What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-02-02 compared with 2023-10-27 · 162 added, 83 removed, 242 unchanged (50% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, 2023

December 31, 2023

June 30, 2023

9 unchanged sentences

Other assets:

Long term investments

Operating lease right-of-use asset

1 unchanged sentence

Total other assets

LIABILITIES AND STOCKHOLDERS'

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

11 unchanged sentences

Total liabilities

Stockholders'

Stockholders' equity:

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

issued and outstanding 9,234,795

issued and outstanding 9,254,795 and 9,234,795 , respectively

Paid in capital

Retained earnings

Total stockholders'

Total liabilities and stockholders'

Total stockholders' equity

Total liabilities and stockholders' equity

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

2 unchanged sentences

Three Months Ended

Six Months Ended

Cost of goods sold

2 unchanged sentences

( 1,347,124 )

( 23,826,517 )

Interest income

(Loss) income before income tax provision

Income tax provision

(Loss) income before income tax provision (benefit)

( 1,249,292 )

Income tax provision (benefit)

Net (loss) income

( 1,146,190 )

(Loss) income per common share:

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended

Six Months Ended

Operating activities:

7 unchanged sentences

Change in cash surrender value of life insurance

(Benefit) Provision for deferred compensation

Provision (benefit) for deferred compensation

Net changes in operating assets and liabilities:

14 unchanged sentences

( 6,997,085 )

( 14,884,929 )

Net cash used in investing activities

( 15,023,416 )

Financing activities:

1 unchanged sentence

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net (decrease) in cash and cash equivalents

( 4,395,893 )

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

Three Months Ended September 30, 2023

Six Months Ended December 31, 2023

Balance, June 30, 2023

Stock-based compensation expense

Balance, September 30, 2023

Three Months Ended September 30, 2022

Stock option exercises

Balance, December 31, 2023

Six Months Ended December 31, 2022

Balance, June 30, 2022

1 unchanged sentence

Stock option exercises

Balance, December 31, 2022

Three Months Ended December 31, 2023

Balance, September 30, 2023

Stock-based compensation expense

Stock option exercises

Balance, December 31, 2023

Three Months Ended December 31, 2022

Balance, September 30, 2022

( 1,146,190 )

Stock-based compensation expense

Stock option exercises

Balance, December 31, 2022

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

December 31, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) BASIS OF PRESENTATION

The condensed consolidated balance sheets as of September 30, 2023 and June 30, 2023, the condensed consolidated statements of operations for the three months ended September 30, 2023 and 2022, the condensed consolidated statements of cash flows for the three months ended September 30, 2023 and 2022, and the condensed consolidated statements of stockholders'

equity for the three months ended September 30, 2023 and 2022, 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, 2023 and June 30, 2023, the condensed consolidated statements of operations for the three and six months ended December 31, 2023 and 2022, the condensed consolidated statements of cash flows for the six months ended December 31, 2023 and 2022, and the condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 2023 and 2022, 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.

7 unchanged sentences

Significant estimates and assumptions are used for, but are not limited to, allowances for credit losses, reserves for excess and obsolete inventories, long-lived and intangible assets, income tax valuation allowance , stock-based compensation and deferred compensation.

Actual results could differ from the Company's estimates.

B) INVESTMENTS

Actual results could differ from the Company's estimates.

B) REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

During the second quarter of fiscal year 2024, the Company learned that due to misinterpretation of the required tax treatment for certain disqualifying dispositions of Incentive Stock Options (ISO), the Company improperly withheld amounts for Social Security and Medicare (“FICA”) taxes on the taxable gains resulting from those dispositions and remitted such amounts to the Internal Revenue Service (“IRS”).

Thus, for such disqualifying dispositions of ISOs beginning in fiscal year 2021, certain employees are owed a refund from the Company for the overpayment of the FICA taxes, with a similar refund due to the Company from the IRS for the employer portion of the taxes which were also remitted to the IRS and expensed by the Company.

The Company intends to reimburse the over withheld taxes to the impacted employees and to file amended 941-X forms with the IRS to claim a refund for both the Company overpayment of FICA taxes as well as the amounts refunded to employees.

