KOSS CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are designed to ensure that (1) information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (2) that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2025. The Company’s management has concluded that the Company’s disclosure controls and procedures as of June 30, 2025, were effective at the reasonable assurance level. Management’s Annual Report on Internal Controls over Financial Reporting . The Company’s management, including its Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and designing such internal controls to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. There are inherent limitations to the effectiveness of any system of internal control over financial reporting, including the possibility of human error or the circumvention or overriding of controls and procedures. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving its control objectives. Management conducted its evaluation of the effectiveness of its internal control over financial reporting based on the framework in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that the Company’s internal control over financial reporting as of June 30, 2025, was effective. Changes in Internal Control over Financial Reporting There were no changes in the Company's internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. ITEM 9B. OTHER INFORMATION Not applicable. ITEM 9C. DISCL OSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 26 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. This information is incorporated by reference to Koss Corporation’s Proxy Statement for its 2025 Annual Meeting of Stockholders to be filed with the Commission under Regulation 14A within 120 days of the end of the fiscal year covered by this Form 10-K. The Company adopted a code of ethics, which is a "code of ethics" as defined by applicable rules of the SEC, which is applicable to its directors, officers and employees. The code of ethics is publicly available on the Company's website at investors.koss.com. 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. ITEM 11. EXECUTIVE COMPENSATION. This information is incorporated by reference to Koss Corporation’s Proxy Statement for its 2025 Annual Meeting of Stockholders to be filed with the Commission under Regulation 14A within 120 days of the end of the fiscal year covered by this Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. This information is incorporated by reference to Koss Corporation’s Proxy Statement for its 2025 Annual Meeting of Stockholders to be filed with the Commission under Regulation 14A within 120 days of the end of the fiscal year covered by this Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. This information is incorporated by reference to Koss Corporation’s Proxy Statement for its 2025 Annual Meeting of Stockholders to be filed with the Commission under Regulation 14A within 120 days of the end of the fiscal year covered by this Form 10-K. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. This information is incorporated by reference to Koss Corporation’s Proxy Statement for its 2025 Annual Meeting of Stockholders to be filed with the Commission under Regulation 14A within 120 days of the end of the fiscal year covered by this Form 10-K. ‎ 27 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. The following documents are filed as part of this report: 1. Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 29 Consolidated Balance Sheets as of June 30, 2025 and 2024 31 Consolidated Statements of Operations for the Years Ended June 30, 2025 and 2024 32 Consolidated Statements of Cash Flows for the Years Ended June 30, 2025 and 2024 33 Consolidated Statements of Stockholders’ Equity for the Years Ended June 30, 2025 and 2024 34 Notes to Consolidated Financial Statements 35 2. Financial Statement Schedules All schedules have been omitted because the information is not applicable, is not material or because the information required is included in the Consolidated Financial Statements or the notes thereto. 3. Exhibits Filed See Exhibit Index attached hereto. ‎ 28 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors Koss Corporation and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Koss Corporation and Subsidiaries (the “Company”) as of June 30, 2025 and 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended June 30, 2025 and 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for the years ended June 30, 2025 and 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. Deferred Compensation As described in Note 10 to the consolidated financial statements, the Company has a deferred compensation agreement with a current officer as of June 30, 2025 and 2024, which is measured at its estimated net present value. The principal consideration for our determination that deferred compensation should be a critical audit matter was based on the subjective nature of the assumptions estimated and used by management to calculate the deferred compensation liability. Assumptions subject to estimate included discount rates, mortality rates, and future retirement date. Changes to these assumptions may have a material impact on the consolidated financial statements. The primary audit procedures we performed to address this critical audit matter included:  We tested the design of controls over the Company’s process for accounting and recording the deferred compensation liability.  We evaluated management’s calculation methodology and its compliance with accounting principles generally accepted in the United States of America regarding deferred compensation liabilities.  We tested the discount and mortality rate assumptions used by management to calculate the deferred compensation liability by independently determining our own assumptions based on the relevant facts and circumstances and recalculating the deferred compensation liability utilizing those assumptions.  