What changed in this filing

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Item 9A. Controls and Procedures

2025-08-29 compared with 2024-08-30 · 153 added, 158 removed, 602 unchanged (34% of the section changed)

24 unchanged sentences

If the Company makes any substantive amendments to the code of ethics or grants any waiver, including any implicit waiver, from a provision of the code to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, the Company will disclose the nature of the amendment or waiver on that website or in a report on Form 8-K.

Insider Trading Arrangements and Policies.

The Company is committed to promoting high standards of ethical business conduct and compliance with applicable laws, rules and regulations.

As part of this commitment, the Company has adopted the Insider Trading and Tipping Policy governing the purchase, sale, and/or other dispositions of the Company’s securities by its directors, officers, and employees, as well as the Company itself, that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to us.

A copy of the Company’s Insider Trading and Tipping Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.

EXECUTIVE COMPENSATION.

105 unchanged sentences

Interest income

(Loss) income before income tax provision (benefit)

Loss before income tax provision (benefit)

( 1,024,515 )

Income tax (benefit) provision

Net (loss) income

(Loss) income per common share:

Income tax provision (benefit)

Loss per common share:

Weighted-average number of shares:

4 unchanged sentences

Operating activities:

Net (loss) income

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

(Recovery of) provision for doubtful accounts receivable

Adjustments to reconcile net loss to net cash used in operating activities:

Provision for (recovery of) credit losses

Depreciation of equipment and leasehold improvements

Accretion of discount on treasury securities

Net accretion of discount on treasury securities

Noncash operating lease expense

2 unchanged sentences

Provision for deferred compensation

Loss on disposal of equipment and leasehold improvements

Net changes in operating assets and liabilities:

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Accrued liabilities

( 1,020,193 )

Deferred revenue

Net cash (used in) provided by operating activities

Net cash used in operating activities

Investing activities:

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Net cash used in investing activities

( 17,024,107 )

Financing activities:

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Net decrease in cash and cash equivalents

( 6,117,108 )

Cash and cash equivalents at beginning of year

1 unchanged sentence

Supplemental cash flow information:

Cash (refunded) paid for income taxes

Cash paid (refunded) for income taxes

The accompanying notes are an integral part of these Consolidated Financial Statements.

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and Koss UK are non-operating and hold no assets.

BASIS OF CONSOLIDATION — The Consolidated Financial Statements include the accounts of Koss and its subsidiaries, Koss Corp B.V.

BASIS OF PRESENTATION AND CONSOLIDATION — The Consolidated Financial Statements include the accounts of Koss and its subsidiaries, Koss Corp B.V.

and Koss UK, which are 100 %-owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated.

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 will reimburse the over withheld taxes to the impacted employees and will 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.

As of June 30, 2024, the over-withheld taxes due to the impacted employees were remitted to the Company’s payroll provider for distribution to the employees.

As such, no liability is recorded in accrued liabilities on the Consolidated Balance Sheet as of that date.

The refund expected from the IRS as of June 30, 2024 and 2023 is $ 722,498 and $ 717,892 , respectively, and is included in prepaid expenses and other current assets on the Consolidated Balance Sheets.

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 Consolidated Balance Sheet as of June 30, 2023 and the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows for the year ended June 30, 2023.

As of June 30, 2023

As Previously Reported

Consolidated Balance Sheet:

Prepaid expenses and other current assets

Total current assets

Accrued liabilities

Total current liabilities

Total liabilities

Retained earnings

Total stockholders' equity

Year Ended June 30, 2023

As Previously Reported

Consolidated Statement of Operations:

Selling, general and administrative expenses

(Loss) from operations

( 24,901,052 )

( 24,884,220 )

Income before income tax provision

Income per common share:

Year Ended June 30, 2023

As Previously Reported

Consolidated Statement of Cash Flows:

Prepaid expenses and other current assets

Accrued liabilities

Net cash provided by operating activities

The effect of this revision on the opening balances within the Company's Consolidated Statement of Stockholders' Equity for the years ended June 30, 2023 and 2022 was as follows:

As Previously Reported

Retained earnings, June 30, 2022

Total stockholders' equity, June 30, 2022

Retained earnings, June 30, 2023

Total stockholders' equity, June 30, 2023

The Company's Consolidated Statement of Stockholders' Equity for the year ended June 30, 2023 has also been revised to reflect the impacts to net income as presented above.

USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reported periods.

Actual results could differ from those estimates.

During the quarter ended September 30, 2024, 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.

REVENUE RECOGNITION — Revenues from product sales are recognized when the customer obtains control of the product, which typically occurs upon shipment from the Company's facility.

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These volume rebates are tied to sales volume within specified periods.

The amount of revenue is reduced for variable consideration related to customer rebates, which are calculated using expected values and is based on program specific factors such as expected rebate percentages and expected volumes.

The amount of revenue is reduced for variable consideration related

to customer rebates, which are calculated using expected values and is based on program specific factors such as expected rebate percentages and expected volumes.

Changes in such accruals may be required if actual sales volume differs from estimated sales volume, which would affect net sales and operating results in the period such variances become known.

18 unchanged sentences

These costs are expensed in the period they are incurred since no patent legal costs are probable to provide a future economic benefit.

INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE — Income (loss) per common and common stock equivalent share is calculated under the provisions of Topic 260 in the Accounting Standards Codification (“ASC”) which provides for calculation of “basic” and “diluted” income (loss) per share.

Basic income (loss) per common and common stock equivalent share includes no dilution and is computed by dividing net income (loss) by the weighted average common shares outstanding for the period.

Diluted income (loss) per common and common stock equivalent share reflects the potential dilution of securities that could share in the earnings (losses) of an entity.

See Note 11 for additional information on income (loss) per common and common stock equivalent share.

LOSS PER COMMON SHARE — Loss per common share is calculated under the provisions of Topic 260 in the Accounting Standards Codification (“ASC”) which provides for calculation of “basic” and “diluted” loss per share.

Basic loss per common share includes no dilution and is computed by dividing net loss by the weighted average common shares outstanding for the period.

Diluted loss per common share reflects the potential dilution of securities that could share in the earnings losses of an entity.

See Note 11 for additional information on loss per common share.

CASH AND CASH EQUIVALENTS — The Company considers depository accounts and investments with a maturity at the date of acquisition and expected usage of three months or less to be cash and cash equivalents.

3 unchanged sentences

ACCOUNTS RECEIVABLE — Accounts receivable consist of unsecured trade receivables due from customers.

An allowance for credit losses is deducted from the cost basis of the receivables and is estimated using the aging method whereby expected credit losses

are determined on the basis of how long a receivable has been outstanding as well as historical loss data.

An allowance for credit losses is deducted from the cost basis of the receivables and is estimated using the aging method whereby expected credit losses are determined on the basis of how long a receivable has been outstanding as well as historical loss data.

The estimates are then adjusted for changes in the risk characteristics of the Company’s customer base, changes in credit practices, current conditions, and reasonable and supportable future forecasts that would impact the collectability of the receivables.

This model replaced the incurred loss model used in previous years.

An adjustment of $ 4,105 was made during the year ended June 30, 2024 to record the appropriate allowance per the new methodology and no write-offs were necessary and there were no recoveries on prior losses.

At June 30, 2025 and 2024, the allowance for credit losses was $ 2,043 and $ 1,922 , respectively.

Adjustments of $ 121 and ($ 4,105 ) were made during the years ended June 30, 2025 and 2024, respectively, to record the appropriate allowance per the aging method.

No write-offs were necessary and there were no recoveries on prior losses in fiscal years 2025 and 2024.

As such, the impact of the change on the Company’s financial statements was not significant.

T he opening balance of accounts receivable was $ 1,379,517 at June 30, 2023 , net of the allowance for credit losses of $ 6,027 .

