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What changed in KOSS CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of KOSS CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+170 added−141 removedSource: 10-K (2025-08-29) vs 10-K (2024-08-30)

Top changes in KOSS CORP's 2025 10-K

170 paragraphs added · 141 removed · 111 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

19 edited+2 added−0 removed28 unchanged
Biggest changeThe Company is dependent upon its ability to retain a base of retailers and distributors to sell the Company’s line of products. A material loss or disruption of retailers and/or distributors could result in a loss of product placement and have an adverse effect on the Company’s financial results.
Biggest changeA material loss or disruption of retailers and/or distributors could result in a loss of product placement and have an adverse effect on the Company’s financial results. The Company’s five largest customers accounted for approximately 50% and 46% of net sales in fiscal years 2025 and 2024, respectively. COMPETITION The Company principally focuses on the stereo headphone industry.
During fiscal years 2024 and 2023, the amounts incurred in complying with federal, state and local statutes and regulations pertaining to environmental standards and occupational safety and health laws and regulations did not materially affect the Company’s operating results or financial condition. The increased public awareness and concern regarding climate change has resulted in increased regulations which are rapidly evolving.
During fiscal years 2025 and 2024, the amounts incurred in complying with federal, state and local statutes and regulations pertaining to environmental standards and occupational safety and health laws and regulations did not materially affect the Company’s operating results or financial condition. The increased public awareness and concern regarding climate change has resulted in increased regulations which are rapidly evolving.
The remaining approximately 23% of the Company’s sales were from headphones used in communications, education settings, and in conjunction with metal detectors, as well as sold to original equipment manufacturers (“OEM”). The products are not significantly differentiated by their retail sales channel or application with the exception of products sold to school systems, prisons, and OEM customers.
The remaining approximately 16% of the Company’s sales were from headphones used in communications, education settings, and in conjunction with metal detectors, as well as sold to original equipment manufacturers (“OEM”). The products are not significantly differentiated by their retail sales channel or application with the exception of products sold to school systems, prisons, and OEM customers.
Management believes that the Company’s business is not seasonal as evidenced by the fact that the Company’s net sales for the last three years, including the year ended June 30, 2024, were fairly evenly dispersed throughout the year.
Management believes that the Company’s business is not seasonal as evidenced by the fact that the Company’s net sales for the last three years, including the year ended June 30, 2025, were fairly evenly dispersed throughout the year.
Additionally, the Company fills direct-to-consumer (“DTC”) orders on its website. The Company markets its products through many domestic retail outlets and numerous retailers worldwide. The Company also markets products directly to several OEMs for use in their products.
Additionally, the Company fills direct-to-consumer (“DTC”) orders on its website and via online marketplaces. The Company markets its products through many domestic retail outlets and numerous retailers worldwide. The Company also markets products directly to several OEMs for use in their products.
The Company considers protecting its intellectual property rights to be central to its business model and competitive position in the stereo headphone industry. ‎ 5 Table of Contents SEASONALITY Although retail sales of consumer electronics have historically been higher during the holiday season, sales of stereo headphones have smoothed throughout the year.
The Company considers protecting its intellectual property rights to be central to its business model and competitive position in the stereo headphone industry. ‎ 5 Table of Contents SEASONALITY Although retail sales of consumer electronics have historically been higher during the holiday season, sales of stereo headphones are generally smooth throughout the year.
International markets are served by domestic sales representatives and sales personnel in the Netherlands and the Caucasus region. The Company utilizes independent distributors in several foreign countries. Approximately 77% of the Company’s fiscal year 2024 sales were from stereo headphones used for listening to music.
International markets are served by domestic sales representatives and sales personnel in the Netherlands and the Caucasus region. The Company utilizes independent distributors in several foreign countries. Approximately 84% of the Company’s fiscal year 2025 sales were from stereo headphones used for listening to music.
Recovery of a single facility through replacement of a supplier in the event of a disaster or suspension of supply could take an estimated six to twelve months, in which case the Company believes that it could restore production of its top 10 selling models (which represent approximately 45% of the Company’s 2024 net sales) within 18-24 months.
Recovery of a single facility through replacement of a supplier in the event of a disaster or suspension of supply could take an estimated six to twelve months, in which case the Company believes that it could restore production of its top 10 selling models (which represented approximately 56% of the Company’s 2025 net sales) within 18-24 months.
The Company is uncertain how the conflict will impact future sales. OPERATIONS The Company has a manufacturing facility in Milwaukee, Wisconsin and uses contract manufacturing facilities in the People’s Republic of China and Taiwan. A contract employee is based in China to manage supplier quality and to assist with development of new products.
MANUFACTURING OPERATIONS The Company has a manufacturing facility in Milwaukee, Wisconsin and uses contract manufacturing facilities in the People’s Republic of China and Taiwan. A contract employee is based in China to manage supplier quality and to assist with development of new products.
In addition, any fluctuations in currency exchange rates could affect the pricing of the Company’s products and divert customers who might choose to purchase lower-priced, less profitable products, and could affect overall demand for the Company’s products.
The creation of additional barriers would reduce the Company’s net sales and net income. In addition, any fluctuations in currency exchange rates could affect the pricing of the Company’s products and divert customers who might choose to purchase lower-priced, less profitable products, and could affect overall demand for the Company’s products.
As of June 30, 2024, the Company had over 400 trademarks registered in approximately 91 countries around the world and over 160 patents in approximately 25 countries. The Company has trademarks to protect the brand name, Koss, and its logo on its products.
As of June 30, 2025, the Company had over 400 trademarks registered in approximately 88 countries around the world and over 170 patents in approximately 26 countries. The Company has trademarks to protect the brand name, Koss, and its logo on its products.
It is unclear as to whether any emerging and evolving regulations will have a material impact on the Company's results of operations. 6 Table of Contents EMPLOYEES As of June 30, 2024, the Company employed 30 non-union employees, 2 of which were part-time employees. The Company also engaged temporary personnel at times during the year ended June 30, 2024.
It is unclear as to whether any emerging and evolving regulations will have a material impact on the Company's results of operations. 6 Table of Contents EMPLOYEES As of June 30, 2025, the Company employed 28 employees, 2 of which were part-time employees. The Company did not engage any temporary personnel during the year ended June 30, 2025.
FOREIGN SALES The Company’s competitive position and risks relating to its business in foreign markets are comparable to those in the domestic market. In addition, the governments of the United States and foreign nations may elect to erect trade barriers on exports and/or imports, respectively. The creation of additional barriers would reduce the Company’s net sales and net income.
None of our employees are covered by a collective bargaining agreement. FOREIGN SALES The Company’s competitive position and risks relating to its business in foreign markets are comparable to those in the domestic market. In addition, the governments of the United States and foreign nations may elect to erect trade barriers and impose further tariffs on exports and/or imports, respectively.
In the years ended June 30, 2024 and 2023, the Company’s largest sales concentration was represented by its own DTC offerings via the Amazon portal and were approximately 17% and 20% of net sales in fiscal years 2024 and 2023, respectively. The Company’s products have broad distribution worldwide across many channels including distributors, specialty stores, mass merchants, and electronics stores.
In the fiscal years ended June 30, 2025 and 2024, the Company’s largest sales concentration was represented by its own DTC offerings via the Amazon portal and were approximately 19% and 17% of net sales in fiscal years 2025 and 2024, respectively.
These activities were conducted by both Company personnel and outside consultants. There was $288,231 in expenses for research and development activities during fiscal year 2023. The Company expects to incur on-going research and development costs related to its Bluetooth® and traditional wired headphones as it is planning to introduce new product offerings on a regular basis.
The Company expects to incur on-going research and development costs related to its Bluetooth® and traditional wired headphones as it is planning to introduce new product offerings on a regular basis.
During the last two fiscal years, net sales of all Koss products were distributed as follows: 2024 2023 United States $ 9,795,438 $ 9,848,521 Sweden 993,043 997,058 Czech Republic 418,004 1,328,476 Ukraine 214,010 (11,955) Korea, Republic of 185,143 176,581 Georgia 125,920 — Canada 101,056 209,159 All other countries 432,455 551,811 Net sales $ 12,265,069 $ 13,099,651 As a result of the Russian-Ukraine conflict, the Company suspended all sales to Russia in accordance with Executive Order 14071 issued by President Biden on April 6, 2022.
