KOSS CORP 10-Q

Item 1. Financial Statements KOSS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) December 31, 2024 June 30, 2024 ASSETS Current assets: Cash and cash equivalents $ 2,535,727 $ 2,837,081 Short term investments 7,164,281 12,104,459 Accounts receivable, less allowance for credit losses of $ 2,043 and $ 1,922 at December 31, 2024 and June 30, 2024, respectively 1,370,071 1,208,319 Inventories 4,570,621 4,473,680 Prepaid expenses and other current assets 942,194 1,081,437 Interest receivable 98,506 170,429 Income taxes receivable 42,131 41,756 Total current assets 16,723,531 21,917,161 Equipment and leasehold improvements, net 1,529,086 1,223,391 Other assets: Long term investments 10,000,634 4,994,327 Operating lease right-of-use asset 2,643,336 2,765,445 Cash surrender value of life insurance 6,539,328 6,299,155 Total other assets 19,183,298 14,058,927 Total assets $ 37,435,915 $ 37,199,479 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 256,143 $ 329,829 Accrued liabilities 858,200 462,858 Deferred revenue 288,016 229,384 Operating lease liability 246,049 239,688 Income taxes payable 28,831 35,899 Total current liabilities 1,677,239 1,297,658 Long-term liabilities: Deferred compensation 2,227,789 2,093,124 Deferred revenue 119,897 119,787 Operating lease liability 2,417,098 2,541,734 Total long-term liabilities 4,764,784 4,754,645 Total liabilities 6,442,023 6,052,303 Stockholders' equity: Common stock, $ 0.005 par value, authorized 20,000,000 shares; issued and outstanding 9,375,795 at December 31, 2024 and 9,299,795 at June 30, 2024, respectively 46,879 46,499 Paid in capital 13,576,206 13,404,477 Retained earnings 17,370,807 17,696,200 Total stockholders' equity 30,993,892 31,147,176 Total liabilities and stockholders' equity $ 37,435,915 $ 37,199,479 The accompanying notes are an integral part of these condensed consolidated financial statements. ‎ 3 Table of Contents KOSS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended December 31 December 31 2024 2023 2024 2023 Net sales $ 3,557,086 $ 3,360,124 $ 6,758,954 $ 6,734,062 Cost of goods sold 2,152,129 2,251,684 4,181,071 4,557,932 Gross profit 1,404,957 1,108,440 2,577,883 2,176,130 Selling, general and administrative expenses 1,546,741 1,584,523 3,356,800 3,120,802 Loss from operations ( 141,784 ) ( 476,083 ) ( 778,917 ) ( 944,672 ) Interest income 238,686 208,809 459,044 421,668 Income (loss) before income tax provision 96,902 ( 267,274 ) ( 319,873 ) ( 523,004 ) Income tax provision 2,760 1,879 5,520 3,758 Net income (loss) $ 94,142 $ ( 269,153 ) $ ( 325,393 ) $ ( 526,762 ) Income (loss) per common share: Basic $ 0.01 $ ( 0.03 ) $ ( 0.03 ) $ ( 0.06 ) Diluted $ 0.01 $ ( 0.03 ) $ ( 0.03 ) $ ( 0.06 ) Weighted-average number of shares: Basic 9,355,686 9,241,208 9,332,844 9,238,002 Diluted 9,629,535 9,241,208 9,332,844 9,238,002 The accompanying notes are an integral part of these condensed consolidated financial statements. ‎ 4 Table of Contents KOSS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended December 31 2024 2023 Operating activities: Net loss $ ( 325,393 ) $ ( 526,762 ) Adjustments to reconcile net loss to net cash used in operating activities: Provision for (recovery of) credit losses 121 ( 4,105 ) Depreciation of equipment and leasehold improvements 113,858 93,647 Accretion of discount on treasury securities ( 152,879 ) ( 234,298 ) Noncash operating lease expense 3,834 3,835 Stock-based compensation expense 19,664 84,040 Change in cash surrender value of life insurance ( 169,596 ) ( 152,892 ) Provision for deferred compensation 134,665 63,255 Net changes in operating assets and liabilities: Accounts receivable ( 161,873 ) ( 130,286 ) Inventories ( 96,941 ) 1,256,774 Prepaid expenses and other current assets 139,243 ( 59,750 ) Interest receivable 71,923 ( 82,896 ) Income taxes receivable ( 375 ) ( 40,462 ) Income taxes payable ( 7,068 ) ( 83,479 ) Accounts payable ( 73,686 ) ( 5,011 ) Accrued liabilities 395,342 ( 418,796 ) Deferred revenue 58,742 ( 107,999 ) Net cash used in operating activities ( 50,419 ) ( 345,185 ) Investing activities: Purchase of equipment and leasehold improvements ( 419,553 ) ( 401,594 ) Life insurance premiums paid ( 70,577 ) ( 81,744 ) Proceeds from the maturity of treasury securities 7,085,000 7,223,000 Purchases of treasury securities ( 6,998,250 ) ( 6,997,085 ) Net cash used in investing activities ( 403,380 ) ( 257,423 ) Financing activities: Proceeds from exercise of stock options 152,445 35,800 Net cash provided by financing activities 152,445 35,800 Net (decrease) in cash and cash equivalents ( 301,354 ) ( 566,808 ) Cash and cash equivalents at beginning of period 2,837,081 3,091,062 Cash and cash equivalents at end of period $ 2,535,727 $ 2,524,254 Supplemental cash flow information: Cash paid for income taxes $ 12,963 $ 127,700 The accompanying notes are an integral part of these condensed consolidated financial statements. ‎ 5 Table of Contents KOSS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Six Months Ended December 31, 2024 Common Stock Paid in Retained Shares Amount Capital Earnings Total Balance, June 30, 2024 9,299,795 $ 46,499 $ 13,404,477 $ 17,696,200 $ 31,147,176 Net loss — — — ( 325,393 ) ( 325,393 ) Stock-based compensation expense — — 19,664 — 19,664 Stock option exercises 76,000 380 152,065 — 152,445 Balance, December 31, 2024 9,375,795 $ 46,879 $ 13,576,206 $ 17,370,807 $ 30,993,892 Six Months Ended December 31, 2023 Common Stock Paid in Retained Shares Amount Capital Earnings Total Balance, June 30, 2023 9,234,795 $ 46,174 $ 13,113,993 $ 18,647,111 $ 31,807,278 Net loss — — — ( 526,762 ) ( 526,762 ) Stock-based compensation expense — — 84,040 — 84,040 Stock option exercises 20,000 100 35,700 — 35,800 Balance, December 31, 2023 9,254,795 $ 46,274 $ 13,233,733 $ 18,120,349 $ 31,400,356 Three Months Ended December 31, 2024 Common Stock Paid in Retained Shares Amount Capital Earnings Total Balance, September 30, 2024 9,350,795 $ 46,754 $ 13,523,356 $ 17,276,665 $ 30,846,775 Net income — — — 94,142 94,142 Stock-based compensation expense — — 5,400 — 5,400 Stock option exercises 25,000 125 47,450 — 47,575 Balance, December 31, 2024 9,375,795 $ 46,879 $ 13,576,206 $ 17,370,807 $ 30,993,892 Three Months Ended December 31, 2023 Common Stock Paid in Retained Shares Amount Capital Earnings Total Balance, September 30, 2023 9,234,795 $ 46,174 $ 13,160,785 $ 18,389,502 $ 31,596,461 Net loss — — — ( 269,153 ) ( 269,153 ) Stock-based compensation expense — — 37,248 — 37,248 Stock option exercises 20,000 100 35,700 — 35,800 Balance, December 31, 2023 9,254,795 $ 46,274 $ 13,233,733 $ 18,120,349 $ 31,400,356 The accompanying notes are an integral part of these condensed consolidated financial statements. ‎ 6 Table of Contents KOSS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A) BASIS OF PRESENTATION The condensed consolidated balance sheets as of December 31, 2024 and June 30, 2024, the condensed consolidated statements of operations for the three and six months ended December 31, 2024 and 2023, the condensed consolidated statements of cash flows for the six months ended December 31, 2024 and 2023, and the condensed consolidated statements of stockholders' equity for the three and six months ended December 31, 2024 and 2023, 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. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The operating results for any interim period are not necessarily indicative of the operating results that may be experienced for the full fiscal year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30 , 2024. The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses. 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 right-of-use assets, income tax valuation allowance , stock-based compensation and deferred compensation. Actual results could differ from the Company's estimates. Beginning with the first quarter of fiscal year 2025, 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 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. Such amortization or accretion is included in interest income, along with other interest on cash and cash equivalents. No allowance for credit losses on held-to-maturity U.S. Treasury securities is recorded as these securities have the following characteristics that support a zero-loss expectation: they are explicitly guaranteed by the U.S. government, are consistently highly rated by major rating agencies and have a long history of no credit losses. See Note 2 for additional information on investments. C) FAIR VALUE MEASUREMENTS Cash equivalents, accounts receivable, and accounts payable approximate fair value based on the short maturity of these instruments. 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. The fair value is based upon quoted market prices and is disclosed in Note 2. D) INCOME TAXES We estimate a provision for income taxes based on the effective tax rate expected to be applicable for the fiscal year. If the actual results are different from these estimates, adjustments to the effective tax rate may be required in the period such determination is made. 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. 7 Table of Contents During the three and six months ended December 31, 2024, state income tax provisions of $ 2,760 and $ 5,520 , respectively, were recorded for the required minimum state tax payments plus estimated tax due on the negligible net taxable income after state net operating loss (NOL) deductions. State income tax provisions of $ 1,879 and $ 3,758 , respectively, were recorded for the three and six months ended December 31, 2023 for minimum state required tax payments only as there was no taxable income after application of available NOLs. No federal income tax provisions were booked for either the three month or six-month periods ending December 31, 2024 or 2023 given the availability of federal net operating loss carryforwards to offset minimal to no taxable income. 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 was 2.8 % and 1.7 % for the three and six months ended December 31, 2024, respectively. The effective tax rate was less than 1 % for the three and six months ended December 31, 2023. 