PREPAID EXPENSES AND OTHER CURRENT ASSETS — Prepaid expenses and other current assets consist primarily of advance payments for software subscriptions and other services to be received in future periods, partial downpayments for inventory not yet received and a refund due from the Internal Revenue Service (“IRS”) for overpayment of improperly withheld amounts for Social Security and Medicare (“FICA”) taxes on the taxable gains resulting from disqualifying dispositions of Incentive Stock Options (ISO) beginning in fiscal year 2021.

The Company has reimbursed the employees for the over withheld taxes.

As of June 30, 2025 and 2024, the net refund expected from the IRS is $ 491,677 and $ 722,498 , respectively, and is included in prepaid expenses and other current assets on the Consolidated Balance Sheets.

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

53 unchanged sentences

administrative expense at that time.

In the year ended June 30, 2023, the Company incurred legal fees and expenses of approximately $ 22,141,000 related to licensing proceeds received in the same year.

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

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

STOCK-BASED COMPENSATION — The Company has a stock-based employee compensation plan, which is described more fully in Note 12.

2 unchanged sentences

The Company recognizes forfeitures as they occur.

OTHER INCOME — The Company maintains a program focused on enforcing its intellectual property and, in particular, certain of its patent portfolio, by filing complaints against certain parties alleging infringement on the Company’s patents relating to its wireless headphone technology.

The Company has granted license agreements related to certain patents allowing the Company to recover certain of the fees and costs that were involved with the underlying efforts to enforce this portfolio .

In the year ended June 30, 2023, the Company received licensing proceeds of $ 33,000,000 , which was recorded as other income.

No other income was received in the year ended June 30, 2024.

Actual results could differ from those estimates.

NEW ACCOUNTING STANDARD

New Accounting Standards Adopted as of July 1, 2023

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

Measurement of Credit Losses on Financial Instruments using the modified retrospective approach for all financial assets measured at amortized cost, including trade receivables and held-to-maturity debt securities.

The main goal of this ASU is to require businesses to adjust their allowance for lifetime expected credit losses rather than incurred losses.

It is believed that the change will result in more timely recognition of such losses.

The expected credit losses estimate will be based upon historical information, current conditions, and reasonable and supportable forecasts.

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

The Company adopted ASU 2016-13 effective July 1, 2023 using the modified retrospective approach for all financial assets measured at amortized cost.

Allowance for Credit Losses – Accounts Receivable:

The allowance for credit losses is deducted from the cost basis of the receivable to present the net amount expected to be collected on the accounts.

The Company measures expected credit losses for accounts receivable using the aging method whereby expected credit losses are determined on the basis of how long a receivable has been outstanding.

Historical loss data is utilized to estimate expected losses as the risk characteristics of the customer base and the Company’s credit practices have not changed significantly over time.

The estimates are then adjusted for current conditions, such as level of inflation and the potential change in credit availability given rising interest rates, as well as supportable and reasonable forecasts indicating whether these conditions will continue into the future or new ones will arise that need to be considered.

Upon evaluation of the impact of this ASU, the Company concluded that minimal reserves were necessary as historical losses were immaterial, and, based on the qualitative and quantitative analysis performed in accordance with Topic 326 requirements, the Company determined there was no reasonable expectation of significant credit losses associated with the Company’s accounts receivable in the foreseeable future.

Allowance for Credit Losses - Held-to Maturity Debt Securities:

The Company did not record an allowance for credit losses on held-to-maturity U.S.

Treasury securities 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.

The adoption of ASU 2016-13 did not have a material impact on the Company’s Consolidated Financial Statements.

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).

Recently Issued Accounting Standard

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This ASU expands annual and interim segment disclosure requirements by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and are included in each reported measure of segment profit or loss.

The amendments also require disclosure of an amount for “other segment items” and additional interim information about segment profit or loss and assets.

The Company has a single reportable segment.