During the last two fiscal years, net sales of all Koss products were distributed as follows: 2025 2024 United States $ 8,968,799 $ 9,795,438 Sweden 1,247,981 993,043 Czech Republic 1,206,827 418,004 Korea, Republic of 207,061 185,143 Malaysia 156,976 41,641 Canada 131,320 101,056 Japan 114,438 66,682 All other countries 590,768 664,062 Net sales $ 12,624,170 $ 12,265,069 As a result of the Russian-Ukraine conflict, the Company suspended all sales to Russia in accordance with Executive Order 14071 issued by President Biden on April 6, 2022.
The Company’s five largest customers accounted for approximately 46% and 51% of net sales in fiscal years 2024 and 2023, respectively. COMPETITION The Company principally focuses on the stereo headphone industry. In the stereo headphone market, the Company competes with all major competitors, many of which are large and diversified and have greater total assets and resources than the Company.
In the stereo headphone market, the Company competes with all major competitors, many of which are large and diversified and have greater total assets and resources than the Company.
The Company relies upon its unique sound, quality workmanship, brand identification, engineering skills, and customer service, as well as its intellectual property portfolio, to support its competitive position. RESEARCH AND DEVELOPMENT The amount expensed on engineering and research activities relating to the development of new products or the improvement of existing products was $238,086 during fiscal year 2024.
The Company relies upon its unique sound, quality workmanship, brand identification, engineering skills, and customer service, as well as its intellectual property portfolio, to support its competitive position. RESEARCH AND DEVELOPMENT The Company’s research and development activities are conducted by both Company personnel and outside consultants.
Sales to Ukraine have also been impacted as a result of the humanitarian crisis there due to the ongoing hostilities. In the years ended June 30, 2024 and 2023, there were no sales to Russia, however, Ukraine resumed ordering in fiscal year 2024 and represented approximately 9% of the Company’s export business during the year ended June 30, 2024.
In the years ended June 30, 2025 and 2024, there were no sales to Russia, however, sales to Ukraine resumed in fiscal year 2024 and those sales represented approximately 2% and 9% of the Company’s export business during the fiscal years ended June 30, 2025 and 2024, respectively. The Company is uncertain how the conflict will impact future sales.
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The Company’s products have broad distribution worldwide across many channels including distributors, specialty stores, mass merchants, and electronics stores. The Company is dependent upon its ability to retain a base of retailers and distributors to sell the Company’s line of products.
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Sales to Ukraine have also been impacted as a result of the humanitarian crisis there due to the ongoing hostilities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

37 edited+25 added−7 removed59 unchanged
Biggest changeWe are subject to income taxes in the United States. Our effective income tax rate could be adversely affected in the future by several factors, including changes in the valuation of deferred tax assets and liabilities and changes in tax laws. We regularly assess all of these matters to determine the adequacy of our tax provision.
Biggest changeChanges in tax laws and unanticipated tax liabilities could adversely affect our effective income tax rate and profitability. The Company is subject to income taxes in the United States.
Factors such as the depth and liquidity of the market for our common stock, investor perceptions of us and our business, actions by institutional shareholders, strategic actions by us, litigation, changes in accounting standards, policies, guidance, interpretations and principles, additions or departures of key personnel, a decline in demand for our products and our results of operations, financial performance and future prospects may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from realizing the liquidity of their shares.
Factors such as the depth and liquidity of the market for our common stock, investor perceptions of us and our business, actions by institutional shareholders, strategic actions by us, litigation, changes in accounting standards, policies, guidance, interpretations and principles, additions or departures of key personnel, a decline in demand for our products and our results of operations, financial performance and future prospects may cause the market price and demand for our common stock to fluctuate substantially, which may 14 Table of Contents limit or prevent investors from realizing the liquidity of their shares.
We have experienced and may again in the future experience supplier price increases, supply chain and shipping interruptions and constraints, volatility in demand for our products caused by sudden and significant changes in production levels by our suppliers, and disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials or other product components, transportation, work force, or force majeure events.
We have experienced, and may again in the future experience supplier price increases, supply chain and shipping interruptions and constraints, volatility in demand for our products caused by sudden and significant changes in production levels by our suppliers, and disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply 11 Table of Contents elements such as raw materials or other product components, transportation, work force, or force majeure events.
Inflation may impact customer demand for our products resulting from a slowdown in consumer spending as disposable income decreases due to rising interest rates, the price of essential items, availability of credit and dwindling savings.
Inflation may impact customer demand for the Company’s products resulting from a slowdown in consumer spending as disposable income decreases due to rising interest rates, the price of essential items, availability of credit and dwindling savings.
The Koss family, including certain members of our management, owns a significant percentage of our stock and, as a result, the trading price for our shares may be depressed and they can take actions that may be adverse to the interests of our stockholders.
The Koss family, including certain members of our management, owns a significant percentage of our stock and, as a result, the trading price for our shares may be depressed and it can take actions that may be adverse to the interests of our stockholders.
These competitors may have significant competitive advantages, including greater financial, engineering, distribution and marketing resources, longer operating histories, better brand recognition among certain groups of consumers, and greater economies of scale. In addition, these competitors often have long-term relationships with many larger retailers that are potentially more important to those retailers.
These competitors may have significant competitive advantages, including greater financial, engineering, distribution and marketing resources, longer operating histories, better brand 12 Table of Contents recognition among certain groups of consumers, and greater economies of scale. In addition, these competitors often have long-term relationships with many larger retailers that are potentially more important to those retailers.
The inability to compete effectively against new and existing competitors could have an adverse effect on our net sales and results of operations, preventing us from achieving future growth. 10 Table of Contents If we are unable to obtain intellectual property rights and/or enforce those rights against third parties who are violating those rights, our business could suffer.
The inability to compete effectively against new and existing competitors could have an adverse effect on our net sales and results of operations, preventing us from achieving future growth. If we are unable to obtain intellectual property rights and/or enforce those rights against third parties who are violating those rights, our business could suffer.
A reduction or interruption in supply, including interruptions due to possible future pandemic- related restrictions, geopolitical unrest, labor shortages or strikes, or a failure to procure adequate components, may lead to delays in manufacturing or increases in costs. Many of the Company’s products are sourced from contract manufacturing facilities in the People’s Republic of China and Taiwan.
A reduction or interruption in supply, including interruptions due to possible future pandemic- related restrictions, geopolitical unrest, labor shortages or strikes, or a failure to procure adequate components, may lead to delays in manufacturing or increases in costs. Over 90% of the Company’s products are sourced from contract manufacturing facilities in the People’s Republic of China and Taiwan.
Other than restrictions on trading that arise under securities laws (or pursuant to our securities trading policy that is intended to facilitate compliance with securities laws), including the prohibition on trading in securities by or on behalf of a person who is aware of nonpublic material information, we have no restrictions on the right of our employees, directors and officers, and their affiliates, to sell their unrestricted shares of common stock. ‎ 14 Table of Contents ITEM 1B.
Other than restrictions on trading that arise under securities laws (or pursuant to our Insider Trading and Tipping Policy that is intended to facilitate compliance with securities laws), including the prohibition on trading in securities by or on behalf of a person who is aware of nonpublic material information, we have no restrictions on the right of our employees, directors and officers, and their affiliates, to sell their unrestricted shares of common stock. ‎ 15 Table of Contents ITEM 1B.
As a result of this volatility, investors may experience losses on their investment in our common stock. 13 Table of Contents A “short squeeze” due to a sudden increase in demand for shares of our common stock that largely exceeds supply could lead to extreme price volatility in shares of our common stock.
As a result of this volatility, investors may experience losses on their investment in our common stock. A “short squeeze” due to a sudden increase in demand for shares of our common stock that largely exceeds supply could lead to extreme price volatility in shares of our common stock.
The Company is dependent upon its ability to attract and retain a base of customers to sell the Company’s line of products. The Company has broad 9 Table of Contents distribution across many channels including specialty stores, mass merchants, electronics stores and computer retailers.
The Company is dependent upon its ability to attract and retain a base of customers to sell the Company’s line of products. The Company has broad distribution across many channels including specialty stores, mass merchants, electronics stores and computer retailers.
The Company continues to experience inflationary cost pressures in our commodities, packaging materials, wages and higher energy and transportation costs, thus potentially impacting our ability to meet customer demand. We attempt to mitigate th ese increases through pricing strategies, as well as working with a dedicated freight forwarding partner to minimize freight rate increases.
The Company continues to experience inflationary cost pressures in commodities, packaging materials, wages and higher energy and transportation costs, thus potentially impacting the ability to meet customer demand. The Company attempts to mitigate th ese increases through pricing strategies, as well as working with a dedicated freight forwarding partner to minimize freight rate increases.
