statements of operations.

No such licensing proceeds were recorded during the same periods in the prior year.

F) INCOME TAXES

We estimate a provision for income taxes based on the effective tax rate expected to be applicable for the fiscal year.

1 unchanged sentence

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.

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.

State income tax provisions of $ 2,760 and $ 5,520 , respectively, were recorded for the three- and six-month periods ending December 31, 2025 and 2024 for the required minimum state tax payments.

There were no federal income tax provisions recorded during the first six months of fiscal years 2026 and 2025 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 Company's tax loss carryforward as of September 30, 2025 was approximately $ 34,500,000 .

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”) and, as such, the future utilization of all federal NOLs available to the Company are so limited.

The Company's tax loss carryforward as of December 31, 2025 was approximately $ 34,760,000 .

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.

The valuation allowance was adjusted to continue to fully offset the net deferred tax asset as there is sufficient negative evidence to support a full valuation allowance.

E) DEFERRED COMPENSATION

G) DEFERRED COMPENSATION

The Company’s deferred compensation liability is for a current officer and is calculated based on years of service and compensation, along with various assumptions related to expected retirement date, discount rates, and mortality tables.

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 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

The deferred compensation liability recorded at December 31, 2025 and June 30, 2025 is $ 2,446,703 and $ 2,226,454 , respectively.

Compensation expense of $ 59,364 and $ 220,249 , respectively, was recorded during the three and six months ended December 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, as well as a 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 5.45 % at December 31, 2025.

For the three and six months ended December 31, 2024, compensation (income) and expense of ($ 62,710 ) and $ 134,665 , respectively, were recorded under this arrangement.

H) RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

15 unchanged sentences

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

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

December 31, 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 September 30, 2025 and June 30, 2025:

September 30, 2025

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

December 31, 2025

Amortized Cost Basis

6 unchanged sentences

The components of inventories were as follows:

September 30, 2025

December 31, 2025

June 30, 2025

8 unchanged sentences

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,

The Company’s income tax expense for the three and six months ended December 31, 2025 and 2024 consisted of the following:

Three Months Ended

Six Months Ended

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.

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, 2025.

For the three and six months ended December 31, 2025, respectively, the effective tax rate was less than 1 % and 1.7 %, respectively.

The effective tax rate for the three and six months ended December 31, 2024 was 2.8 % and 1.7 %, 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 NOL carryforwards that existed as of June 30, 2025.

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

7 unchanged sentences

‎ 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.

No material changes in uncertain tax positions or valuation allowances were recorded during the three- and six-month periods ended December 31, 2025 or 2024.

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 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.

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

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

REVENUE RECOGNITION

2 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

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 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.

In the six months ended December 31, 2025 and 2024, the Company recognized revenue, which was included in the deferred revenue liability at the beginning of those periods of $ 153,935 and $ 141,787 , 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.

3 unchanged sentences

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

Three Months Ended September 30,

Three Months Ended December 31,

Six Months Ended December 31,

Net income (loss)

3 unchanged sentences

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.

(1) Weighted average stock options excluded during the three months ended December 31, 2025 and the six months ended December 31, 2025 and 2024 due to anti-dilution were 72,696 , 98,030 , and 425,304 , respectively.

For the three months ended December 31, 2024, no stock options were anti-dilutive.

RELATED PARTY TRANSACTIONS

5 unchanged sentences

ACCOUNTS RECEIVABLE CONCENTRATIONS

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).

As of December 31, 2025, three of the Company’s customers each represented more than 10% of total accounts receivable, and collectively these customers accounted for approximately 46 % of total accounts receivable ( 19 %, 14 % and 13 %, 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.

4 unchanged sentences

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,

Three Months Ended

Six Months Ended

Cost of goods sold

3 unchanged sentences

Legal and professional expense

Deferred compensation expense

Deferred compensation expense (income)

Other selling, general and administrative expenses

1 unchanged sentence

Net income (loss)

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

Segment net income (loss) includes interest income, other 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

December 31, 2025

June 30, 2025

3 unchanged sentences

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.

The Company applied the provisions of ASU 2023-07 retrospectively and has included comparative information for the three and six months ended December 31, 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.

1 unchanged sentence

LEGAL MATTERS

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

As of December 31, 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.

4 unchanged sentences

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

On November 20, 2025, the Company resolved its lawsuit against PEAG, LLC d/b/a JLab Audio and granted a license covering certain of its patents.

Gross proceeds of $ 250,000 were recognized and recorded as other income during the three and six months ended December 31, 2025.

Total contingent legal fees and related expenses of $ 250,000 offset these proceeds and were recorded as a selling, general and administrative expense during the three and six months ended December 31, 2025.

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.

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

The matter was resolved at a cost of $ 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