Upon adoption of ASU 2023-07, the Company will be required to provide annual and interim disclosures of significant expense categories such as cost of goods sold, selling and general and administrative expenses when those amounts are regularly provided to the CODM, as well as a description of other segment items.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with retrospective application to all prior periods presented.

Because ASU 2023-07 relates solely to disclosure requirements, adoption does not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

See Note 18 for additional information.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740):

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Management is currently assessing the impact of the adoption of this standard on the Company’s Consolidated Financial Statements.

In March 2024, FASB issued ASU 2024 - 03, Income Statement – Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40):

Disaggregation of Certain Income Statement Expenses, which was subsequently amended by ASU 2025 - 01 in January 2025 to clarify and refine certain requirements.

The ASU requires public business entities to disclose in the notes to the financial statements the amounts of employee compensation, depreciation, amortization, and inventory costs included in each relevant income statement line item.

The guidance also requires disclosure of other expense categories if they are significant to an understanding of the entity’s financial performance.

The amendments are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027 and entities are required to apply the amendments retrospectively.

Early adoption is permitted.

The Company will evaluate the impact of these standards on its Consolidated Financial Statements and related disclosures.

While the adoption of ASU 2024 - 03 and ASU 2025 - 01 will not affect the Company’s recognition, measurement or presentation of expenses on the face of the Consolidated Statements of Operations, it is expected to result in expanded disclosures in the notes to the Consolidated Financial Statements.

The Company has not yet determined whether it will early adopt the guidance.

REVENUE RECOGNITION

24 unchanged sentences

Due within one year

Due after one year through five years

The components of inventories at June 30, 2025 and 2024 were as follows:

16 unchanged sentences

Equipment and leasehold improvements, net

During the year ended June 30, 2024 and 2023, depreciation expense was $ 192,272 and $ 230,292 , respectively.

During the fiscal years ended June 30, 2025 and 2024, depreciation expense was $ 237,210 and $ 192,272 , respectively.

The Company utilizes the liability method of accounting for income taxes.

The liability method measures the expected income tax impact of future taxable income and deductions implicit in the Consolidated Balance Sheets.

The income tax (benefit) provision in 2024 and 2023 consisted of the following:

The income tax provision (benefit) in 2025 and 2024 consisted of the following:

Years Ended June 30,

Total income tax (benefit) provision

Total income tax provision (benefit)

The 2025 and 2024 tax results in an effective rate different than the federal statutory rate because of the following:

Years Ended June 30,

Federal income tax (benefit) liability at statutory rate

Federal income tax benefit at statutory rate

State income tax liability, net of federal income tax effect

Utilization of net operating loss carryforwards

( 1,720,747 )

Increase (decrease) in valuation allowance

Increase in valuation allowance

Stock option (deduction)

All other permanent items

Return-to-provision

Return-to-provision adjustment

Deferred adjustment related to payroll tax withholding on disqualifying disposition of incentive stock options

1 unchanged sentence

Uncertain tax position

Total income tax (benefit) provision

During the year ended June 30, 2024, a federal tax benefit of $ 81,278 was recorded as a result of the return-to-provision (RTP) adjustments recorded in the period identified.

The adjustments were identified when the prior year tax returns were filed in the third quarter of fiscal year 2024.

State income tax expense of $ 7,674 , which represented only the required minimum estimated state tax payments due, offset the federal tax benefit for a total income tax benefit of $ 73,604 .

For the year ended June 30, 2023, as a result of additional income generated by licensing fees, partially offset by related legal fees and expenses, taxable income for the period was generated.

Deferred adjustment related to state net operating loss

Total income tax provision (benefit)

During the year ended June 30, 2025, a federal tax provision of $ 5,570 was recorded for the uncertain tax position related to research and development (R&D) credits taken in a prior year .

State income tax expense of $ 11,912 , which represented only the required minimum estimated state tax payments due, combined with the federal tax expense for a total income tax expense of $ 17,482 .