Risks Related to Our Operations and Financial Results The Company is dependent on the proper functioning of our contract manufacturers, our supply chain, and our distribution networks. Any disruptions could adversely affect our business, financial condition or results of operations.
Operational and Financial Risks The Company is dependent on the proper functioning of our contract manufacturers, our supply chain, and our distribution networks. Any disruptions could adversely affect our business, financial condition or results of operations.
The Company uses contract manufacturing facilities in the People’s Republic of China. Significant increases in wages or wage taxes paid by contract manufacturing facilities may increase the cost of goods manufactured in China which could have a material adverse effect on the Company’s profit margins and profitability.
Significant increases in wages or wage taxes paid by contract manufacturing facilities may increase the cost of goods manufactured in China which could have a material adverse effect on the Company’s profit margins and profitability.
Our largest concentration of sales in fiscal year 2024 came from our DTC sales via the Amazon portal and accounted for more than 17% and 20% of our net sales in fiscal years 2024 and 2023, respectively.
Our largest concentration of sales in fiscal year 2025 came from our DTC sales via the Amazon portal and accounted for more than 19% and 17% of our net sales in fiscal years 2025 and 2024, respectively.
Risks associated with potential operations, commitments, and investments outside of the U.S. include but are not limited to risks of: global and local economic, social and political conditions and uncertainty; currency exchange restrictions and currency fluctuations; export and import duties; war, such as the invasion of Ukraine by Russia, military conflicts in the Middle East or terrorist attack; local outbreak of disease or pandemic; renegotiation or nullification of existing contracts or international trade arrangements; labor market conditions and workers’ rights affecting our manufacturing operations or those of our customers; macro-economic conditions impacting key markets and sources of supply; changing laws and policies affecting trade, taxation, financial regulation, immigration, and investment; compliance with laws and regulations that differ among jurisdictions, including those covering taxes, intellectual property ownership and infringement, imports and exports, anti-corruption, and anti-bribery, antitrust and competition, data privacy, and environment, health, and safety; and general hazards associated with the assertion of sovereignty over areas in which operations are conducted, transactions occur, or counterparties are located.
Risks associated with potential operations, commitments, and investments outside of the U.S. include but are not limited to risks of: global and local economic, social and political conditions and uncertainty; currency exchange restrictions and currency fluctuations; export and import duties; additional tariffs imposed on exports from the U.S. to other countries, potentially impacting pricing to customers in those countries; war, such as the invasion of Ukraine by Russia, military conflicts in the Middle East or terrorist attack; local outbreak of disease or pandemic; renegotiation or nullification of existing contracts or international trade arrangements; labor market conditions and workers’ rights affecting our manufacturing operations or those of our customers; macro-economic conditions impacting key markets and sources of supply; changing laws and policies affecting trade, taxation, financial regulation, immigration, and investment; compliance with laws and regulations that differ among jurisdictions, including those covering taxes, intellectual property ownership and infringement, imports and exports, anti-corruption, and anti-bribery, antitrust and competition, data privacy, and environment, health, and safety; and general hazards associated with the assertion of sovereignty over areas in which operations are conducted, transactions occur, or counterparties are located. 10 Table of Contents A shift in U.S. and China trade relations, policies and imposed tariffs could adversely affect the Company’s business, financial condition and results of operations.
In accordance with Executive Order 14071 signed on April 6, 2022, the Company suspended sales to Russia at that time. Also, as a result of the humanitarian crisis in Ukraine created by the war and the population seeking refuge in other countries, sales to Ukraine were impacted.
In accordance with Executive Order 14071 signed on April 6, 2022 soon after the war began, the Company suspended sales to Russia. Also, as a result of the humanitarian crisis in Ukraine created by the war and the population seeking refuge in other countries, sales to Ukraine have been impacted.
Michael Koss, our President and Chief Executive Officer, beneficially owned 4,018,410 shares of our common stock as of August 1, 2024, representing 42.5% of shares outstanding on such date, including shares held by a voting trust over which Mr. Koss holds sole voting and dispositive power.
Michael Koss, our President and Chief Executive Officer, beneficially owned 3,858,410 shares of our common stock as of August 1, 2025, representing 40.8% of shares outstanding on such date, including shares held by a voting trust over which Mr. Koss holds sole voting and dispositive power.
Any failure to maintain the security of the data, including the penetration of our network security and the misappropriation of confidential and personal information, could result in business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs, and also result in deterioration in customers confidence in us and other competitive disadvantages, and thus could have a material adverse impact on our financial condition and results of operations. 11 Table of Contents Cyberattacks are a growing geopolitical risk, becoming larger, more frequent, more sophisticated and more relentless as technology has evolved, resulting in privacy, security, and compliance concerns.
Any failure to maintain the security of the data, including the penetration of our network security and the misappropriation of confidential and personal information, could result in business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs, and also result in deterioration in customers confidence in us and other competitive disadvantages, and thus could have a material adverse impact on our financial condition and results of operations.
Additionally, over the years, the Company, the technology industry, and the stock market as a whole have experienced extreme stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to companies’ operating performance.
Additionally, over the years, the Company, the technology industry, and the stock market as a whole have experienced dramatic and extreme stock price and volume fluctuations that have affected stock prices in ways that may have been driven primarily by social media hype rather than companies’ operating performance and prospects.
Component defects could make the Company’s products unsafe and create a risk of property damage and personal injury. There can be no assurance the Company will be able to detect all issues and defects in the products it offers. Failure to do so can result in widespread technical and performance issues affecting the Company’s products.
There can be no assurance that the Company will be able to detect all issues and defects in the products it offers. Failure to do so can result in widespread technical and performance issues affecting the Company’s products.
During the fiscal year ended June 30, 2024, the sales price of our common stock fluctuated between a reported high sales price of $6.95 on May 14, 2024 and a reported low sales price of $2.27 on April 17, 2024. The trading volume in shares of our common stock can also vary widely.
During the fiscal year ended June 30, 2025, the sales price of our common stock fluctuated between a reported high sales price of $18.73 on July 3, 2024 and a reported low sales price of $4.00 on April 9, 2025. The trading volume in shares of our common stock can also vary widely.
If any of the following risks, or those unidentified develop into actual events, our business may not grow, our stock price may suffer, and we may be unable to stay in business. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
If any of the following risks, or those unidentified, develop into actual events, the Company’s business, reputation, results of operations, financial condition and stock price can be materially and adversely affected. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
Persistent inflationary pressures and elevated interest rates have the potential to adversely affect the Company’s business, financial condition and results of operations, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
If certain customers, individually or in aggregate, choose to no longer sell our products, slow their rate of purchase of our products or decrease the number of unique products they purchase, our results of operations would be adversely affected.
If certain customers, individually or in aggregate, choose to no longer sell our products, slow their rate of purchase of our products or decrease the number of unique products they purchase, our results of operations would be adversely affected. 13 Table of Contents Our products may experience quality problems from time to time that can result in decreased sales and operating margin and harm to our reputation.
There have been no sales to Russia during the fiscal years ended June 30, 2024 and 2023, however, sales to Ukraine resumed during the current fiscal year with more expected in the future.
There were no sales to Russia during the fiscal years ended June 30, 2025 and 2024, however, sales to Ukraine resumed in the fiscal year ended June 30, 2024 with more expected in the future. Prior to the imposition of the sanctions against Russia, fiscal year 2022 sales to Russia approximated 2% of the Company’s total sales.
Other risk factors further exacerbated by inflation include supply chain disruptions, increased oil and energy costs, risks of international operations and the recruitment and retention of talent. Risks Related to our International Operations Economic regulation, trade restrictions, and increasing manufacturing costs in China could adversely impact our business and results of operations.
Other risk factors further exacerbated by inflation include supply chain disruptions, increased oil and energy costs, risks of international operations and the recruitment and retention of talent. Risks Related to our International Operations We may be subject to risks related to doing business in, and having counterparties based in, foreign countries.
They are a significant threat to individual organizations and national security. High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting businesses.
High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting businesses. While we devote resources to security measures to protect our systems and data, these measures cannot provide absolute security.
For example, during the most recent fiscal year, daily trading volume ranged from a low of 2,000 shares on April 30, 2024 to a high of 19,694,200 on May 14, 2024.
For example, during the most recent fiscal year, daily trading volume ranged from a low of 11,400 shares on May 1, 2025 to a high of 70,055,500 on July 3, 2024.