Based on an analysis of Accounting Standards Codification ASC 250 – “Accounting Changes and Error Corrections” (“ASC 250”), Staff Accounting Bulletin 99 – “Materiality” and Staff Accounting Bulletin 108 – “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, the Company determined that these errors did not result in the previously issued consolidated financial statements being materially misstated, and as such no restatement was necessary.

The following tables present the effect of the revision on the condensed consolidated balance sheet as of June 30, 2023, the condensed consolidated statements of operations for the three and six months ended December 31, 2022, and the condensed consolidated statement of cash flows for the six months ended December 31, 2022.

As of June 30, 2023

As Previously Reported

Condensed consolidated balance sheet:

Prepaid expenses and other current assets

Total current assets

Accrued liabilities

Total current liabilities

Total liabilities

Retained earnings

Total stockholders' equity

Three Months Ended December 31, 2022

Six Months Ended December 31, 2022

As Previously Reported

Condensed consolidated statements of operations:

Selling, general and administrative expenses

(Loss) from operations

( 1,347,813 )

( 1,347,124 )

( 23,832,185 )

( 23,826,517 )

(Loss) income before income tax provision

( 1,249,981 )

( 1,249,292 )

Net (loss) income

( 1,146,879 )

( 1,146,190 )

(Loss) income per common share:

Six Months Ended December 31, 2022

As Previously Reported

Condensed consolidated statement of cash flows:

Prepaid expenses and other current assets

Accrued liabilities

Net cash (used in) provided by operating activities

The effect of this revision on the opening balances within the Company's condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 2023 and 2022 was as follows:

As Previously Reported

Retained earnings, June 30, 2022

Total stockholders' equity, June 30, 2022

Retained earnings, September 30, 2022

Total stockholders' equity, September 30, 2022

Retained earnings, June 30, 2023

Total stockholders' equity, June 30, 2023

Retained earnings, September 30, 2023

Total stockholders' equity, September 30, 2023

The Company's condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 2022 have also been revised to reflect the impacts to net income as presented above.

C) INVESTMENTS

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

2 unchanged sentences

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

C) INCOME TAXES

D) FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the measurement date.

A three-tier hierarchy prioritizes the inputs used in measuring fair value.

These tiers include Level 1, defined as observable inputs such as quoted market prices in active markets;

Level 2, defined as inputs other than quoted market prices in active markets that are either directly or indirectly observable;

and Level 3, defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

The asset's or liability's fair value measurement within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company’s U.S.

treasury debt securities are 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.

E) 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.

During the quarter ended September 30, 2023, a state income tax provision of $ 1,879 was recorded for the minimum tax payments expected given the taxable net loss for the quarter.

No federal tax benefit or provision was recorded for the quarter.

The Tax Cuts and Jobs Act (TCJA) changed the rules for deducting net operating losses (NOLs) beginning with the 2018 tax year.

Before 2018, NOLs were fully deductible and could be carried back two years and carried forward 20 years.

For NOLs arising in tax years beginning after December 31, 2017, the TCJA limits the NOL deduction to 80 percent of taxable income.

As such, the utilization of the Company’s net operating loss carryforwards from fiscal years after 2018 were limited to 80 percent of the resulting taxable income.

For the three months ended September 30, 2022, due to additional income generated by licensing fees, partially offset by related legal fees and expenses, taxable income resulted.

The utilization of net operating loss carryforwards significantly reduced the taxable income, resulting in federal and state tax provisions of $ 449,103 and $ 148,838 , respectively, for the three-month period ended September 30, 2022.

The effective tax rate was less than 1 % for the three months ended September 30, 2023 and 5.7 % for the three months ended September 30, 2022.

It is anticipated that the effective rate in the current year and future years will be reduced by utilization of a portion or all of the federal and state net operating loss carryforwards that existed as of June 30, 2023.

The Company's taxable loss generated during the quarter ended September 30, 2023 increased the tax loss carryforward as of September 30, 2023 to approximately $ 32,100,000 .

Given the taxable loss for the current quarter, the expectation for utilization of the estimated tax loss carryforward is lessened, and as such, the future realization of this continues to be uncertain.

During the three and six months ended December 31, 2023, a state income tax provision of $ 1,879 and $ 3,758 was recorded for the minimum tax payments expected given the taxable net losses in those periods.