For the year ended June 30, 2024, a federal tax benefit of $ 81,278 was recorded as a result of the Return-to-Provision (RTP) adjustment.

State tax expense of $ 7,674 was also recorded in that same period for the required minimum state tax payments.

For the year ended June 30, 2025, another $ 1,150,000 was added to the NOL balance as a result of taxable net losses 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 whereas NOL carryforwards from fiscal 2017 and 2018 could be utilized to offset taxable income at 100 percent.

The utilization of net operating loss carryforwards significantly reduced the taxable income for the year ended June 30, 2023, resulting in federal and state tax provisions of $ 230,139 and $ 87,238 , respectively.

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.

Temporary differences which give rise to deferred income tax assets and liabilities at June 30, 2025 and 2024 include:

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The Company has federal net operating loss carryforwards of approximately $ 34,000,000 which can be carried forward indefinitely and state net operating loss carryforwards totaling approximately $ 11,231,000 in Wisconsin, which expire in tax years 2029 through 2044 and approximately $ 15,367,000 in other states.

Given a taxable net loss for fiscal year 2024, it is expected that $ 1,270,000 will be added to the Company’s federal net operating loss carryforwards.

The Company's remaining tax loss carryforward as of June 30, 2024 is expected to be approximately $ 32,778,000 and given recurring taxable losses with the exception of fiscal year 2023 whereby taxable income was generated mainly as a result of non-recurring license proceeds, the future realization of this continues to be uncertain.

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

For the year ended June 30, 2023, the Company utilized federal net operating loss carryforwards of approximately $ 6,944,000 to offset taxable income.

At the state level, net operating loss carryforwards of $ 4,381,000 in Wisconsin and all other states combined were utilized.

Given a taxable net loss for fiscal year 2025, it is expected that $ 1,150,000 will be added to the Company’s federal net operating loss carryforwards and, given recurring taxable losses with the exception of fiscal year 2023 whereby taxable income was generated mainly as a result of non-recurring license proceeds, the future realization of this continues to be uncertain.

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

For the year ended June 30, 2024, the Company added federal net operating loss carryforwards of approximately $ 1,270,000 as a result of a taxable net loss for that fiscal year.

The need for a valuation allowance is evaluated each accounting period based on the Company’s evaluation of positive and negative evidence concerning the usage of their deferred tax assets.

1 unchanged sentence

The need for a valuation allowance is an estimate at period-end, which is subject to change once additional evidence is obtained in future periods.

The following are the changes in the valuation allowance:

Decrease (Increase)

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Generally accepted accounting principles in the United States (“GAAP”) prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return.

Due to the non-recurring license proceeds, the Company had positive taxable income for the fiscal year ending June 30, 2023 and was able to use all their federal R&D tax credits, including carryovers, of $ 132,466 .

Due to positive taxable income in prior years, a significant portion of the Company’s federal R&D tax credits were taken, including carryovers.

The claim for research and development (R&D) tax credits continues to be a highly scrutinized area by the Internal Revenue Service and, while the Company is confident in its credit claim, it cannot anticipate the impact that future guidance could have on current claims.

Due to the costs of defense, the Company may also decide to settle for less than the full amount of the credits used on the returns.

As a result, the Company believes that it is more likely than not that upon audit, the realization of the credits used would be 80% and accordingly recorded a liability of approximately $ 28,000 and $ 25,000 as a reserve for an uncertain tax position (“UTP”) related to the R&D credits taken at June 30, 2024 and 2023, respectively.

The UTP increased during 2024 due to a change in the final credit amount utilized with the fiscal year 2023 tax return.

The reserve for UTP was recorded in income taxes payable on the Consolidated Balance Sheets.

As a result, the Company believes that it is more likely than not that upon audit, the realization of the credits used would be 80% and accordingly recorded a liability as a reserve for an uncertain tax position (“UTP”) related to the R&D credits taken.

The UTP balance is $ 38,100 and $ 28,200 at June 30, 2025 and 2024, respectively.