We may be subject to risks related to doing business in, and having counterparties based in, foreign countries. We engage in operations, and enter into agreements with counterparties, located outside the U.S., which exposes us to political, governmental, and economic instability and foreign currency exchange rate fluctuations.
We engage in operations, and enter into agreements with counterparties located outside the U.S., which exposes us to political, governmental, and economic instability and foreign currency exchange rate fluctuations. Any disruption caused by these factors could harm our business, results of operations, financial condition, liquidity, and prospects.
If our tax strategies are ineffective or we are not in compliance with domestic and international tax laws, our financial position, operating results, and cash flows could be adversely affected. Our business, financial condition and results of operations may be adversely impacted by the effects of inflation.
If current tax strategies are ineffective or not in compliance with domestic and international tax laws, the Company’s financial position, operating results, and cash flows could be adversely affected. Risks Related to our Stock Our stock price has been, and may in the future, be subject to significant fluctuations and volatility.
The length, impact and outcome of the ongoing conflict is highly unpredictable and the conflict has caused, and has expected to continue to cause, global political, economic and social instability, volatility in commodity prices and energy prices, increased cyberattacks and disruptions to the global economy, international trade and global supply chain.
For example, the conflict in Russia and Ukraine and the related sanctions and trade restrictions on Russia have caused and are expected to continue to cause, global political, economic and social instability, volatility in 9 Table of Contents commodity prices and energy prices, increased cyberattacks and disruptions to the global economy .
Risks Related to our Stock Our stock price has been, and may in the future, be subject to significant fluctuations and volatility. The market price of our stock is subject to price volatility.
The market price of our stock is subject to price volatility.
Additionally, government trade policies, including the imposition of tariffs, export restrictions, sanctions or other retaliatory measures, as described above under “ The Company is dependent on the proper functioning of our contract manufacturers, our supply chain, and our distribution networks.
See further discussion below under “ The Company is dependent on the proper functioning of our contract manufacturers, our supply chain, and our distribution networks.
In a world that runs on the internet, the Company can only be as strong as its weakest link, whether as a financial service provider, third party distributor, reseller, transportation service provider, contract manufacturer, customer or consumer. Changes in tax laws and unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.
These types of attacks can also have an impact on the entire supply and distribution chain for the Company’s product line. Given connectivity through the internet, the Company can only be as strong as the weakest link, whether that is a financial service provider, third party distributor, reseller, transportation service provider, contract manufacturer, customer or consumer.
Our products may experience quality problems from time to time that can result in decreased sales and operating margin and harm to our reputation. We offer products that can be affected by design and manufacturing defects. Defects can also exist in components used for our products.
We offer products that can be affected by design and manufacturing defects. Defects can also exist in components used for our products. Component defects could make the Company’s products unsafe and create a risk of property damage and personal injury.
Any disruptions could adversely affect our business, financial condition or results of operations. ,” could limit our ability to source materials and products from China at acceptable prices or at all. We do not currently have arrangements with contract manufacturers in other countries that may be acceptable substitutes.
Furthermore, political polarization within the United States and the possibility of policy reversals or delayed legislative action may contribute to economic volatility and reduce business and consumer confidence. Primarily all of the Company’s contract manufacturing facilities are located in China and we do not currently have arrangements with contract manufacturers in other countries that may be acceptable substitutes.
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While we devote resources to security measures to protect our systems and data, these measures cannot provide absolute security. The investor must also recognize the risk that these types of attacks might have on the entire supply and distribution chain for the Company’s product line.
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Macroeconomic and Political Risks The Company's operations and results are influenced by both global and regional economic environments, and less than favorable economic conditions may have a material adverse impact on the Company's business, operating results, and financial position. The Company sales outside the U.S. represent nearly 30% of total net sales for the fiscal year ended Jne 30, 2025.
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Geopolitical conflicts including those between Russia and Ukraine, those occurring in the Middle East and other similar conflicts could adversely affect our business, financial condition, and results of operations. In February 2022, Russian military forces invaded Ukraine, resulting in an ongoing military conflict between the two countries.
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Moreover, the Company relies almost exclusively on contract manufacturing facilities based in the People’s Republic of China to produce its goods, underscoring the critical importance of this region to its overall operations. As a result, the Company’s business, financial condition, and results of operations may be adversely affected by unfavorable global, national, and regional economic conditions and political developments.
Removed
In response to the invasion, the United States, United Kingdom, and European Union, along with others, imposed significant sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future.
Added
Inflationary pressures, sustained higher interest rates, and increased energy and labor costs have reduced consumer discretionary spending and may continue to impact demand for the Company’s products. In addition, supply chain disruptions, fluctuations in foreign currency exchange rates, and the imposition of new tariffs or trade restrictions could increase our costs and reduce profitability.
Removed
Prior to the imposition of the sanctions against Russia, sales to Russia approximated 2% of the Company’s total sales. 12 Table of Contents On October 7, 2023, Hamas launched attacks on civilian and military targets in Southern and Central Israel, to which the Israel Defense Forces responded.
Added
The Company’s operations may be affected by political developments, international trade disputes and restrictions, natural disasters, public health concerns, and other disruptions to business activities.
Removed
In addition, Hezbollah has launched attacks on Northern Israel, to which Israel also responded. The conflict has negatively impacted transportation in the region and the supply of energy. The length and severity of the conflict is unknown at this time and any continuation of the clash may escalate in the future into a greater regional conflict.
Added
Political developments, international trade or other disputes, natural disasters, public health concerns, and various business disruptions may have a significant adverse impact on the Company, as well as its customers, employees, contract manufacturers, logistics providers, and distributors.
Removed
We are unable to predict the impact the above conflicts will have on our business, financial condition and results of operations for the future. We continue to actively monitor the conflicts and will report on any adverse effects as necessary as developments occur.
Added
Uncertainty associated with the current U.S. presidential administration and changes in government policies that have and will continue to occur may operations, cost structure, and competitive environment. For example, the recent changes to corporate tax laws and rates, environmental regulations, international trade agreements and newly enacted tariffs could increase operating costs or reduce access to key markets.
Removed
Any disruption caused by these factors could harm our business, results of operations, financial condition, liquidity, and prospects.
Added
Additionally, restrictions on international trade, the imposition of tariffs, sanctions and other controls on imports or exports of goods, technology or data, can materially adversely impact the Company’s business and supply chain.
Added
Further restrictive measures, which could be announced with little or no warning, could limit the Company’s ability to source materials and product from China at acceptable prices or at all and necessitate a change to the Company’s supply chain which would be disruptive, time-consuming and expensive.
Added
Any disruptions could adversely affect our business, financial condition or results of operations ” and “ A shift in U.S. and China trade relations, policies and imposed tariffs could adversely affect the Company’s business, financial condition and results of operations.” Geopolitical tensions, armed conflicts and acts of terrorism could adversely affect our business, financial condition, and results of operations.
Added
Ongoing and escalating geopolitical conflicts, including the Russia - Ukraine war, instability in the Middle East, and heightened tensions between the United States and China, create significant uncertainty in the global economic and regulatory environment.
Added
These conflicts may lead to supply chain disruptions, restrictions on the movement of goods, changes in trade policies, and imposition of new tariffs, sanctions, or export controls.
Added
Recent years have seen escalating conflicts in the Middle East, involving attacks by militant groups, responses from national defense forces, and retaliatory actions across borders. Such military engagements often bring international involvement, with foreign powers providing support, participating in defense operations, and sometimes engaging in evacuations. These developments underscore the increasing complexity and risk within the global geopolitical landscape.
Added
The conflicts have exacerbated regional instability, impacted global shipping lanes and increased energy and raw material costs. Tensions between the U.S. and China could result in additional tariffs beyond what were recently imposed, retaliatory trade measures, or regulatory restrictions that increase the cost of manufacturing and sourcing materials.
Added
These risks may limit the Company’s ability to procure critical products and components, extend lead times, increase transportation and input costs, and adversely impact competitiveness in key markets.
Added
In addition, the uncertain and rapidly evolving nature of these geopolitical developments makes it difficult to predict the full extent of their impact on the Company’s operations, financial condition, and results of operations. Our business, financial condition and results of operations may be adversely impacted by the effects of inflation.
Added
The Company’s operations and financial results are subject to risks arising from evolving U.S.-China trade relations. In April 2025, the U.S. government imposed tariffs of up to 145% on certain imports from China, significantly increasing the Company’s costs of goods sourced from China.
