Knock-off brands of headphones manufactured overseas have affected Koss' sales.
Knock-off brands of headphones manufactured overseas have affected Koss' sales. (Photo:

Koss Corp. faces steep challenges

From this office, it’s always been difficult to watch good Milwaukee people and companies endure hard times.

That was true when the Koss Corp. and the Koss family suffered through a court case in which a former company executive pleaded guilty to six counts of felony fraud and pay $34 million in restitution in 2010.

Make no mistake. The company and the Koss family were victims in that embezzlement case.

I have always found my limited interactions with members of the Koss family to be pleasant. They strike me as hard-working, honest Milwaukee people with unquestioned integrity. The fact that the family patriarch, John C. Koss, invented the Stereophone in 1958 is one of the coolest milestones in Wisconsin’s entrepreneurial history.

Koss continues as the company’s chairman, but the day-to-day operations of the firm are handled by his sons, Michael J. Koss, president and chief executive officer, and John Koss Jr., vice president of sales. Add a third generation, as Michael Koss Jr. is the director of marketing.

The CEO recently informed employees about the latest daunting challenges facing the company.

"The company had extremely disappointing results in the past fiscal year and in the quarter ended June 30, 2014," Michael J. Koss said in one of the most blunt CEO quarterly report statements I have read in a long time. "We experienced major setbacks in export sales, particularly in Europe. That drop in sales was significant enough for us to suspend operations in Mexico until sales volumes support enough demand for the products being produced there. In addition, with the changes that need to be made to the Striva Wi-Fi headphone technology, we wrote off the capitalized software costs as well as the related tooling and inventory. These three factors resulted in a significant loss in the fiscal year 2014."

The company‚Äôs 12-month net loss was $5.6 million, compared with net income of $5.4 million a year earlier. The company‚Äôs quarterly sales dipped to $6.2 milli…