The UTP increased during 2025 due to an additional credit amount utilized with the fiscal year 2024 tax return.

The reserve for UTP is recorded in income taxes payable on the Consolidated Balance Sheets.

There were no other matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return that have been recorded on the Company’s Consolidated Financial Statements for the years ended June 30, 2025 and 2024.

9 unchanged sentences

On January 28, 2021, the Credit Agreement was amended to extend the expiration to October 31, 2022, and to change the interest rate to Wall Street Journal Prime less 1.50 %.

A Third Amendment to the Credit Agreement effective October 30, 2022, extends the maturity date to October 31, 2024.

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.

11 unchanged sentences

Sales commissions

Amounts owed to employees for overpayment of payroll taxes on disqualifying dispositions of incentive stock options

Sales returns

Volume incentive rebates

Total accrued liabilities

8 unchanged sentences

The life expectancies used in the calculation of net present value were 17.30 and 18.10 years for fiscal years ended June 30, 2025 and 2024, respectively.

The increase in the deferred compensation expense recorded in the year ended June 30, 2024 compared to the prior year was due mainly to the annual increase in the future payments under the arrangement, offset partially by the increase in the discount factor.

The increase in the deferred compensation expense recorded in the year ended June 30, 2025 compared to the prior year was due mainly to the annual increase in the future payments under the arrangement along with the reduction in the time period before payments commence, offset partially by the increase in the discount factor.

The current officer's retirement date is estimated to be October 2029.

INCOME (LOSS) PER COMMON AND COMMON STOCK EQUIVALENT SHARE

Basic income (loss) per 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:

LOSS PER COMMON SHARE

Basic loss per 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:

Years Ended June 30,

3 unchanged sentences

Diluted shares

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

(1) Excludes 717,024 weighted average stock options during the year ended June 30, 2024 as the impact of such awards was anti-dilutive.

No stock options were anti-dilutive for the year ended June 30, 2023.

Net loss attributable to common shareholders per share:

(1) Excludes 385,613 and 717,024 weighted average stock options during the years ended June 30, 2025 and 2024 as the impact of such awards was anti-dilutive.

STOCK OPTIONS

22 unchanged sentences

1.73 - $ 2.65

Shares under option at June 30, 2024

13 unchanged sentences

Total recognized tax benefit

A summary of the Company’s non-vested stock option activity and related weighted-average grant date fair values for the fiscal years ended June 30, 2025 and 2024 is as follows:

Non-vested as of June 30, 2023

28 unchanged sentences

The lease is described more fully in Note 14.

During the year ended June 30, 2024, the Company made no charitable contribution to the Koss Foundation (the “Foundation”), a 501(c)(3) charitable organization for which Michael J.

Koss and John C.

Koss Jr., executive officers of the Company, serve as officers.

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

There were $ 75,000 of charitable contributions made to the Foundation during the year ended June 30, 2023.

EMPLOYEE BENEFIT PLANS

5 unchanged sentences

This plan covers all employees of the Company who have completed one full fiscal quarter of service.

Matching contributions can be made at the discretion of the

Board of Directors.

Matching contributions can be made at the discretion of the Board of Directors.

For fiscal years 2025 and 2024, the matching contribution was 25 % of employee contributions to the plan.

4 unchanged sentences

The five largest customers of the Company accounted for approximately 50 % of net sales in fiscal year 2025 and 46 % in fiscal year 2024.

The three customers with individual accounts receivable balances greater than 10% as of June 30, 2024 were Ingram Micro, Amazon Vendor Central and The Computer Supply People.

As of June 30, 2024 and 2023, accounts receivable from Ingram Micro represented 18 % and 14 % of total trade accounts receivable, respectively, and Amazon Vendor Central accounts receivable represented approximately 15 % and 13 %, respectively.