Added
On May 12, 2025, the U.S. and China reached a temporary 90 - day trade truce, reducing these tariffs to approximately 30%, including a 10% baseline reciprocal tariff and a 20% surcharge on specific categories.
Added
The truce, effective May 14 through August 12, 2025, resulted in a suspension of the elevated China - specific tariff rates, with China reciprocally reducing tariffs on U.S. exports. On August 12, 2025, the US and China extended a tariff truce for another 90 days, pushing negotiations into the fall. The long - term trajectory of trade policy remains uncertain.
Added
Failure to extend the agreement could result in the reinstatement of triple - digit percentage tariffs on imports from China, materially increasing the Company’s cost of goods sold and potentially disrupting supply chains. In addition, legal challenges to the tariffs are ongoing in U.S. courts, creating further uncertainty about the scope and enforceability of these measures.
Added
Continued volatility in trade relations between the U.S. and China, including the potential for reinstated tariffs or new trade restrictions, could adversely impact the Company’s sourcing, pricing, and profitability.
Added
The Company is actively monitoring these developments and assessing mitigation strategies, including alternative sourcing arrangements, however, no assurance can be given that such strategies will fully offset the impact of adverse trade policy changes.
Added
Cyberattacks are a growing geopolitical risk, becoming larger, more frequent, more sophisticated and more relentless as technology has evolved, resulting in privacy, security, and compliance concerns. They are a significant threat to individual organizations and national security.
Added
The Company’s effective income tax rate and profitability could be adversely affected in the future by several factors, including changes in tax laws, regulations, administrative guidance or interpretations at the federal, state, or international level and changes in the valuation of deferred tax assets and liabilities. ‎ On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the “OBBB Act”), a sweeping tax and spending law that makes permanent many provisions of the 2017 Tax Cuts and Jobs Act (the “TCJA”), while introducing new tax policies and restructuring others.
Added
While certain provisions may reduce the Company’s tax liability, such as modifications to corporate tax rates, deductions, credits, treatment of foreign income, and expensing rules , others may introduce new complexity and audit risk. The Company will continue to monitor the potential impact of the OBBB Act.
Added
Because tax laws are dynamic and often retroactive or uncertain in interpretation, projected tax liabilities may differ significantly from eventual obligations. The net impact remains uncertain, and misapplication of the new rules could lead to materially adverse outcomes. The Company regularly assesses all of these tax-related matters to determine the adequacy of its tax provision.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+0 added−0 removed3 unchanged
Biggest changeAnnual vulnerability assessments and penetration testing, as well as periodic web application scanning, is performed by third party service providers as directed by the Company’s Managed Service Provider (“MSP”). The results of these tests are shared with the CFO by the MSP.
Biggest changeEnhancements have also been made to endpoint protection and remote access protocols, including enhanced encryption, two-factor authentication (2FA) and real-time threat monitoring. Annual vulnerability assessments and penetration testing, as well as periodic web application and internal network scanning, are performed by third party service providers as directed by the Company’s Managed Service Provider (“MSP”).
Management is provided regular updates on the Company’s cybersecurity programs and material cybersecurity risk and mitigation strategies, along with any necessary enhancements to those programs. Cybersecurity policies and processes are reviewed annually with the Board of Directors, which serves in an oversight role as a whole.
Management is provided regular updates on the Company’s cybersecurity programs, training metrics, system health status and material cybersecurity risk and mitigation strategies, along with any necessary enhancements to those programs. Cybersecurity policies and processes are reviewed annually with the Board of Directors, which serves in an oversight role as a whole.
We have processes in place to evaluate the potential risks from cybersecurity threats associated with our use of third-party service providers that have access to our data, including a review process for such providers’ cybersecurity practices, risk assessments, contractual requirement and system monitoring.
The results of these tests are shared with the CFO by the MSP. We have processes in place to evaluate the potential risks from cybersecurity threats associated with our use of third-party service providers that have access to our data, including a review process for such providers’ cybersecurity practices, risk assessments, contractual requirement and system monitoring.
Governance The Company’s MSP is responsible for identifying and assessing risks on an ongoing basis to ensure that the Company’s policies and procedures are functioning as designed to protect the Company’s information systems from potential cybersecurity threats.
Governance Cybersecurity remains a critical component of corporate governance at the Company. The Company’s MSP is responsible for identifying and assessing risks on an ongoing basis to ensure that the Company’s policies and procedures are functioning as designed to protect the Company’s information systems from potential cybersecurity threats.
These programs include regular monitoring of outside threats, continuous updating of software to mitigate risk, education of employees to the risks of external threats, a simplification of infrastructure to minimize servers and migration of business-critical systems, including the Company’s ERP system, to Tier-1 cloud service providers.
These programs include regular monitoring of outside threats, continuous updating of software to mitigate risk, implementation of a formal policy related to employees that access corporate systems from personal devices, a simplification of infrastructure to minimize servers and migration of business-critical systems, including the Company’s ERP system, to Tier-1 cloud service providers.
The Company also recently partnered with a breach protection platform to provide security and phishing training to its employees. The Company has not been impacted by any previous cybersecurity incidents that would materially affect business operations or financial conditions.
The Company also partners with a breach protection platform to provide ongoing, self-guided cybersecurity training to its employees to reduce risk from phishing, social engineering and password-related attacks. The Company has not been impacted by any previous cybersecurity incidents that would materially affect business operations, customer relationships or financial conditions.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+1 added−1 removed0 unchanged
Biggest changeThe remaining lawsuits are pending in U.S. District Courts in District of Massachusetts (Bose Corporation), Southern District of California (PEAG, LLC), and District of Utah (Skullcandy, Inc.). 15 Table of Contents ITEM 4. MINE SAFETY D ISCLOSURES Not applicable. ‎ 16 Table of Contents PART II
Biggest changeThe Company is investigating the merits of the notice. 16 Table of Contents ITEM 4. MINE SAFETY D ISCLOSURES Not applicable. ‎ 17 Table of Contents PART II
LEGAL PROCEEDINGS As part of its intellectual property enforcement program, on July 22, 2020, the Company brought patent infringement suits against each of Apple Inc., Bose Corporation, PEAG, LLC d/b/a jLab Audio, Plantronics, Inc. and Polycom, Inc., and Skullcandy, Inc., alleging infringement of the Company’s patents relating to its wireless headphone technology and seeking monetary relief and attorneys’ fees.
ITEM 3. LEGAL PROCEEDINGS As part of its intellectual property enforcement program, on July 22, 2020, the Company brought patent infringement suits against certain parties, including PEAG, LLC d/b/a jLab Audio and Skullcandy, Inc., alleging infringement of the Company’s patents relating to its wireless headphone technology and seeking monetary relief and attorneys’ fees.
Removed
The lawsuit against Apple, Inc. filed in the U.S. District Court in the Western District of Texas on July 22, 2020 was dismissed on July 23, 2022 following resolution of the litigation between parties. The lawsuit against Plantronics, Inc. and Polycom, Inc. was dismissed on August 4, 2023 following resolution of the litigation between parties.
Added
The lawsuits still unresolved are pending in Southern District of California (PEAG, LLC), and District of Utah (Skullcandy, Inc.). In early fiscal 2020, the Company was notified by One-E-Way, Inc. that some of the Company’s wireless products may infringe on certain One-E-Way patents. A Supplemental Notice of Infringement was sent to the Company on March 18, 2025.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−0 removed0 unchanged
Biggest changeSubsequently, the Board of Directors periodically approved increases in the amount authorized for repurchase under the program. As of June 30, 2024, the Board had authorized the repurchase of an aggregate of $45,500,000 of common stock under the stock repurchase program, of which $43,360,247 had been expended. No purchases were made during the years ended June 30, 2024 or 2023.
Biggest changeSubsequently, the Board of Directors periodically approved increases in the amount authorized for repurchase under the program. As of June 30, 2025, the Board had authorized the repurchase of an aggregate of $45,500,000 of common stock under the stock repurchase program, of which $43,360,247 had been expended.
COMPANY REPURCHASES OF EQUITY SECURITIES Total Total Number of Approximate Dollar Number Average Shares Purchased as Value of Shares of Shares Price Paid Part of Publicly Available under Period (2024) Purchased per Share Announced Plan (1) Repurchase Plan April 1 - April 30, 2024 — $ — — $ 2,139,753 May 1 - May 31, 2024 — $ — — $ 2,139,753 June 1 - June 30, 2024 — $ — — $ 2,139,753 (1) 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.