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, 2024. The Company's taxable loss generated during the first six months of fiscal year 2025 increased the tax loss carryforward as of December 31, 2024 to approximately $ 32,900,000 . 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 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 December 31, 2024 and June 30, 2024 is $ 2,227,789 and $ 2,093,124 , respectively. Compensation expense of $ 134,665 was recorded during the six months ended December 31, 2024 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 an additional year of service completed. The discount factor used to calculate the net present value of the liability was stable at 5.53 % at December 31, 2024 compared to 5.55 % at June 30, 2024. A compensation benefit of $( 62,710 ) was recorded under this arrangement for the three months ended December 31, 2024 as the discount factor increased from 5.12 % at September 30, 2024 to 5.53 % as of December 31, 2024. Compensation expense of $ 123,190 and $ 63,255 , respectively, was recorded for the three and six months ended December 31, 2023. 2. INVESTMENTS The following tables summarize the unrealized positions for the held-to-maturity debt securities as of December 31, 2024 and June 30, 2024: December 31, 2024 Amortized cost basis Gross unrealized gains Gross unrealized losses Fair Value US Treasury securities $ 17,164,915 $ 49,513 $ — $ 17,214,428 Total $ 17,164,915 $ 49,513 $ — $ 17,214,428 June 30, 2024 Amortized cost basis Gross unrealized gains Gross unrealized losses Fair Value US Treasury securities $ 17,098,786 $ — $ ( 56,278 ) $ 17,042,508 Total $ 17,098,786 $ — $ ( 56,278 ) $ 17,042,508 ‎ 8 Table of Contents 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, 2024 and June 30, 2024: December 31, 2024 Amortized Cost Basis Fair value Due within one year $ 7,164,281 $ 7,175,136 Due after one year through five years 10,000,634 10,039,292 Total $ 17,164,915 $ 17,214,428 June 30, 2024 Amortized Cost Basis Fair value Due within one year $ 12,104,459 $ 12,075,702 Due after one year through five years 4,994,327 4,966,806 Total $ 17,098,786 $ 17,042,508 3. INVENTORIES The components of inventories were as follows: December 31, 2024 June 30, 2024 Raw materials $ 1,939,517 $ 1,973,531 Finished goods 4,592,254 4,357,621 Inventories, gross 6,531,771 6,331,152 Reserve for obsolete inventory ( 1,961,150 ) ( 1,857,472 ) Inventories, net $ 4,570,621 $ 4,473,680 4. CREDIT FACILITY On May 14, 2019, the Company entered into a secured credit facility (“Credit Agreement”) with Town Bank (“Lender”). The Credit Agreement provides for a $ 5,000,000 revolving secured credit facility for letters of credit for the benefit of the Company of up to a sublimit of $ 1,000,000 . There are no unused line fees in the credit facility. On January 28, 2021, the Credit Agreement was amended to change the interest rate to Wall Street Journal Prime less 1.50 %. An amendment to the Credit Agreement effective October 30, 2024, extended the maturity date to October 31, 2026, and removed one of the covenants requiring submission of annual financial performance projections to the Lender. The Company and the Lender also entered into a General Business Security Agreement dated May 14, 2019 under which the Company granted the Lender a security interest in substantially all of the Company’s assets in connection with the Company’s obligations under the Credit Agreement. 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 December 31, 2024, the Company was in compliance with all covenants related to the Credit Agreement. As of December 31, 2024 and June 30, 2024, there were no outstanding borrowings on the facility. 5. REVENUE RECOGNITION The Company disaggregates its net sales by geographical location as it believes it best depicts how the nature, timing and uncertainty of net sales and cash flows are affected by economic factors. The following table summarizes net sales by geographical location: Three Months Ended Six Months Ended December 31, December 31, 2024 2023 2024 2023 United States $ 2,181,541 $ 2,666,978 $ 4,348,905 $ 5,270,669 Export 1,375,545 693,146 2,410,049 1,463,393 Net Sales $ 3,557,086 $ 3,360,124 $ 6,758,954 $ 6,734,062 Deferred revenue relates primarily to consumer and customer warranties. These constitute future performance obligations, and the Company defers revenue related to these future performance obligations. 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, 2024 and 2023, the Company recognized revenue, which was included in the 9 Table of Contents deferred revenue liability at the beginning of those periods of $ 141,787 and $ 197,718 , 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. 6. 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, 2024 2023 2024 2023 Numerator Net income (loss) $ 94,142 $ ( 269,153 ) $ ( 325,393 ) $ ( 526,762 ) Denominator Weighted average shares, basic 9,355,686 9,241,208 9,332,844 9,238,002 Dilutive effect of stock compensation awards (1) 273,849 — — — Diluted shares 9,629,535 9,241,208 9,332,844 9,238,002 Net income (loss) attributable to common shareholders per share: Basic $ 0.01 $ ( 0.03 ) $ ( 0.03 ) $ ( 0.06 ) Diluted $ 0.01 $ ( 0.03 ) $ ( 0.03 ) $ ( 0.06 ) (1) Excludes 713,846 weighted average stock options during the three months ended December 31, 2023 as the impact of such awards was anti-dilutive. Weighted average stock options excluded during the six months ended December 31, 2024 and 2023 due to anti-dilution were 425,304 and 743,465 , respectively. For the three months ended December 31, 2024, no stock options were anti-dilutive. 