The Computer Supply People accounts receivable as of June 30, 2024 and 2023 was approximately 12 % and less than 10 %, respectively, while there was no accounts receivable from Eurostar as of the end of the current fiscal year, the accounts receivable as of June 30, 2023 was 24 % of total trade accounts receivable.

The three customers with individual accounts receivable balances greater than 10% as of June 30, 2025 were Access Catalog, Ingram Micro and Amazon Vendor Central.

As of June 30, 2025 and 2024, accounts receivable from Access Catalog represented 16 % and less than 10 % of total trade accounts receivable, respectively, Ingram Micro accounts receivable represented 13 % and 18 %, respectively, and Amazon Vendor Central accounts receivable represented approximately 11 % and 15 %, respectively.

The Computer Supply People accounts receivable as of June 30, 2025 and 2024 was less than 10 % and 12 %, respectively.

The majority of international customers, outside of Canada, purchase products on a cash against documents or cash in advance basis.

Approximately 5 % and 24 % of the Company's trade accounts receivable at June 30, 2024 and 2023, were foreign receivables denominated in U.S.

Approximately 5 % of the Company's trade accounts receivable at both June 30, 2025 and 2024, were foreign receivables denominated in U.S.

The Company uses contract manufacturing facilities in the People’s Republic of China and Taiwan.

2 unchanged sentences

However, increased costs from the vendor or an interruption of supply from this vendor could have a material adverse effect on the Company's profit margins and profitability.

SEGMENT INFORMATION

The Company has a single reportable segment, the design, manufacture and sale of headphones and related accessories, which reflects the manner in which the Company’s Chief Executive Officer, who is the Company’s CODM, regularly reviews financial information to manage the business, allocate resources and assess performance.

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 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.

Years Ended June 30,

Cost of goods sold

Gross profit margin

Selling, general and administrative expenses:

New product certification and compliance testing

Legal and professional expense

Deferred compensation expense

Other selling, general and administrative expenses

Selling, general and administrative expenses

Segment net loss includes interest income and income taxes.

The CODM also reviews the following balance sheet items at period-end as part of performance monitoring and resource allocation decisions:

As of June 30,

Cash and cash equivalents

Short term investments

Long term investments

Total segment assets

The Company applied the provisions of ASU 2023-07 retrospectively and has included comparative information for the year ended June 30, 2024.

Because the Company operates as a single reportable segment, the amounts above reconcile directly to the corresponding consolidated financial statement line items.

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

LEGAL MATTERS

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

 As previously reported, the Company has launched a program focused on enforcing its intellectual property and, in particular, certain of its patent portfolio.

The Company has continued to enforce its intellectual property by filing 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 will be due to third parties.

 As previously reported, the Company maintains a program focused on enforcing its intellectual property and, in particular, certain of its patent portfolio.

The Company has 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 Consolidated 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 .

During the year ended June 30, 2023, 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 were recorded as other income, offset by legal fees and related expenses of approximately $ 22,141,000 which were recorded as selling, general and administrative expenses.

Also, on August 4, 2023 , the Company’s lawsuit against Plantronics, Inc.

and Polycom, Inc.

was dismissed following resolution of the litigation between the parties and had no impact on the Company’s Consolidated Financial Statements.

 The Company was notified by One-E-Way, Inc.

 In early fiscal year 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.

A Supplemental Notice of Infringement was sent to the Company on March 18, 2025.

The Company is investigating the merits of the notice.

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 Consolidated Financial Statements.

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Although management currently believes that resolving these claims against us, individually or in aggregate, will not have a material adverse impact on our Consolidated Financial Statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

SUBSEQUENT EVENTS

The Company leases a reach truck under a financing lease arrangement.

The lease has a non-cancelable term of 36 months and requires monthly payments of $ 990 , due on the first day of each month, beginning July 1, 2025.

The lease contains a $ 1 purchase option at the end of the lease term that the Company is reasonably certain to exercise, and at which time ownership of the lift truck will transfer to the Company.