We confirmed with the current officer his expected retirement date. 29 Table of Contents /s/ Wipfli LLP PCAOB ID 344 We have served as the Company’s auditor since 2019. Radnor, Pennsylvania August 29, 2025 ‎ 30 Table of Contents KOSS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of June 30, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 2,807,797 $ 2,837,081 Short term investments 12,879,882 12,104,459 Accounts receivable, less allowance for credit losses of $ 2,043 and $ 1,922 , respectively 1,135,672 1,208,319 Inventories 4,885,067 4,473,680 Prepaid expenses and other current assets 738,330 1,081,437 Interest receivable 121,178 170,429 Income taxes receivable 36,179 41,756 Total current assets 22,604,105 21,917,161 Equipment and leasehold improvements, net 1,476,898 1,223,391 Other assets: Long term investments 4,000,774 4,994,327 Operating lease right-of-use asset 2,518,088 2,765,445 Cash surrender value of life insurance 6,584,744 6,299,155 Total other assets 13,103,606 14,058,927 Total assets $ 37,184,609 $ 37,199,479 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 819,330 $ 329,829 Accrued liabilities 582,140 462,858 Deferred revenue 242,644 229,384 Operating lease liability 252,579 239,688 Income taxes payable 42,958 35,899 Total current liabilities 1,939,651 1,297,658 Long-term liabilities: Deferred compensation 2,226,454 2,093,124 Deferred revenue 119,314 119,787 Operating lease liability 2,289,155 2,541,734 Total long-term liabilities 4,634,923 4,754,645 Total liabilities 6,574,574 6,052,303 Stockholders' equity: Common stock, $ 0.005 par value, authorized 20,000,000 shares; issued and outstanding 9,456,438 and 9,299,795 , respectively 47,282 46,499 Paid in capital 13,741,384 13,404,477 Retained earnings 16,821,369 17,696,200 Total stockholders' equity 30,610,035 31,147,176 Total liabilities and stockholders' equity $ 37,184,609 $ 37,199,479 The accompanying notes are an integral part of these Consolidated Financial Statements. ‎ 31 Table of Contents KOSS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended June 30, 2025 2024 Net sales $ 12,624,170 $ 12,265,069 Cost of goods sold 7,850,572 8,079,622 Gross profit 4,773,598 4,185,447 Selling, general and administrative expenses 6,510,721 6,057,606 Loss from operations ( 1,737,123 ) ( 1,872,159 ) Interest income 879,774 847,644 Loss before income tax provision (benefit) ( 857,349 ) ( 1,024,515 ) Income tax provision (benefit) 17,482 ( 73,604 ) Net loss $ ( 874,831 ) $ ( 950,911 ) Loss per common share: Basic $ ( 0.09 ) $ ( 0.10 ) Diluted $ ( 0.09 ) $ ( 0.10 ) Weighted-average number of shares: Basic 9,363,117 9,251,373 Diluted 9,363,117 9,251,373 The accompanying notes are an integral part of these Consolidated Financial Statements. ‎ 32 Table of Contents KOSS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended June 30, 2025 2024 Operating activities: Net loss $ ( 874,831 ) $ ( 950,911 ) 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 237,210 192,272 Net accretion of discount on treasury securities ( 222,880 ) ( 379,591 ) Noncash operating lease expense 7,669 7,669 Stock-based compensation expense 31,782 155,834 Change in cash surrender value of life insurance ( 215,012 ) ( 197,363 ) Provision for deferred compensation 133,330 96,004 Net changes in operating assets and liabilities: Accounts receivable 72,526 175,303 Inventories ( 411,387 ) 1,949,761 Prepaid expenses and other current assets 343,107 ( 78,923 ) Interest receivable 49,251 ( 119,279 ) Income taxes receivable 5,577 45,145 Income taxes payable 7,059 ( 51,338 ) Accounts payable 489,501 62,316 Accrued liabilities 119,282 ( 1,020,193 ) Deferred revenue 12,787 ( 73,132 ) Net cash used in operating activities ( 214,908 ) ( 190,531 ) Investing activities: Purchase of equipment and leasehold improvements ( 490,717 ) ( 461,760 ) Life insurance premiums paid ( 70,577 ) ( 81,744 ) Proceeds from the maturity of treasury securities 14,303,000 14,331,000 Purchases of treasury securities ( 13,861,990 ) ( 13,985,921 ) Net cash used in investing activities ( 120,284 ) ( 198,425 ) Financing activities: Proceeds from exercise of stock options 305,908 134,975 Net cash provided by financing activities 305,908 134,975 Net decrease in cash and cash equivalents ( 29,284 ) ( 253,981 ) Cash and cash equivalents at beginning of year 2,837,081 3,091,062 Cash and cash equivalents at end of year $ 2,807,797 $ 2,837,081 Supplemental cash flow information: Cash paid (refunded) for income taxes $ 4,847 $ ( 67,410 ) The accompanying notes are an integral part of these Consolidated Financial Statements. ‎ 33 Table of Contents KOSS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY 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 — — — ( 950,911 ) ( 950,911 ) Stock-based compensation expense — — 155,834 — 155,834 Exercise of common stock options 65,000 325 134,650 — 134,975 Balance, June 30, 2024 9,299,795 46,499 13,404,477 17,696,200 31,147,176 Net loss — — — ( 874,831 ) ( 874,831 ) Stock-based compensation expense — — 31,782 — 31,782 Exercise of common stock options 156,643 783 305,125 — 305,908 Balance, June 30, 2025 9,456,438 $ 47,282 $ 13,741,384 $ 16,821,369 $ 30,610,035 The accompanying notes are an integral part of these Consolidated Financial Statements. ‎ 34 Table of Contents KOSS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS — Koss Corporation ("Koss"), a Delaware corporation, and its 100 %-owned subsidiaries (collectively the "Company"), reports its finances as a single reporting segment, as the Company’s only business line is the design, manufacture and sale of stereo headphones and related accessories. The Company leases its plant and office in Milwaukee, Wisconsin. The domestic market is served by domestic sales representatives and independent manufacturers' representatives working directly with certain retailers, distributors, and original equipment manufacturers. International markets are served by domestic sales representatives and sales personnel in the Netherlands and the Caucasus region which utilize independent distributors in several foreign countries. The Company has two subsidiaries, Koss Corp B.V. and Koss U.K. Limited ("Koss UK"), which were formed to comply with certain European Union ("EU") requirements. Koss Corp B.V. and Koss UK are non-operating and hold no assets. 