7. RELATED PARTY TRANSACTIONS The Company leases its facility in Milwaukee, Wisconsin from Koss Holdings, LLC, which is controlled by five equal ownership interests in trusts held by the five beneficiaries of a former chairman’s revocable trust and includes current stockholders of the Company. On May 24, 2022, the lease was renewed for a period of five years , ending June 30, 2028, and is being accounted for as an operating lease. The lease extension maintained the rent at a fixed rate of $ 380,000 per year and included an option to renew at an increased rate of $ 397,000 for an additional five years ending June 30, 2033. The negotiated increase in rent slated for 2028 will be the first increase in rent since 1996. The Company is responsible for all property maintenance, insurance, taxes and other normal expenses related to ownership. 8. ACCOUNTS RECEIVABLE CONCENTRATIONS As of December 31, 2024, the Company’s top three accounts receivable customers represented approximately 52 %, 15 % and 9 % 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. ‎ 10 Table of Contents 9. LEGAL MATTERS As of December 31, 2024, 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. As part of this program, the Company filed complaints against certain parties alleging infringement on the Company’s patents relating to its wireless audio technology. In the event that a monetary award or judgment is received by the Company in connection with these complaints, all or portions of such amounts, such as contingent legal fees, will be due to third parties. The Company may incur additional fees and costs related to these lawsuits, however, timing and impact on its condensed financial statements is uncertain. 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. 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 December 31, 2024 and June 30, 2024. The ultimate resolution of these matters is not determinable unless otherwise noted. 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. 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. ‎ 11 Table of Contents CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995 (the “Act”) (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the Securities Exchange Commission, press releases, or otherwise. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Act. Forward-looking statements may include, but are not limited to, projections of revenue, income or loss and capital expenditures, statements regarding future operations, anticipated financing needs, compliance with financial covenants in loan agreements, plans for acquisitions or sales of assets or businesses, plans relating to products or services of the Company, assessments of materiality, predictions of future events, the effects of pending and possible litigation and assumptions relating to the foregoing. In addition, when used in this Form 10-Q, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “may,” “will,” “shall,” “should,” “could,” “would,” “forecasts,” “predicts,” “potential,” “continue”, “seeks”, “goal”, “projects” and variations thereof and similar expressions are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified based on current expectations. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements contained in this Form 10-Q, or in other Company filings, press releases, or otherwise. 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: continued future fluctuations in economic conditions; the Company’s ability to successfully develop new products and assess potential market opportunities; the receptivity of consumers to new consumer electronics technologies; the Company’s ability to successfully and profitably market its products; the rate and consumer acceptance of new product introductions; the amount and nature of competition for the Company’s products; pricing; the number and nature of customers and their product orders; the Company’s ability to meet demand for products; production by third party vendors; foreign manufacturing, sourcing, and sales (including foreign government regulation, trade and importation concerns); uncertainties associated with the pandemics and other health crises or natural disasters, including their possible effects on the Company’s operations and its supply chain; the impact of the ongoing conflict in Eastern Europe and the instability 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; borrowing costs; changes in tax rates; the outcome of any litigation, government investigations, enforcement actions or other legal proceedings; the Company’s ability to retain and hire key personnel 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, 2024 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. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect new information. ‎ 12 Table of Contents