As a result of the net losses, no federal tax provision was recorded for the three and six months ended December 31, 2023.

During the three months ended December 31, 2022, a federal tax benefit of $ 74,389 and a state tax benefit of $ 28,713 were recorded based on a taxable loss.

For the six months ended December 31, 2022, as a result of additional income generated by licensing fees, offset by related legal fees and expenses, taxable income for the period was generated.

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

As such, the utilization of the Company’s net operating loss carryforwards from fiscal years after 2018 is limited to 80 percent of the resulting taxable income.

Utilization of net operating loss carryforwards significantly reduced the taxable income, resulting in federal and state tax provisions of $ 374,714 and $ 120,125 , respectively, for the six-month period ended December 31, 2022.

The effective tax rate was less than 1 % for the six months ended December 31, 2023 and 5.3 % for the six months ended December 31, 2022.

It is anticipated that the effective rate in the current year and future years will continue to be reduced by utilization of a portion or all of the federal and state net operating loss carryforwards that existed as of June 30, 2023.

The Company's taxable loss generated during the first half of fiscal year 2024 increased the tax loss carryforward as of December 31, 2023 to approximately $ 31,995,000 .

Given the taxable loss for the six-month period, the expectation for utilization of the estimated tax loss carryforward is lessened, 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.

Temporary differences which give rise to deferred income tax assets and liabilities at September 30, 2023 and June 30, 2023 include:

September 30, 2023

Temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2023 and June 30, 2023 include:

December 31, 2023

June 30, 2023

14 unchanged sentences

Deferred income tax liabilities:

Total deferred income tax liabilities

Net deferred income tax assets

D) LEGAL COSTS

F) 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.

3 unchanged sentences

The contingent legal fee expenses could have a material effect on the results of operations, however, timing and impact is uncertain and is dependent on the resolution of related litigation.

E) OTHER INCOME

In the three months ending September 30, 2022, the Company received licensing proceeds of $ 33,000,000 , which was recorded as other income.

No other income was received in the three months ended September 30, 2023.

G) OTHER INCOME

No other income was received in the three and six months ended December 31, 2023.

In the three and six months ending December 31, 2022, the Company received licensing proceeds of $ 0 and $ 33,000,000 , respectively, which was recorded as other income.

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

F) 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, 2023 and June 30, 2023 is $ 1,937,185 and $ 1,997,120 , respectively.

The decrease in the deferred compensation liability for the current officer during the three months ended September 30, 2023 resulted in compensation income under this arrangement of $ 59,935 .

Deferred compensation expense of $ 42,301 was recognized in the three months ended September 30, 2022.

G) RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

The deferred compensation liability recorded at December 31, 2023 and June 30, 2023 is $ 2,060,375 and $ 1,997,120 , respectively.

The increase in the deferred compensation liability for the current officer during the six months ended December 31, 2023 resulted in compensation expense under this arrangement of $ 63,255 .

A reduction to deferred compensation expense of $ 46,075 was recognized in the six months ended December 31, 2022.

I) RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

Effective July 1, 2023, the Company adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326):

2 unchanged sentences

CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including trade receivables and held-to-maturity debt securities.

Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.

Financial assets measured at amortized cost are presented at the net amount expected to be collected by using an allowance for credit losses.

The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets, including accounts receivable.

8 unchanged sentences

The Company did no t record an allowance for credit losses on held-to-maturity U.S.

Treasury securities of $ 17,183,653 as these securities have the following characteristics that support a zero loss expectation:

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

they are explicitly guaranteed by the U.S.

2 unchanged sentences

Results for reporting periods beginning after July 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”).

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not, or are not expected by management to have a material impact on the Company’s present or future consolidated financial statements .

The following tables summarize the unrealized positions for the held-to-maturity debt securities as of September 30, 2023 and June 30, 2023:

September 30, 2023

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not have, or are not expected by management to have a material impact on the Company’s present or future consolidated financial statements .

The following tables summarize the unrealized positions for the held-to-maturity debt securities as of December 31, 2023 and June 30, 2023:

December 31, 2023

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, 2023 and June 30, 2023:

September 30, 2023

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, 2023 and June 30, 2023:

December 30, 2023

Amortized Cost Basis

Due within one year

Due after one year through five years

June 30, 2023

2 unchanged sentences

The components of inventories were as follows:

September 30, 2023

December 31, 2023

June 30, 2023

14 unchanged sentences

The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type.