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. 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. There are a very limited number of customers for which control does not pass until they have received the products at their facility. Revenue from product sales is adjusted for estimated warranty obligations and variable consideration, which are detailed below. The amount of revenue recognized is to reflect the consideration expected to be received for those goods or services. Warranties - The Company offers a lifetime warranty to consumers in the United States and certain other countries. This lifetime warranty creates a future performance obligation. The Company determines the standalone selling price for this performance obligation using the cost-plus method. There are also certain foreign distributors that receive warranty repair parts and replacement headphones to satisfy warranty obligations in those countries. The Company defers revenue to recognize the future obligations related to these warranties. The deferred revenue is based on historical analysis of warranty claims relative to sales. This deferred revenue reflects the Company's best estimates of the amount of warranty returns and repairs it will experience during those future periods. If future warranty activity varies from the estimates, the Company will adjust the estimated deferred revenue, which would affect net sales and operating results in the period that such adjustment becomes known. The Company typically receives payment for product at the time of shipment or under normal collection terms, which are generally 30-60 days. The Company estimates that the warranty related performance obligation is satisfied within one to three years and therefore uses that same time frame for recognition of the deferred revenue, using amortization of 50 % in year 1 , 30 % in year 2 , and 20 % in year 3 for domestic sales. Export deferred revenue, where applicable, is recognized over a 12-month period from date of shipment. Reserves for Variable Consideration - Revenue from product sales is recorded at the net sales price, which includes estimates of variable consideration for which reserves are established and which result from returns, rebates, and co-pay assistance that are offered within contracts between the Company and its customers. Overall, these reserves reflect the Company's best estimates of the amount of consideration to which it is entitled based on the terms of the contract. If actual results in the future vary from the estimates, the Company will adjust these estimates, which would affect net sales and operating results in the period such variances become known. Product Returns - The Company generally offers customers a limited right of return. The Company estimates the amount of product sales that may be returned by its customers and records the estimate as a reduction of revenue in the period the related product revenue is recognized. Product return liabilities are estimated using historical sales and returns information. If actual results in the future vary from the estimates, the Company will adjust these estimates, which would affect net sales and operating results in the period such variances become known. Volume Rebates - The Company offers volume rebates to certain customers in the United States and certain foreign distributors. These volume rebates are tied to sales volume within specified periods. The amount of revenue is reduced for variable consideration related 35 Table of Contents 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. Seller Fees – The Company pays fees to a major online marketplace for use of its services. Referral fees, the commission paid to the online platform to cover the costs associated with promoting, advertising, and facilitating product sales to its customers, are calculated as a percentage of the sales price and are imposed on sales of all products sold through the marketplace. When orders are fulfilled by the online marketplace, the Company is assessed fulfillment fees to cover the cost of fulfillment of the order as well as the assumption of risk of inventory control, damages and returns. The fees assessed are based on a product’s category, price, size and weight and are deducted from the sales price of each product prior to remittance to the Company with revenue reported on a net basis. Revenue from orders obtained through the online marketplace, but fulfilled by the Company direct to the end customer, are reported as gross sales and referral fees are recorded as selling expense in selling, general and administrative expenses. The Company’s related fulfillment costs are recorded in cost of goods sold. Sales Commissions - The Company has elected the practical expedient of not capitalizing sales commissions. RESEARCH AND DEVELOPMENT — Research and development is primarily comprised of product prototypes and testing. These activities, charged to operations as a component of selling, general and administrative expenses in the accompanying Consolidated Statements of Operations, amounted to $ 213,870 and $ 238,086 in 2025 and 2024, respectively. ADVERTISING COSTS — Advertising costs included within selling, general and administrative expenses in the accompanying Consolidated Statements of Operations were $ 251,966 in 2025 and $ 142,859 in 2024. Such costs are expensed as incurred. INCOME TAXES — The Company operates as a C Corporation under the Internal Revenue Code (the “Code”). Amounts provided for income tax expense (benefit) are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred income tax assets and liabilities are adjusted through the provision (benefit) for income taxes. The differences relate principally to different methods used for depreciation and amortization for income tax purposes, net operating loss carryforwards, capitalization requirements of the Code, allowances for doubtful accounts, provisions for excess and obsolete inventory, stock-based compensation, warranty reserves, and other income tax-related carryforwards. A valuation allowance is established when necessary to reduce deferred income tax assets to the amount that is more likely than not to be realized. PATENT COSTS — The Company incurs on-going legal fees and filing costs related to the patent portfolio. These costs are expensed in the period they are incurred since no patent legal costs are probable to provide a future economic benefit. 