What changed in this filing

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Item 1. Financial Statements

2026-05-08 compared with 2026-01-30 · 112 added, 76 removed, 308 unchanged (38% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

December 31, 2025

March 31, 2026

June 30, 2025

1 unchanged sentence

Cash and cash equivalents

Short term investments

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

Available-for-sale investments, at fair value

Short term investments held to maturity, at amortized cost

Accounts receivable, less allowance for credit losses of $ 2,043 at March 31, 2026 and June 30, 2025

Prepaid expenses and other current assets

4 unchanged sentences

Other assets:

Long term investments

Long term investments held to maturity, at amortized cost

Finance lease right-of-use asset

20 unchanged sentences

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

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

issued and outstanding 9,466,438 at March 31, 2026 and 9,456,438 at June 30, 2025, respectively

Paid in capital

Accumulated other comprehensive loss

Retained earnings

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of goods sold

7 unchanged sentences

Total other income, net

Income (loss) before income tax provision

Loss before income tax provision

Income tax provision

Net income (loss)

Income (loss) per common share:

Loss per common share:

Weighted-average number of shares:

1 unchanged sentence

KOSS CORPORATION

CO NDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

Three Months Ended

Nine Months Ended

Other comprehensive loss:

Unrealized loss on available-for-sale securities

Total comprehensive loss

KOSS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended

Nine Months Ended

Operating activities:

30 unchanged sentences

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Six Months Ended

Nine Months Ended

Supplemental cash flow information:

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

Six Months Ended December 31, 2025

Nine Months Ended March 31, 2026

Comprehensive

Balance, June 30, 2025

Stock-based compensation expense

Unrealized loss on available-for-sale securities

Stock option exercises

Balance, December 31, 2025

Six Months Ended December 31, 2024

Balance, March 31, 2026

Nine Months Ended March 31, 2025

Comprehensive

Balance, June 30, 2024

Stock-based compensation expense

Unrealized loss on available-for-sale securities

Stock option exercises

Balance, March 31, 2025

Three Months Ended March 31, 2026

Comprehensive

Balance, December 31, 2025

Three Months Ended December 31, 2025

Balance, September 30, 2025

Stock-based compensation expense

Unrealized loss on available-for-sale securities

Stock option exercises

Balance, March 31, 2026

Three Months Ended March 31, 2025

Comprehensive

Balance, December 31, 2024

Three Months Ended December 31, 2024

Balance, September 30, 2024

Stock-based compensation expense

Unrealized loss on available-for-sale securities

Stock option exercises

Balance, December 31, 2024

Balance, March 31, 2025

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025

March 31, 2026

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) BASIS OF PRESENTATION

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.

The condensed consolidated balance sheets as of March 31, 2026 and June 30, 2025, the condensed consolidated statements of operations for the three and nine months ended March 31, 2026 and 2025, the condensed consolidated statements of comprehensive loss for the three and nine months ended March 31, 2026 and 2025, the condensed consolidated statements of cash flows for the nine months ended March 31, 2026 and 2025, and the condensed consolidated statements of stockholders' equity for the three and nine months ended March 31, 2026 and 2025, 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.

9 unchanged sentences

B) INVESTMENTS

Debt securities are classified as held-to-maturity as the Company has the positive intent and ability to hold them to maturity.

The securities are carried at amortized cost as current or noncurrent based upon maturity date and unrealized gains and losses are recognized when realized.

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

The Company’s investments consist of debt securities classified as available-for-sale and are recorded at fair value.

Any unrealized gains or losses arising from changes in the fair value of these available-for-sale debt securities are recognized in accumulated other comprehensive income (loss) until they are realized through the sale of the securities or if an impairment is identified.

Available-for-sale debt securities are classified as short-term investments in the Company’s financial statements as management intends to use the proceeds from the sales of these securities to fund potential acquisitions, although the exact timing of such acquisitions is currently undetermined.