COMPANY REPURCHASES OF EQUITY SECURITIES Total Total Number of Approximate Dollar Number Average Shares Purchased as Value of Shares of Shares Price Paid Part of Publicly Available under Period Purchased per Share Announced Plan (1) Repurchase Plan April 1 - April 30, 2025 — $ — — $ 2,139,753 May 1 - May 31, 2025 — $ — — $ 2,139,753 June 1 - June 30, 2025 — $ — — $ 2,139,753 (1) 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.
Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant. ‎ 17 Table of Contents
Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant. ‎ 18 Table of Contents
This number does not include individual participants in security position listings. There were no dividends declared during the fiscal years ended June 30, 2024 and 2023.
This number does not include individual participants in security position listings. There were no dividends declared during the fiscal years ended June 30, 2025 and 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. MARKET INFORMATION ON COMMON STOCK The Company’s common stock is traded on The Nasdaq Capital Market under the trading symbol KOSS. There were 560 record holders of the Company’s common stock as of August 26, 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. MARKET INFORMATION ON COMMON STOCK The Company’s common stock is traded on The Nasdaq Capital Market under the trading symbol KOSS. There were 584 record holders of the Company’s common stock as of August 25, 2025.
DIVIDENDS We have not paid dividends on our capital stock since March 2014 and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements.
No purchases were made during the fiscal years ended June 30, 2025 or 2024. DIVIDENDS We have not paid dividends on our capital stock since March 2014 and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

41 edited+31 added−22 removed40 unchanged
Biggest changeIncome tax expense of $317,377 was incurred during the previous fiscal year as a direct result of the licensing income earned during the year. ‎ 18 Table of Contents Consolidated Results The following table presents selected consolidated financial data for each of the past two fiscal years: Consolidated Performance Summary 2024 2023 Net sales $ 12,265,069 $ 13,099,651 Net sales (decrease) % from prior year period (6.4)% (26.0)% Gross profit $ 4,185,447 $ 4,457,414 Gross profit as % of net sales 34.1% 34.0% Selling, general and administrative expenses $ 6,057,606 $ 29,341,634 Selling, general and administrative expenses as % of net sales 49.4% 224.0% Interest income $ 847,644 $ 520,809 Other income $ — $ 33,000,000 (Loss) income before income tax (benefit) provision $ (1,024,515) $ 8,636,589 (Loss) income before income tax (benefit) provision as % of net sales (8.4)% 65.9% Income tax (benefit) provision $ (73,604) $ 317,377 Income tax (benefit) provision as % of (loss) income before income tax (benefit) provision 7.2% 3.7% 2024 Results of Operations Compared with 2023 Net sales for the year ending June 30, 2024 declined by 6.4% to $12,265,069 primarily due to a 24.0% drop in sales to the Company’s export markets as well as a 19.7% decrease in DTC sales.
Biggest changeLegal fees and expenses also increased in support of the Compan y’s patent defense litigation and the settlement of an ADA lawsuit related to the Koss.com website. Total tax expense of $17,482 was recorded for the year ended June 30, 2025 driven by minimum required payments and in increase in the uncertain tax position (UTP) related to research and development credits taken in the prior year and the appropriate tax and penalties that would be incurred should there be a denial of the credits During the prior year, a federal tax benefit of $73,604 was recorded as a result of the return-to-provision adjustment identified during the third quarter of fiscal year 2024. ‎ 19 Table of Contents Consolidated Results The following table presents selected consolidated financial data for each of the past two fiscal years: Consolidated Performance Summary 2025 2024 Net sales $ 12,624,170 $ 12,265,069 Net sales increase (decrease) % from prior year period 2.9% (6.4)% Gross profit $ 4,773,598 $ 4,185,447 Gross profit as % of net sales 37.8% 34.1% Selling, general and administrative expenses $ 6,510,721 $ 6,057,606 Selling, general and administrative expenses as % of net sales 51.6% 49.4% Interest income $ 879,774 $ 847,644 Loss before income tax provision (benefit) $ (857,349) $ (1,024,515) Loss before income tax provision (benefit) as % of net sales (6.8)% (8.4)% Income tax provision (benefit) $ 17,482 $ (73,604) Income tax provision (benefit) as % of loss before income tax provision (benefit) (2.0)% 7.2% 2025 Results of Operations Compared with 2024 Net sales for the year ending June 30, 2025 were $12,624,170, a 2.9% increase compared to $12,265,069 in the prior fiscal year, primarily behind a 48% increase in sales to Europe and a 16.5% increase in DTC sales.
The RTP adjustments were identified as part of the preparation and submission of the fiscal year 2023 tax returns during the third quarter. State income tax expense of $7,674, which represented only the required minimum estimated tax payments due, partially offset the benefit.
The RTP adjustments were identified as part of the preparation and submission of the fiscal year 2023 tax returns during the third quarter fiscal year 2024. State income tax expense of $7,674, which represented only the required minimum estimated tax payments due, partially offset the benefit.
The results of the Company’s operations are therefore susceptible to consumer confidence and adverse macroeconomic factors such as inflation, slower growth or recession, higher interest rates, and wage and commodity inflation. In addition, the economic sanctions imposed as a result of the Russia/Ukraine conflict have impacted certain of our customers in those markets and the surrounding regions.
The results of the Company’s operations are therefore susceptible to consumer confidence and adverse macroeconomic factors such as newly imposed tariffs, inflation, slower growth or recession, higher interest rates, and wage and commodity inflation. In addition, the economic sanctions imposed as a result of the Russia/Ukraine conflict have impacted certain of our customers in those markets and the surrounding regions.
Short Term Liquidity The Company anticipates funding its normal recurring trade payables, accrued expenses, ongoing R&D costs, inventory purchases and any potential interest payments, if it utilizes its line of credit facility, through existing working capital, funds provided by operating activities and interest earned on investments.
Short Term Liquidity The Company anticipates funding its normal recurring trade payables, accrued expenses, ongoing R&D costs, inventory purchases, related tariffs and any potential interest payments, if it utilizes its line of credit facility, through existing working capital, funds provided by operating activities and interest earned on investments.
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 23 Table of Contents 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.
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 24 Table of Contents 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 may also record a specific reserve for individual accounts if they become aware of specific customer circumstances such as bankruptcy or deterioration in operation results or financial position. These specific reserves are re-evaluated and adjusted as additional information is received that impacts the amount reserved.
The Company may also record a specific reserve for individual accounts if they become aware of specific customer circumstances such as bankruptcy or deterioration in operational results or financial position. These specific reserves are re-evaluated and adjusted as additional information is received that impacts the amount reserved.
The negative covenants include restrictions on other indebtedness, liens, fundamental changes, certain investments, disposition of assets, mergers and liquidations, among other restrictions. The Company is currently in compliance with all covenants related to the Credit Agreement. As of June 30, 2024 and 2023, there were no outstanding borrowings on the facility.
The negative covenants include restrictions on other indebtedness, liens, fundamental changes, certain investments, disposition of assets, mergers and liquidations, among other restrictions. The Company is currently 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.
As of June 30, 2024, the Board had authorized the repurchase of an aggregate of $45,500,000 of common stock under the stock repurchase program, of which $43,360,247 had been expended. No stock repurchases were made under the program during the years ended June 30, 2024 or 2023.
As of June 30, 2025, the Board had authorized the repurchase of an aggregate of $45,500,000 of common stock under the stock repurchase program, of which $43,360,247 had been expended. No stock repurchases were made under the program during the years ended June 30, 2025 or 2024.
We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, taking into consideration certain possible adverse impacts from inflation, the economic sanctions imposed on the international community as a result of the continued conflicts in Eastern Europe and the Middle East, and any changes to the global economic situation as a consequence of future pandemics.
We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, taking into consideration certain possible adverse impacts from inflation, recently enacted tariffs, the economic sanctions imposed on the international community as a result of the continued conflicts in Eastern Europe and the Middle East, and any changes to the global economic situation as a consequence of future pandemics.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The purpose of this discussion and analysis is to enhance the understanding and evaluation of the financial position, results of operations, cash flows, indebtedness, and other key financial information of the Company for fiscal years 2024 and 2023.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The purpose of this discussion and analysis is to enhance the understanding and evaluation of the financial position, results of operations, cash flows, indebtedness, and other key financial information of the Company for fiscal years 2025 and 2024.
As of June 30, 2024, the amount of common stock subject to repurchase by the Company under the Board of Director’s prior authorization remained $2,139,753 at the discretion of the Chief Executive Officer of the Company.
As of June 30, 2025, the amount of common stock subject to repurchase by the Company under the Board of Director’s prior authorization remained $2,139,753 at the discretion of the Chief Executive Officer of the Company.