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. The Company maintains its cash on deposit at a commercial bank located in the United States of America. The Company periodically has cash balances in excess of insured amounts. The Company has not experienced, and does not expect to incur, any losses on these deposits. 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. 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. 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 . 36 Table of Contents 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. 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 discount to maturity. Such amortization or accretion is included in interest income, along with other interest on cash and cash equivalents. Accrued interest receivable on held-to-maturity debt securities is shown separately on the Consolidated Balance Sheets and is not included in any estimate for credit losses. 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 4 for additional information on investments. INVENTORIES — As of June 30, 2025 and 2024, the Company’s inventory was recorded using standard cost which approximates the lower of first in first out (“FIFO”) cost or net realizable value. The carrying value of inventory is reviewed for impairment on at least a quarterly basis, or more frequently if warranted due to changes in market conditions. See Note 5 for additional information on inventory. EQUIPMENT AND LEASEHOLD IMPROVEMENTS — Equipment and leasehold improvements are stated at cost. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Major expenditures for leasehold improvements and equipment and significant renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation and amortization are removed from the accounts and any resulting gains or losses are included in operations. See Note 6 for additional information on equipment and leasehold improvements. LEASES — The Company determines if a contract is a lease at the date of inception. 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 the former chairman’s revocable trust and includes current stockholders of the Company. The lease agreement provides the Company the right to substantially all of the economic benefits and direct the use of the building, thus is considered a lease. The agreement does not convey ownership of the building to the lessee at the end of the lease term, does not contain an option to purchase the underlying asset at the end of the lease term and the lease term is not for a major part of the remaining economic life of the underlying asset so is accounted for as an operating lease. Operating leases are reported on the Company's Consolidated Balance Sheets as operating lease right-of-use ("ROU") assets and operating lease liabilities. Operating lease ROU assets and liabilities are valued at the present value of the future lease payment obligations. The Company uses a rate based upon current incremental borrowing rates to determine the present value of future lease payments as the rate is not implicit in the lease. Operating lease expense is recorded on a straight-line basis over the life of the lease taking into account expected renewal periods. LIFE INSURANCE POLICIES — Life insurance policies are stated at cash surrender value or at the amount the Company would receive in the case of split-dollar arrangements. Increases in cash surrender value, net of annual premiums paid, and the proceeds from company-owned life insurance policies are included in selling, general and administrative expenses and other income, respectively, in the Consolidated Statements of Operations. DEFERRED COMPENSATION —At June 30, 2025 and 2024, 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 Consolidated Statements of Operations. See Note 10 for additional information on deferred compensation. 37 Table of Contents FAIR VALUE OF FINANCIAL INSTRUMENTS — 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. 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 4. IMPAIRMENT OF LONG-LIVED ASSETS — The Company evaluates the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Management determines fair value using an undiscounted future cash flow analysis or other accepted valuation techniques. No impairments of the Company's long-lived assets were recorded in the years ended June 30, 2025 or 2024. 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. Proceeds from the settlement of legal disputes are recorded in other income when the amounts are determinable, and the collection is certain. License proceeds are considered functional and as such are recorded at a point in time, based on the underlying agreement. Related contingent legal fees and expenses are recorded in selling, general and administrative expense at that time. 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. The Company accounts for stock-based compensation in accordance with ASC 718 “Compensation - Stock Compensation”. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. The Company recognizes forfeitures as they occur. 2. 