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, 2023, the Company was in compliance with all covenants related to the Credit Agreement.

As of September 30, 2023 and June 30, 2023, there were no outstanding borrowings on the facility.

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, 2023, the Company was in compliance with all covenants related to the Credit Agreement.

As of December 31, 2023 and June 30, 2023, 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, 2023 and 2022, the Company recognized revenue which was included in the deferred revenue liability at the beginning of the periods of $ 107,205 and $ 167,939 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 time frame for recognition of the deferred revenue.

In the six months ended December 31, 2023 and 2022, the Company recognized revenue, which was included in the deferred revenue liability at the beginning of the periods of $ 197,718 and $ 210,236 , 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) INCOME PER COMMON AND COMMON STOCK EQUIVALENT SHARE

2 unchanged sentences

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

Three Months Ended September 30,

Three Months Ended December 31,

Six Months Ended December 31,

Net (loss) income

( 1,146,190 )

Weighted average shares, basic

2 unchanged sentences

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

(1) Excludes approximately 773,085 weighted average stock options during the three months ended September 30, 2023, as the impact of such awards was anti-dilutive.

For the three months ended September 30, 2022, no stock options were anti-dilutive.

(1) Excludes 713,846 , 743,465 , and 590,046 weighted average stock options during the three and six months ended December 31, 2023 and the three months ended December 31, 2022, respectively, as the impact of such awards was anti-dilutive.

For the six months ended December 31, 2022, no stock options were anti-dilutive.

RELATED PARTY TRANSACTIONS

4 unchanged sentences

The Company is responsible for all property maintenance, insurance, taxes and other normal expenses related to ownership.

During the three months ended September 30, 2022, the Company made a charitable contribution of $ 79,000 to the Koss Foundation (the “Foundation”), a 501(c)(3) charitable organization for which Michael J.

During the six months ended December 31, 2022, the Company accrued and made charitable contributions of $ 79,000 to the Koss Foundation (the “Foundation”), a 501(c)(3) charitable organization for which Michael J.

Koss and John C.

1 unchanged sentence

Neither officer receives fees or compensation from the Foundation for holding these positions.

There were no charitable contributions made to the Foundation during the three months ended September 30, 2023.

There were no charitable contributions made to the Foundation during the three and six months ended December 31, 2023.

ACCOUNTS RECEIVABLE CONCENTRATIONS

As of September 30, 2023, the Company’s top three accounts receivable customers represented approximately 30 %, 18 % and 12 % of trade accounts receivable.

As of December 31, 2023, the Company’s top three accounts receivable customers represented approximately 23 %, 18 % and 14 % of trade accounts receivable.

The top three accounts receivable customers as of June 30, 2023 represented approximately 24 %, 14 % and 13 %.

3 unchanged sentences

All contributions to date have been fully allocated to employees’ company contribution accounts.

No contributions were made for the three months ended September 30, 2023 or 2022, respectively.

No contributions were made for the three or six months ended December 31, 2023 or 2022, respectively.

STOCK-BASED COMPENSATION

In 2023, pursuant to the recommendation of the Board of Directors, the shareholders approved the creation of the Koss Corporation 2023 Equity Incentive Plan (the “2023 Plan”).

Concurrently with the adoption of the new plan, the Koss Corporation 2012 Omnibus Incentive Plan (the “2012 Plan”) was terminated.

The 2023 Plan is administered by the Compensation Committee of the Board of Directors and provides for the granting of various stock-based incentive awards to eligible participants, primarily officers and certain key employees of the Company.

2,000,000 shares of common stock were authorized for issuance under the 2023 Plan, plus any shares subject to awards remaining outstanding under the 2012 Plan that expired or are otherwise forfeited, canceled, or terminated.

The Company’s Board of Directors will determine the terms and conditions under which an option will become exercisable but expects that stock options granted under the 2023 Plan will vest over a three -to- five -year period from the date of grant.

An option will expire no more than ten years from its grant date, with the exception of incentive stock options held by a 10% stockholder, which will expire no more than five years from the grant date.