Investing Activities Net cash used by investing activities for year ended June 30, 2024 was related to capital expenditures, including the replacement of a roof section of the building and HVAC upgrades for approximately $330,000 and premiums on company-owned life insurance policies for two of its executives.
For the fiscal year ended June 30, 2024, cash used by investing activities was related to capital expenditures, including the replacement of a roof section of the building and HVAC upgrades for approximately $330,000 and premiums of $82,000 on company-owned life insurance policies for two of its executives.
As of June 30, 2024 and 2023, the Company had no outstanding borrowings on its bank line of credit facility under the Credit Agreement (described below under “Credit Facility").
As of June 30, 2025 and 2024, the Company had no outstanding borrowings on its bank line of credit facility under the Credit Agreement (described below under “Credit Facility").
The facility is in good repair and, in the opinion of management, is suitable and adequate for the Company’s business purposes. ‎ 22 Table of Contents Critical Accounting Policies Our discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
The facility is in good repair and, in the opinion of management, is suitable and adequate for the Company’s business purposes. ‎ 23 Table of Contents Critical Accounting Estimates Our discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
The current fiscal year adjustment to the net operating loss carryforward increased the deferred tax asset to approximately $8,500,000 as of June 30, 2024, and the future realization of this continues to be uncertain.
The current fiscal year adjustment to the net operating loss carryforward increased the deferred tax asset to approximately $8,700,000 as of June 30, 2025, and the future realization of this continues to be uncertain.
If the Company is unable to generate sufficient cash flow from operations, then it may be required to sell assets, reduce capital expenditure, or draw on its credit facilities.
If the Company is unable to generate sufficient cash flow from operations, then it may 22 Table of Contents be required to sell assets, reduce capital expenditure, or draw on its credit facilities.
A reduction or interruption in supply, including interruptions due to pandemic related restrictions, geopolitical unrest, labor shortages or strikes, or a failure to procure adequate components, may lead to delays in manufacturing or increases in costs. The global supply chain remains fragile, even while there is some stabilization and improved predictability.
A reduction or interruption in supply, including interruptions due to pandemic related restrictions, geopolitical unrest, labor shortages or strikes, newly imposed tariffs, or a failure to procure adequate components, may lead to delays in manufacturing or increases in costs. The global supply chain remains fragile despite pockets of stabilization and improved predictability.
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.
On January 28, 2021, the Credit Agreement was amended to change the interest rate to Wall Street Journal Prime less 1.50%. An amendment effective October 31, 2024 extended the maturity date to October 31, 2026.
The Company’s taxable loss for the year ended June 30, 2024 increased the federal tax loss carryforward by $1,270,000, resulting in an expected carryforward of approximately $32,800,000 by the end of the fiscal year.
The Company’s taxable losses for the years ended June 30, 2025 and 2024 increased the federal tax loss carryforward by approximately $1,150,000 and $1,270,000, respectively, resulting in an expected carryforward of approximately $34,00,000 by the end of the current fiscal year.
Proceeds of $14,331,000 were received during the year ended June 30, 2024 from the maturity of U.S. Treasury securities and were mostly reinvested to purchase $14,286,000 of similar securities at a $300,000 discount. In the prior year, cash used for investing activities was almost entirely related to the purchase of $19,334,000 of U.S.
Proceeds of $14,331,000 were received during the prior fiscal year from the maturity of U.S. Treasury securities which were mostly reinvested to purchase $14,286,000 of similar securities at a $300,000 discount. Financing Activities The cash generated from financing activities in the fiscal years ended June 30, 2025 and 2024 was solely a result of stock option exercises.
Koss and the Company have been recognized as the creator of the personal listening industry. The Company initially developed the first Koss SP 3 stereo headphones in 1958 and has been an innovator in the field ever since.
See also the “Cautionary Statement Regarding Forward-Looking Statements” on page 4 of this Report. Overview John C. Koss and the Company have been recognized as the creator of the personal listening industry. The Company initially developed the first Koss SP 3 stereo headphones in 1958 and has been an innovator in the field ever since.
Deferred income tax provisions are based on changes in the deferred tax assets and liabilities from period to period. Additionally, we analyze our ability to recognize the net deferred income tax assets created in each jurisdiction in which we operate to determine if valuation allowances are necessary based on the “more likely than not” criteria.
Additionally, we analyze our ability to recognize the net deferred income tax assets created in each jurisdiction in which we operate to determine if valuation allowances are necessary based on the “more likely than not” criteria. ‎ 25 Table of Contents ITEM 7A. QUANTITATIVE AND QU ALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable . ITEM 8.
This compares to $520,809 of interest income earned in the prior fiscal year from these securities. 19 Table of Contents A net income tax benefit of $73,604 was reported for the year ended June 30, 2024 and included a federal income tax benefit of $81,278 recorded as a result of the return-to-provision (RTP) adjustments recorded in the period identified.
In the prior year, a net income tax benefit of $73,604 was reported for the year, which included a federal income tax benefit of $81,278 recorded as a result of the return-to-provision (RTP) adjustments recorded in the period identified.
Treasury investments held during the year in order to earn a return on the Company’s excess cash while maintaining a low risk profile.
Treasury investments held during the years in order to earn a return on the Company’s excess cash while maintaining a low risk profile. Total tax expense of $17,482 was recorded for the year ended June 30, 2025.
The Company regularly evaluates new product offerings, inventory levels, and capital expenditure to ensure that it is effectively allocating resources in line with current market conditions. 21 Table of Contents Long Term Liquidity The Company’s future capital requirements, to a certain extent, are also subject to general conditions in or affecting the electronics industry and are subject to general economic, political, financial, competitive, legislative, and regulatory factors that are beyond its control.
Long Term Liquidity The Company’s future capital requirements, to a certain extent, are also subject to general conditions in or affecting the electronics industry and are subject to general economic, political, financial, competitive, legislative, and regulatory factors that are beyond its control.
Other risk factors further exacerbated by inflation include supply chain disruptions, increased oil and energy costs, risks of international operations and the recruitment and retention of talent. The Company relies on our third-party supply chain, primarily in southern China, and distribution networks and the availability of necessary components to produce a considerable number of our products.
The Company relies on our third-party supply chain, primarily in southern China, and distribution networks and the availability of necessary components to produce a considerable number of our products.
Gross profit as a percentage of net sales for the year ended June 30, 2024 was 34.1% versus 34.0% for the prior fiscal year. Gross margins vary by customer, product, and markets and, as a result, any shifts in the mix can impact the overall gross margin.
Gross margins vary by customer, product, and markets and, as a result, any shifts in the mix can impact the overall gross margin.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the Consolidated Financial Statements included herewith. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. See also the “Cautionary Statement Regarding Forward-Looking Statements” on page 4 of this Report. Overview John C.
Unless otherwise indicated, comparisons of financial information reflect the fiscal year ended June 30, 2025 versus the fiscal year ended June 30, 2024. Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
If the program continues to be successful with the remaining complaints, the Company may receive additional royalties, offers to purchase its intellectual property, or other remedies advantageous to its competitive position; however, there is no guarantee of a positive outcome from these efforts, which could ultimately be time consuming and unsuccessful.
The Company has, in the past, recovered certain of the fees and costs that were involved with the underlying efforts to enforce this portfolio and, if the program continues to be successful with the remaining complaints, the Company may receive additional royalties, offers to purchase its intellectual property, or other remedies advantageous to its competitive position.
During the years ended June 30, 2024 and 2023, there were no sales to Russia. 20 Table of Contents Liquidity and Capital Resources Cash Flows The following table summarizes our cash flows from operating, investing and financing activities for each of the past two fiscal years: Total cash provided by (used in): 2024 2023 Operating activities $ (190,531) $ 10,735,649 Investing activities (198,425) (17,024,107) Financing activities 134,975 171,350 Net (decrease) in cash and cash equivalents $ (253,981) $ (6,117,108) Operating Activities Cash used in operating activities of the Company during the year ended June 30, 2024 included bonus payouts of $403,000 and funding of $362,000 relating to employee payroll taxes on the gains from the disqualifying dispositions of incentive stock options.
Liquidity and Capital Resources Cash Flows The following table summarizes our cash flows from operating, investing and financing activities for each of the past two fiscal years: Total cash provided by (used in): 2025 2024 Operating activities $ (214,908) $ (190,531) Investing activities (120,284) (198,425) Financing activities 305,908 134,975 Net (decrease) in cash and cash equivalents $ (29,284) $ (253,981) Operating Activities During the fiscal year ended June 30, 2025, cash used in operating activities of the Company consisted of approximately $375,000 of payments to the Custom Border Patrol for the newly imposed tariffs on product shipped from China.