During the quarter ended March 31, 2026, the Company reclassified its debt securities previously designated as held-to-maturity to available-for-sale in connection with changes in the Company’s anticipated liquidity needs as the Company adopted a diversification by acquisition strategy.

The debt securities had an amortized cost of $ 16,994,043 and fair value of $ 16,956,081 as of March 31, 2026.

As a result of the transfer, the Company recorded an unrealized loss of $ 37,962 in other comprehensive loss, representing the difference between the securities’ amortized cost and fair value.

The unrealized loss is the sole component of accumulated other comprehensive income for the three months ended March 31, 2026.

Management concluded that the transfer was consistent with the exceptions to the held-to-maturity classification restrictions under applicable accounting guidance due to changes in circumstances that could not have been reasonably anticipated at the time the securities were classified as held-to-maturity.

Debt securities were classified as held-to-maturity at June 30, 2025 as the Company had the positive intent and ability to hold them to maturity.

The securities were carried at amortized cost as current or noncurrent based upon maturity date and unrealized gains and losses were recognized only if realized.

The amortized cost of all 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 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.

Accrued interest receivable on 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 U.S.

Treasury securities is recorded as these securities have the following characteristics that support a zero-loss expectation:

5 unchanged sentences

The Company’s U.S.

treasury debt securities are recorded at amortized cost with fair value disclosure.

treasury debt securities at March 31, 2026 are recorded at fair value as they are classified as available-for-sale.

At June 30, 2025, U.S.

treasury debt securities were classified as held-to-maturity and recorded at amortized cost with fair value disclosure.

They have a readily available market price (Level 1 input), thus a lesser degree of judgment needs to be used in measuring fair value, and fair value was determined by quoted market prices.

7 unchanged sentences

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.

In the nine months ended March 31, 2026, 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.

No such licensing proceeds were recorded during the same period in the prior year or during the three months ended March 31, 2026 and 2025.

F) INCOME TAXES

2 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.

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.

State income tax provisions of $ 1,825 and $ 7,345 , respectively, were recorded for the three- and nine-month periods ending March 31, 2026 for the required minimum state tax payments.

State income tax expense of $ 5,204 and $ 10,724 , respectively, was recorded for the three and nine months ended March 31, 2025 as well for the required minimum state tax payments.

Federal income tax expense of $ 707 was recorded during the three and nine months ended March 31, 2025 as a result of the amendment of a prior year tax return.

No other federal income tax provisions were recorded during the first nine 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”) 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 .

The Company's tax loss carryforward as of March 31, 2026 was approximately $ 35,290,000 .

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 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.

The deferred compensation liability recorded at March 31, 2026 and June 30, 2025 is $ 2,446,100 and $ 2,226,454 , respectively.

Compensation income of $ 603 was recorded during the three months ended March 31, 2026, mostly due to an increase in the discount factor from 5.45 % at December 31, 2025 to 5.62 % at March 31, 2026.

Expense of $ 219,646 was recorded during the nine month period ended March 31, 2026 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 5.62 % at March 31, 2026.

For the three and nine months ended March 31, 2025, compensation expense of $ 14,016 and $ 148,680 , respectively, were recorded under this arrangement.

H) RECENT ACCOUNTING PRONOUNCEMENTS

16 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 December 31, 2025 and June 30, 2025:

December 31, 2025

During the three months ended March 31, 2026, the Company transferred its debt securities with an amortized cost basis of $ 16,994,043 from its held-to-maturity portfolio to its available-for-sale portfolio.

The securities were transferred at their aggregate fair value of $ 16,956,081 on March 31, 2026.

As a result of the transfer, the Company recorded a $ 37,962 unrealized loss in accumulated other comprehensive loss within stockholders’ equity during the period.

The transfer was made in response to the Company’s recently announced diversification strategy via acquisition and the related cash requirements of funding potential acquisition opportunities.

Following the transfer, the securities are classified as available-for-sale and carried at fair value on the condensed consolidated balance sheet.