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): Improvements to Income Tax Disclosures. The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid and requires consistent categories and greater disaggregation of information in the rate reconciliation, income taxes paid disaggregated by jurisdiction and certain other amendments. The new guidance will be effective for annual periods beginning after December 15, 2024, or the Company’s fiscal year ending June 30, 2026. Management is currently assessing the impact of the adoption of this standard on the Company’s Consolidated Financial Statements. 38 Table of Contents 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. 3. 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: 2025 2024 United States $ 8,968,799 $ 9,795,438 Export 3,655,371 2,469,631 Net Sales $ 12,624,170 $ 12,265,069 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. The Company recognized revenue, which was included in the deferred revenue liability at the beginning of the periods, of $ 230,192 and $ 308,851 in the years ended June 30, 2025 and 2024, respectively, for performance obligations related to consumer and customer warranties. The deferred revenue liability was $ 422,303 as of June 30, 2 023 . The Company estimates that the deferred revenue performance obligations are satisfied within 1 to 3 years and therefore uses the same time frame for recognition of the deferred revenue. 4. INVESTMENTS The following tables summarize the unrealized positions for the held-to-maturity debt securities as of June 30, 2025 and 2024, respectively: Amortized Cost Basis Gross unrealized gains Gross unrealized losses Fair Value US Treasury securities $ 16,880,656 $ 52,103 $ 625 $ 16,932,134 Total $ 16,880,656 $ 52,103 $ 625 $ 16,932,134 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 The following tables summarize the fair value and amortized cost basis of the held-to-maturity debt securities by contractual maturity as of June 30, 2025 and 2024, respectively: Amortized Cost Basis Fair Value Due within one year $ 12,879,882 $ 12,909,183 Due after one year through five years 4,000,774 4,022,951 Total $ 16,880,656 $ 16,932,134 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 39 Table of Contents 5. INVENTORIES The components of inventories at June 30, 2025 and 2024 were as follows: 2025 2024 Raw materials $ 1,966,662 $ 1,973,531 Finished goods 4,815,881 4,357,621 Inventories, gross 6,782,543 6,331,152 Reserve for obsolete inventory ( 1,897,476 ) ( 1,857,472 ) Inventories, net $ 4,885,067 $ 4,473,680 6. EQUIPMENT AND LEASEHOLD IMPROVEMENTS The major categories of equipment and leasehold improvements at June 30, 2025 and 2024 are summarized as follows: Estimated useful lives (in years) 2025 2024 Machinery and equipment 5 - 10 $ 619,064 $ 619,064 Furniture and office equipment 5 - 10 337,419 337,419 Tooling 5 3,898,743 3,765,766 Computer & technology equipment 3 - 5 197,073 197,073 Leasehold improvements 3 - 11 3,591,681 3,171,070 Assets in progress N/A 297,120 359,990 8,941,100 8,450,382 Less: accumulated depreciation and amortization 7,464,202 7,226,991 Equipment and leasehold improvements, net $ 1,476,898 $ 1,223,391 During the fiscal years ended June 30, 2025 and 2024, depreciation expense was $ 237,210 and $ 192,272 , respectively. 7. INCOME TAXES 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 provision (benefit) in 2025 and 2024 consisted of the following: Years Ended June 30, 2025 2024 Current: Federal $ 5,570 $ ( 81,278 ) State 11,912 7,674 Deferred — — Total income tax provision (benefit) $ 17,482 $ ( 73,604 ) ‎ 40 Table of Contents The 2025 and 2024 tax results in an effective rate different than the federal statutory rate because of the following: Years Ended June 30, 2025 2024 Federal income tax benefit at statutory rate $ ( 171,882 ) $ ( 214,457 ) State income tax liability, net of federal income tax effect ( 28,359 ) ( 41,386 ) Increase in valuation allowance 207,877 270,679 Stock option (deduction) ( 152,407 ) ( 243 ) All other permanent items ( 47,104 ) ( 45,299 ) R&D credit ( 6,999 ) ( 25,459 ) Return-to-provision adjustment 3,411 ( 81,738 ) Deferred adjustment related to payroll tax withholding on disqualifying disposition of incentive stock options 33,665 110,906 State tax rate change 43,812 ( 55,248 ) Uncertain tax position 4,279 2,593 Deferred adjustment related to state net operating loss 119,059 — Other 12,130 6,048 Total income tax provision (benefit) $ 17,482 $ ( 73,604 ) 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. Temporary differences which give rise to deferred income tax assets and liabilities at June 30, 2025 and 2024 include: 2025 2024 Deferred income tax assets: Deferred compensation $ 541,577 $ 523,785 Stock-based compensation 34,315 76,532 Accrued expenses and reserves 498,423 501,736 Deferred revenue 123,766 102,519 Federal and state net operating loss carryforwards 8,697,265 8,508,548 IRC Section 174 research and development costs 127,053 116,204 Credit carryforwards 173,529 184,406 Equipment and leasehold improvements 184,868 159,648 Operating lease liability 618,268 696,026 Valuation allowance ( 10,384,574 ) ( 10,176,697 ) Total deferred income tax assets 614,490 692,707 Deferred income tax liabilities: Operating right-of-use asset ( 612,516 ) ( 692,028 ) Other ( 1,974 ) ( 679 ) Total deferred income tax liabilities ( 614,490 ) ( 692,707 ) Net deferred income tax assets $ — $ — D eferred income tax balances reflect the effects of temporary differences between the tax bases of assets and liabilities and their carrying amounts. These differences are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. The recognition of these deferred tax balances will be realized through normal recurring operations and, as such, the Company has recorded the value of such expected benefits. 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 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 41 Table of Contents allowance. 