As with the 2012 Plan, pursuant to the 2023 Plan new shares will be issued upon exercise of stock options.

LEGAL MATTERS

As of September 30, 2023, the Company is involved in the matters described below:

As of December 31, 2023, 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.

On August 4, 2023, the Company’s lawsuit against Plantrontrics, Inc.

and Polycom, Inc.

was dismissed following resolution of the litigation between the parties, which had no impact on the Company’s condensed consolidated financial statements.

During the three months ended September 30, 2022, in connection with its intellectual property enforcement program, the Company granted a license covering certain of its patents and recognized gross proceeds of $ 33,000,000 , which was recorded as other income.

Total legal fees and related expenses of $ 21,016,408 offset these proceeds and were recorded as selling, general and administrative expense.

During the six months ended December 31, 2022, in connection with its intellectual property enforcement program, the Company granted a license covering certain of its patents and recognized gross proceeds of $ 33,000,000 , which was recorded as other income.

Total legal fees and related expenses of $ 1,125,000 and $ 22,141,408 in the three and six months ended December 31, 2022, respectively, offset these proceeds and were recorded as selling, general and administrative expense.

• 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.

No lawsuits involving these allegations have yet been filed and served on the Company.

The Company is currently investigating whether these allegations have any merit.

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 September 30, 2023 and June 30, 2023.

The Company estimates that this matter will ultimately be resolved at a cost of approximately $ 41,000 and has accrued this amount as of December 31, 2023 and June 30, 2023.

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

1 unchanged sentence

Although management currently believes that resolving these claims against the Company, individually or in the aggregate, will not have a material adverse impact on its condensed consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

SUBSEQUENT EVENT

At the Company’s Annual Meeting on October 18, 2023, the shareholders approved the Koss Corporation 2023 Equity Incentive Plan (the “2023 Plan”).

Concurrently with the adoption of the new plan, the Koss Corporation 2012 Omnibus Incentive Plan (the “2012 Plan”) was terminated.

The 2023 Plan will be administered by the Compensation Committee of the Board of Directors and provides for the granting of various stock-based incentive awards to eligible participants, primarily officers and certain key employees of the Company.

The 2023 Plan has available for issuance 2,000,000 shares of common stock thereunder, plus any shares subject to awards remaining outstanding under the 2012 Plan that expired or are otherwise forfeited, canceled, or terminated.

As with the 2012 Plan, pursuant to the 2023 Plan new shares will be issued upon exercise of stock options.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

7 unchanged sentences

In addition to the factors discussed in this Form 10-Q, other factors that could contribute to or cause such differences include, but are not limited to, developments in any one or more of the following areas:

future fluctuations in economic conditions, increase in prices for raw materials, labor, and fuel caused by rising inflation, the receptivity of consumers to new consumer electronics technologies, the rate and consumer acceptance of new product introductions, competition, pricing, the number and nature of customers and their product orders, production by third party vendors, foreign manufacturing, sourcing, and sales (including foreign government regulation, trade and importation concerns), the effects of the COVID-19 or other pandemics on the economy, the impact of the Russian-Ukrainian conflict or other disruptive geopolitical events on the Company’s operations, borrowing costs and interest rates, changes in tax rates, pending or threatened litigation and investigations and their outcomes, and other risk factors described in the Risk Factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and subsequently filed Quarterly Reports on Form 10-Q

future fluctuations in economic conditions, increase in prices for raw materials, labor, and fuel caused by rising inflation, the receptivity of consumers to new consumer electronics technologies, the rate and consumer acceptance of new product introductions, competition, pricing, the number and nature of customers and their product orders, production by third party vendors, foreign manufacturing, sourcing, and sales (including foreign government regulation, trade and importation concerns), the effects of the COVID-19 or other pandemics on the economy, the impact of the Russian-Ukrainian conflict, the Israel-Hamas war, or other disruptive geopolitical events on the Company’s operations, borrowing costs and interest rates, changes in tax rates, pending or threatened litigation and investigations and their outcomes, and other risk factors described in the Risk Factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and subsequently filed Quarterly Reports on Form 10-Q

Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which speak only as of the date hereof.

1 unchanged sentence

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