The following table summarizes the amortized cost and fair value of the debt securities available for sale at March 31, 2026:

March 31, 2026

Amortized cost basis

2 unchanged sentences

US Treasury securities

At June 30, 2025, the debt securities were classified as held to maturity and the amortized cost and fair value are shown below:

June 30, 2025

3 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 December 31, 2025 and June 30, 2025:

December 31, 2025

The following tables summarize the fair value and amortized cost basis of the debt securities by contractual maturity as of March 31, 2026 and June 30, 2025:

March 31, 2026

Amortized Cost Basis

6 unchanged sentences

The components of inventories were as follows:

December 31, 2025

March 31, 2026

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 and six months ended December 31, 2025 and 2024 consisted of the following:

The Company’s income tax expense for the three and nine months ended March 31, 2026 and 2025 consisted of the following:

Three Months Ended

Six Months Ended

Nine Months Ended

Total income tax provision

All income is derived from domestic operations.

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.

For both the three and nine months ended March 31, 2026, the effective tax rate was less than 1 %.

The effective tax rate for the three and nine months ended March 31, 2025 was 1.9 % and 1.8 %, 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.

8 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- and six-month periods ended December 31, 2025 or 2024.

No material changes in uncertain tax positions or valuation allowances were recorded during the three- and nine-month periods ended March 31, 2026 or 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 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.

As of March 31, 2026, the Company was in compliance with all covenants related to the Credit Agreement.

As of March 31, 2026 and June 30, 2025, there were no outstanding borrowings on the facility.

REVENUE RECOGNITION

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine 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 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.

In the nine months ended March 31, 2026 and 2025, the Company recognized revenue, which was included in the deferred revenue liability at the beginning of those periods of $ 203,348 and $ 192,592 , 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.

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 December 31,

Six Months Ended December 31,

Net income (loss)

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,

Weighted average shares, basic

1 unchanged sentence

Diluted shares

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

(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.

Net loss attributable to common shareholders per share:

(1) Weighted average stock options excluded during the three months ended March 31, 2026 and 2025 and the nine months ended March 31, 2026 and 2025 due to anti-dilution were 77,889 , 354,000 , 91,414 and 401,884 , respectively.

RELATED PARTY TRANSACTIONS

5 unchanged sentences

ACCOUNTS RECEIVABLE CONCENTRATIONS

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.

As of March 31, 2026, three of the Company’s customers each represented more than 10% of total accounts receivable, and collectively these customers accounted for approximately 45 % of total accounts receivable ( 16 %, 16 % 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 accounts receivable.

SEGMENT INFORMATION

1 unchanged sentence

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 CODM regularly reviews revenue, certain significant expense categories, net loss 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

Six Months Ended

Nine Months Ended

Cost of goods sold

6 unchanged sentences

Selling, general and administrative expenses

Net income (loss)

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

Segment net 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:

December 31, 2025

March 31, 2026

June 30, 2025

Cash and cash equivalents

Short term investments

Long term investments

Available-for-sale investments

Short term investments, held-to-maturity

Long term investments, held-to-maturity

Total segment assets

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.

The Company applied the provisions of ASU 2023-07 retrospectively and has included comparative information for the three and nine months ended March 31, 2025 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.

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

LEGAL MATTERS

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

As of March 31, 2026, 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.

The patent infringement lawsuit between the Company and Skullcandy Inc.

is in the appeal stage after a federal judge in Utah dismissed the case with prejudice on March 25, 2026.

This lawsuit is the last remaining case in a series of litigation initiated by the Company against major headphone manufacturers in 2020.

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.

Gross proceeds of $ 250,000 were recognized and recorded as other income during the nine months ended March

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 nine months ended March 31, 2026.

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

26 unchanged sentences

and China given recently enacted tariffs and their uncertainty;

the impact of the ongoing conflict in Eastern Europe and the instability in the Middle East on the Company’s operations;

the impact of the ongoing conflicts in Eastern Europe and the instability and escalation in the Middle East on the Company’s operations;

the effects of any judicial, executive or legislative action affecting the Company or the audio/video industry;

6 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