At lease commencement, the Company recognized a right-of-use (“ROU”) asset and a corresponding lease liability of $ 31,716 , representing the present value of lease payments discounted at the current borrowing rate per the lessor of 7.75 %.

The ROU asset will be presented within Other Assets and will be amortized over the lease term.

The lease liability will be presented within Current and Long-Term Liabilities on the Consolidated Balance Sheet.

On July 4, 2025, the U.S.

Congress enacted the One Big Beautiful Bill Act (the “OBBB Act”), which introduced significant tax changes such as making permanent many of the provisions of the TCJA, while introducing new, or restructuring other, tax policies.

The provisions include modification to corporate tax rates, expensing rules for research and development, restoration of the 100% bonus depreciation deduction, treatment of foreign income and various other changes to credits and deductions.

The Company will assess the specific financial statement implications and evaluate the impacts on income taxes payable, deferred tax assets and liabilities (including valuation allowances), and the effective tax rate, in accordance with ASC 740.

Given the complexity of the legislation and the variables involved, management is currently unable to reasonably estimate the financial impact on the Company.

EXHIBIT INDEX

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Koss as President of K.F.T.

Corporation**

Death Benefit Agreement with John C.

Filed as Exhibit 9.1 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2023 and incorporated herein by reference.

Stock Purchase Agreement with John C.

Death Benefit Agreement with John C.

Filed as Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996 and incorporated herein by reference.

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Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by reference.

Revolving Credit Agreement dated May 14, 2019, between Koss Corporation and Town Bank Filed as Exhibit 10.1 to the Company’s Form 8-K on May 16, 2019 and incorporated by reference herein.

First Amendment to Revolving Credit Agreement dated January 28, 2022, and between Koss Corporation and Town Bank filed as Exhibit 10.1 to the Company’s Form 10-Q on January 29, 2022 and incorporated by reference here.

Revolving Credit Agreement dated May 14, 2019, between Koss Corporation and Town Bank.

Filed as Exhibit 10.1 to the Company’s Form 8-K on May 16, 2019 and incorporated h erein by reference .

First Amendment to Revolving Credit Agreement dated January 28, 2021, and between Koss Corporation and Town Bank.

Filed as Exhibit 10.1 to the Company’s Form 10-Q on January 29, 2021 and incorporated herein by reference.

Second Amendment to Revolving Credit Agreement dated February 4, 2022.

Filed as Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2023 and incorporated herein by reference .

Third Amendment to Revolving Credit Agreement, effective October 30, 2022, by and between the Company and Town Bank.

Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q on October 28, 2022 and incorporated herein by reference.

Fourth Amendment to Revolving Credit Agreement, effective October 30, 2024, by and between the Company and Town Bank.

Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q on November 1, 2024 and incorporated herein by reference.

General Business Security Agreement dated May 14, 2019, between Koss Corporation and Town Bank Filed as Exhibit 10.2 to the Company’s Form 8-K on May 16, 2019 and incorporated by reference herein.

6 unchanged sentences

Filed as Exhibit 14 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2011 and incorporated by reference herein.

Koss Corporation Insider Trading and Tipping Policy**

Subsidiaries of Koss Corporation.

3 unchanged sentences

Rule 13a -14(a)/15d-14(a) Certification of Chief Financial Officer.

Section 1350 Certification of Chief Executive Officer.

Section 1350 Certification of Chief Financial Officer.

Certification of Michael Koss, Chief Executive Officer, pursuant to 18 U.S.C.

Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***

Certification of Kim Schulte, Chief Financial Officer, pursuant to 18 U.S.C.

Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***

Koss Corporation Incentive-Based Compensation Clawback Policy.

Filed as Exhibit 97 to the Company’s Annual Report on Form 10-K for the year ended June 30, 2024 and incorporated herein by reference.

The following financial information from Koss Corporation’s Annual Report on Form 10-K for the year ended June 30, 2025, formatted in XBRL (eXtensible Business Reporting Language):

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Furnished herewith.

This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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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-K

Item 9A. Controls and Procedures