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. As of the end of the period, the Company has evaluated all evidence concerning the usage of their deferred tax assets and the determination has been made to maintain a full valuation allowance on the Company’s net deferred tax asset. 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. Balance, Decrease (Increase) beginning in valuation Balance, Years Ended June 30, of year allowance end of year 2025 $ ( 10,176,697 ) $ ( 207,877 ) $ ( 10,384,574 ) 2024 $ ( 9,906,018 ) $ ( 270,679 ) $ ( 10,176,697 ) 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 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 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. Additionally, GAAP provides guidance on the recognition of interest and penalties related to income taxes. No interest or penalties related to income taxes has been accrued or recognized as of and for the years ended June 30, 2025 or 2024. The Company records interest related to unrecognized tax benefits, when applicable, in interest expense. The Company files income tax returns in the United States federal jurisdiction and in several state jurisdictions. The Company’s federal tax returns and state income tax returns are open for the standard statutory period. 8. 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 and 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 extend the expiration to October 31, 2022, and 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 June 30, 2025, the Company was in compliance with all covenants related to the Credit Agreement. As of June 30, 2025 and 2024, there were no outstanding borrowings on the facility and t here was no interest expense recognized during the years then ended. ‎ 42 Table of Contents 9. ACCRUED LIABILITIES Accrued liabilities as of June 30, 2025, and 2024 were as follows: 2025 2024 Cooperative advertising and promotion allowances $ 122,561 $ 86,935 Customer credit balances 43,811 33,453 Employee benefits 94,663 72,240 Legal and professional fees 57,300 80,200 Bonus and profit-sharing 30,000 52,563 Sales commissions 50,844 44,045 Sales returns 16,434 11,615 Volume incentive rebates 130,420 48,896 Other 36,107 32,911 Total accrued liabilities $ 582,140 $ 462,858 10. DEFERRED COMPENSATION As of June 30, 2025 and 2024, the Company has a deferred compensation agreement with a current officer. 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 Consolidated Statements of Operations. The Company's non-current deferred compensation obligation is recorded as deferred compensation in the Consolidated Balance Sheets. The deferred compensation liability of $ 2,226,454 and $ 2,093,142 recorded at June 30, 2025 and June 30, 2024, respectively, relates to a supplemental retirement plan for a current officer that calls for annual cash compensation following retirement from the Company in an amount equal to 2 % of base salary, as defined in the agreement, multiplied by the number of years of service to the Company. The retirement payments are to be paid monthly to the officer until his death and then to his surviving spouse monthly until her death. Deferred compensation expense of $ 133,330 and $ 96,004 was recognized under this arrangement during the years ended June 30, 2025 and 2024, respectively, to record the liability at net present value of the future expected payments. The net present value was calculated using a discount factor of 5.81 % and 5.55 % at June 30, 2025 and 2024, respectively. 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, 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. 11. 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, 2025 2024 Numerator Net (loss) income $ ( 874,831 ) $ ( 950,911 ) Denominator Weighted average shares, basic 9,363,117 9,251,373 Dilutive effect of stock compensation awards (1) — - Diluted shares 9,363,117 9,251,373 Net loss attributable to common shareholders per share: Basic $ ( 0.09 ) $ ( 0.10 ) Diluted $ ( 0.09 ) $ ( 0.10 ) (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. 43 Table of Contents 12. STOCK OPTIONS In July 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 Compensation Committee of the Board of Directors administers the 2023 Plan 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. As of June 30, 2025, no new stock-based awards have been granted under the 2023 Plan. The fair value of each stock option grant under the 2012 Plan was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. Forfeitures are accounted for as they occur. The expected term of awards granted was determined based on historical experience with similar awards, giving consideration to the expected term and vesting schedules. The expected volatility was determined based on the Company’s historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate was based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. As of June 30, 2025, there was $ 1,473 of total unrecognized compensation cost related to stock options granted under the 2012 Plan. This cost is expected to be recognized over a weighted average period of 0.06 years. The Company recognized stock-based compensation expense of $ 31,782 and $ 155,834 in 2025 and 2024, respectively. These expenses were included in selling, general and administrative expenses. The following table identifies options granted, exercised, canceled, or available for exercise pursuant to the 2012 Plan: Aggregate Weighted Intrinsic Weighted Average Value of Stock Average Remaining In-The- Number of Options Exercise Contractual Money Shares Price Range Price Life - Years Options Shares under option at June 30, 2023 920,911 $ 1.73 - $ 2.92 $ 2.21 2.21 $ 1,373,117 Granted — $ — $ — Exercised ( 65,000 ) $ 1.73 - $ 2.65 $ 2.08 Expired ( 200,000 ) $ $ 2.92 $ 2.92 Forfeited — $ — $ — Shares under option at June 30, 2024 655,911 $ 1.73 - $ 2.65 $ 2.01 1.65 $ 1,602,600 Granted — $ — $ — Exercised ( 156,643 ) $ 1.73 - $ 2.65 $ 1.95 Expired ( 220,911 ) $ $ 2.17 $ 2.17 Forfeited ( 5,000 ) $ $ 1.73 $ 1.73 Shares under option at June 30, 2025 273,357 $ 1.73 - $ 2.65 $ 1.91 1.45 $ 871,190 Exercisable as of June 30, 2024 501,911 $ 1.73 - $ 2.65 $ 2.05 1.19 $ 1,202,985 Exercisable as of June 30, 2025 253,357 $ 1.73 - $ 2.65 $ 1.93 1.16 $ 803,790 The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of the Company's stock on any given date and the exercise price, multiplied by the number of in-the-money outstanding and exercisable stock options. ‎ 44 Table of Contents A summary of intrinsic value and cash received from stock option exercises and fair value of vested stock options for the fiscal years ended June 30, 2025 and 2024 is as follows: 2025 2024 Total intrinsic value of stock options exercised $ 671,786 $ 179,865 Cash received from stock option exercises $ 305,908 $ 134,975 Total fair value of stock options vested $ 144,327 $ 278,208 Total recognized tax benefit $ 140,892 $ 37,073 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: Weighted Average Grant Date Shares Fair Value Non-vested as of June 30, 2023 388,666 $ 1.17 Granted — — Vested ( 234,666 ) 1.19 Forfeited — — Non-vested as of June 30, 2024 154,000 1.14 Granted — — Vested ( 129,000 ) 1.12 Forfeited ( 5,000 ) 1.22 Non-vested as of June 30, 2025 20,000 $ 1.22 13. STOCK REPURCHASE PROGRAM In April 1995, the Board of Directors approved a stock repurchase program authorizing the Company to purchase from time to time up to $ 2,000,000 of its common stock for its own account. Subsequently, the Board of Directors periodically approved increases in the amount authorized for repurchase under the program. As of June 30, 2025, the repurchase of an aggregate of $ 45,500,000 of common stock was authorized under the stock repurchase program, of which $ 43,360,247 had been expended. No shares were repurchased in fiscal year 2025 or 2024. 14. LEASES 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 the 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 (the “Extended Term”), 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 “Second Extended Term”). 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. The Company used its incremental borrowing rate as of the date of renewal, May 24, 2022, to recalculate the net present value of the operating lease ROU asset and liability. Both the Extended Term and the Second Extended Term renewal options were included in the calculation of the ROU asset and liability as the Company believes it is reasonably certain to exercise both rights to renew. The non-lease components of the agreement related to common area maintenance charges are accounted for separately. Supplemental information related to lease expense and valuation of the ROU asset and liability was as follows: Year Ended 2025 2024 Operating lease cost $ 387,669 $ 387,669 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ ( 380,000 ) $ ( 380,000 ) Weighted-average remaining lease term (in years) 8 9 Weighted-average discount rate 5.25 % 5.25 % 45 Table of Contents The maturity schedule of future minimum lease payments and reconciliation to the operating lease liabilities reported on the 2025 Consolidated Balance Sheet is as follows: Year Ending June 30, 2026 $ 380,000 2027 380,000 2028 380,000 2029 397,000 2030 397,000 Thereafter 1,191,000 Total lease payments 3,125,000 Present value adjustment ( 583,266 ) Total lease liabilities $ 2,541,734 15. 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 the former chairman’s revocable trust and includes current stockholders of the Company. The lease is described more fully in Note 14. 16. EMPLOYEE BENEFIT PLANS The Company amended and restated its Koss Employee Stock Ownership Trust (“KESOT”) effective July 1, 2023 and received approval from the Board of Directors on July 26, 2023. Substantially all domestic employees are participants in the KESOT under which an annual contribution in either cash or common stock may be made at the discretion of the Board of Directors. All contributions to date have been fully allocated to employees’ company contribution accounts. No contributions were made for the years ended June 30, 2025 or 2024, respectively. The Company maintains a retirement savings plan under Section 401(k) of the Internal Revenue Code. 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. For fiscal years 2025 and 2024, the matching contribution was 25 % of employee contributions to the plan. Vesting of Company contributions occurs immediately. Company contributions were $ 79,240 and $ 80,831 during 2025 and 2024, respectively. 17. CONCENTRATIONS In the years ended June 30, 2025 and 2024, the Company’s largest concentration of sales came from DTC through the Amazon portal and were approximately 19 % and 17 % of net sales in fiscal year 2025 and 2024, respectively. 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, 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 % of the Company's trade accounts receivable at both June 30, 2025 and 2024, were foreign receivables denominated in U.S. dollars. The Company uses contract manufacturing facilities in the People’s Republic of China and Taiwan. The majority of the contract manufacturing is done by two vendors with one vendor representing approximately 68 % and 65 % of the manufacturing costs in fiscal years 2025 and 2024, respectively. The Company has a long-term relationship with this vendor. 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. 18. 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. 46 Table of Contents 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, 2025 2024 Net sales $ 12,624,170 $ 12,265,069 Cost of goods sold 7,850,572 8,079,622 Gross profit margin 37.8 % 34.1 % Selling, general and administrative expenses: New product certification and compliance testing 226,719 22,036 Legal and professional expense 999,359 940,090 Deferred compensation expense 133,330 96,004 Other selling, general and administrative expenses 5,151,313 4,999,476 Selling, general and administrative expenses 6,510,721 6,057,606 Net loss ( 874,831 ) ( 950,911 ) 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, 2025 2024 Cash and cash equivalents $ 2,807,797 $ 2,837,081 Short term investments 12,879,882 12,104,459 Long term investments 4,000,774 4,994,327 Inventories 4,885,067 4,473,680 Total segment assets 37,184,609 37,199,479 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. 19. LEGAL MATTERS As of June 30, 2025, the Company is involved in the following matters described below:  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 .  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. 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. The Company estimates that this matter will ultimately be resolved at a cost of approximately $ 41,000 and has accrued this amount in accrued liabilities as of June 30, 2025 and 2024. The ultimate resolution of these matters is not determinable unless otherwise noted. We are also subject to a variety of other claims and suits that arise from time to time in the ordinary course of our business. 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. 47 Table of Contents 20. 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. ‎ 48 Table of Contents EXHIBIT INDEX Exhibit No. Exhibit Description 3.1 Amended and Restated Certificate of Incorporation of Koss Corporation, as in effect on November 19, 2009. Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2009 and incorporated herein by reference. 3.2 By-Laws of Koss Corporation. Filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended June 30, 1996 and incorporated herein by reference. 3.3 Amendment to the By-Laws of Koss Corporation. Filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K on March 7, 2006 and incorporated herein by reference. 3.4 Amendment to the By-Laws of Koss Corporation. Filed as Exhibit 3.4 to the Company's Annual Report on Form 10-K for the year ended June 30, 2020 and incorporated herein by reference. 4.1 Description of Common Stock of Koss Corporation. Filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended June 30, 2020 and incorporated herein by reference. 9.1 Restated Koss Voting Trust Agreement by and among Michael J. Koss (the Voting Trustee) and John C. Koss, Jr. and Michael J. Koss, as co-Trustees of the John C. Koss, Sr. Revocable Trust, the Nancy Koss 2012 Trust, the Koss Family Trust and Michael J. Koss as President of K.F.T. Corporation. 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. 10.1 Death Benefit Agreement with John C. Koss. 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. * 10.2 Consent of Directors (Supplemental Executive Retirement Plan for Michael J. Koss dated March 7, 1997). 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. * 10.3 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 . 10.4 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. 10.5 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 . 10.6 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. 10.7 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. 10.8 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. 10.9 Koss Corporation 2012 Omnibus Incentive Plan (Incorporated by reference to Appendix B to Koss Corporation's Definitive Proxy Statement on Schedule 14A filed on August 27, 2012). * 10.10 Koss Corporation 2023 Equity Incentive Plan. Filed as Exhibit 10.1 to Koss Corporation’s Current Report on Form 8-K filed on October 23, 2023 and incorporated herein by reference. * 10.11 Koss Corporation 2023 Equity Incentive Plan Notice of Grant of Stock Option Award. Filed as Exhibit 10.2 to Koss Corporation's Quarterly Report on 10-Q filed February 2, 2024 and incorporated herein by reference. * 14 Koss Corporation Code of Ethics. 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. 19.1 Koss Corporation Insider Trading and Tipping Policy** 21.1 Subsidiaries of Koss Corporation. Filed as Exhibit 21.1 to the Company’s Annual report on Form 10-K for the year ended June 30, 2020 and incorporated herein by reference. 23.1 Consent of Wipfli LLP. ** 31.1 Rule 13a -14(a)/15d-14(a) Certification of Chief Executive Officer. ** 31.2 Rule 13a -14(a)/15d-14(a) Certification of Chief Financial Officer. ** 32.1 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*** 32.2 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*** 97 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. 49 Table of Contents 101 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): (i) Consolidated Balance Sheets as of June 30, 2025 and 2024, (ii) Consolidated Statements of Operations for the years ended June 30, 2025 and 2024, (iii) Consolidated Statements of Cash Flows for the years ended June 30, 2025 and 2024, (iv) Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2025 and 2024 and (v) the Notes to the Consolidated Financial Statements. 104 The cover page from Koss Corporation’s Annual Report on Form 10-K for the year ended June 30, 2025, filed with the Securities and Exchange Commission on August 29, 2025, formatted in XBRL Cover Page Interactive Data File ** __________________________ * Denotes a management contract or compensatory plan or arrangement ** Filed herewith *** 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. ‎ 50 Table of Contents SIGNATURES 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. KOSS CORPORATION By: /s/ Michael J. Koss August 29, 2025 Michael J. Koss Chairman Chief Executive Officer By: /s/ Kim M. Schulte August 29, 2025 Kim M. Schulte Chief Financial Officer Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on August 29, 2025. /s/ Michael J. Koss /s/ Thomas L. Doerr Michael J. Koss, Director Thomas L. Doerr, Director /s/ Steven A. Leveen /s/ William J. Sweasy Steven A. Leveen, Director William J. Sweasy, Director /s/ Lenore E. Lillie Lenore E. Lillie, Director 51