Export sales fell 24% while domestic sales fell minimally at less than 1%. Gross profit as a percentage of sales increased slightly by 0.1 percentage points to 34.1%.
Overall domestic sales fell 8.4% while Export sales grew quite significantly at 48%. Gross profit as a percentage of sales increased by 3.7 percentage points over the prior fiscal year from 34.1% to 37.8%.
Additionally, the Company may owe all or a portion of any future proceeds arising from the enforcement program to third parties. The Company believes that its financial position remains strong. The Company had $2.8 million of cash and cash equivalents, $12.1 million of short-term investments and available credit facilities of $5.0 million on June 30, 2024.
There is no guarantee, however, of a positive outcome from these efforts, which could ultimately be time-consuming and unsuccessful. Additionally, the Company may owe all or a portion of any future proceeds arising from the enforcement program to third parties. The Company believes that its financial position remains strong.
The impact of broader economic factors such as inflation and shifts in consumer behavior could result in overcapacity in the market and rising freight costs. The Company continues to monitor the situation. Selling, general and administrative expenses for the fiscal year ended June 30, 2024 declined approximately 80% from $29,342,000 to $6,058,000.
The Company continues to stay abreast of current events that might impact future freight rates and will act accordingly to ensure availability of goods. The impact of broader economic factors such as newly imposed tariffs, inflation and shifts in consumer behavior could result in overcapacity in the market and rising freight costs. The Company continues to monitor the situation.
The utilization of net operating loss carryforwards significantly reduced the taxable income, resulting in federal and state tax provisions of $230,139 and $87,237, respectively. The effective tax rate was 7.2% for the fiscal year ended June 30, 2024 compared to 3.7% for the previous fiscal year.
The effective tax rate was 2.1% for the fiscal year ended June 30, 2025 compared to 7.2% for the previous fiscal year.
Financing Activities The cash generated from financing activities in the years ended June 30, 2024 and 2023 was solely driven by stock option exercises. In the fiscal year ended 2024, there were stock option exercises of 65,000 shares generating $134,975 of cash.
In the fiscal year ended 2025, exercises of stock options for 156,643 shares generated $305,908 of cash while stock option exercises for 65,000 shares in the previous fiscal year generated $134,975 of cash.
The Company continues to monitor ongoing tensions in Eastern Europe and the Middle East and the supply chain team will react as necessary should supply chain disruptions occur. This could include increasing the investment in inventory, being alert to potential short supply situations, assisting suppliers with acquisition of critical components and utilizing alternative sources and/or air freight.
This includes being alert to potential short supply situations, assisting suppliers with acquisition of critical components and utilizing alternative sources and/or air freight. Following Russia’s invasion of Ukraine in February 2022, global financial and credit markets around the world saw heightened volatility.
Inflationary cost increases have resulted in higher costs of commodities, packaging materials, and wages, along with higher energy and transportation costs. These increases have been partially mitigated by pricing actions implemented in the prior fiscal year and the Company continues to work with a dedicated freight forwarding partner to minimize freight rate increases.
These increases have been partially mitigated by somewhat higher pricing on new product launches, and the Company continues to work with a dedicated freight forwarding partner to minimize freight rate increases. Other risk factors further exacerbated by inflation include supply chain disruptions, risks of international operations, tight labor markets, and the challenges in recruitment and retention of talent.
Cash outflow was partially offset by tighter inventory buying practices and interest received on investments. During the previous year, cash provided by operating activities of the Company included the licensing proceeds received, partially offset by the payment of related legal fees and expenses and the profit-sharing payout.
Cash used in operating activities of the Company during the prior fiscal year related mostly to bonus payouts of $403,000 and funding of $362,000 relating to reimbursement of employee payroll taxes incorrectly withheld on the gains from the disqualifying dispositions of incentive stock options. Cash outflow was partially offset by tighter inventory buying practices and interest received on investments.
Purchases of equipment and leasehold improvements by the Company of $98,441 and the payment of premiums on Company-owned life insurance policies for two of its executives also contributed to the overall use of cash during the year ended June 30, 2023.
Investing Activities Net cash used by investing activities for fiscal year 2025 was mostly related to capital expenditures comprised of a new roof section replacement for $346,000 and other leasehold improvements of approximately $75,000. The Company also paid life insurance premiums of $71,000 on company-owned life insurance policies for two of its executives.
Treasury securities at a discount of $474,000, offset slightly by proceeds of $2,022,000 from the maturity of one of the Company’s U.S. Treasury notes.
Proceeds of $14,303,000 from the maturity of U.S. Treasury securities were received during the year, of which $14,059,000 was reinvested in new similar securities at a discount of $197,000.
Removed
Fiscal Year 2024 Summary  Net sales declined 6.4% to $12,265,069 due predominantly to the timing of inventory replenishment by the Company’s largest European distributor in addition to a slowdown in Direct-to-Consumer (DTC) sales.
Added
Fiscal Year 2025 Summary  Net sales grew 2.9% to $12,624,170, mainly as a result of a 48% increase in sales to our European distributors, a 16.5% increase in Direct-to-Consumer (DTC) sales.
Removed
The favorable mix of higher margin domestic distributor sales and lower volume of lower margin export sales were offset by the adverse impact of the continued sell-through of inventory brought in at higher freight rates.  Selling, general and administrative expenses decreased significantly from the prior fiscal year due primarily to legal fees and expenses incurred in support of the Company’s patent defense litigation, coupled with bonus and profit-sharing expense related to the net income from licensing proceeds in the prior year.
Added
The growth was somewhat offset by lower sales to domestic distributors claiming excess inventory of prior year models of non-Koss electronics combined with a drop in sales to the Education market due to a delay in an order while awaiting budget approval.
Removed
Excluding the effect of these fees and expenses, selling, general and administrative expenses decreased by approximately 3.7%, mainly attributable to lower payroll expense as a result of personnel attrition.  No other income was reported for the year ended June 30, 2024, however, $33,000,000 in licensing proceeds received in the first quarter of the prior year was recorded as other income during the year ended June 30, 2023.  A tax benefit of $73,604 was recorded for the year ended June 30, 2024 as a result of the return-to-provision adjustment identified during the third quarter.
Added
A favorable sales mix, with a higher mix of higher margin sales to certain domestic distributors and DTC coupled with sales to Europe that generated higher than normal margins due to new product sales.
Removed
The downturn in export net sales of $781,499 for the fiscal year 2024 is almost entirely due to a shortfall in sales to the Company’s largest European distributor as they delayed replenishment of their inventory, as well as a 19.6% decline in sales to Asia behind lower sales to an original equipment manufacturer of metal detectors.
Added
The prior year’s adverse impact of the continued sell-through of inventory brought in at higher freight rates also contributed to the favorable gross margin for the 2025 fiscal year.  Selling, general and administrative expenses increased 7.5% over the prior fiscal year principally due to the increase in new product compliance testing and certification.
Removed
A revival of orders from the Ukrainian distributor slightly offset the decline. Domestic sales for the year ended June 30, 2024 decreased by less than 1%, or $53,083, to $9,795,438. DTC sales, which represent nearly 30% of the Company’s total sales, were down almost 20%.
Added
Growth in net export sales of $1,185,738, or 48%, for the fiscal year 2025 is predominantly driven by the significant increase in sales to two of the Company’s largest European distributors, which consisted of nearly $1,400,000 new product sales. Sales to the Asian markets were up almost 52%, assisting Europe with the overall increase.
Removed
We believe this decline is driven by softer discretionary spending as consumers react to higher inflation and other spending commitments. A near 50% increase in sales to E-tailers, a sizable custom headphone order during the current fiscal year and a slight improvement in sales to certain of the Company’s U.S. distributors mostly offset the decline in DTC sales.
Added
For the year ended June 30, 2025, domestic sales declined by 8.4%, or $826,637. Sales to our domestic distributors were down 27.3% behind weak commitments to stocking inventory and there was a $531,000 drop in sales to the Education market due to a delay in the finalization of a significant order while awaiting budget approval.
Removed
While the mix of higher margin U.S. distributor sales coupled with fewer lower margin export sales was favorable compared to the prior fiscal year, the impact of an increase in the reserve for excess and obsolete inventory and continued sell-off of inventory received at higher freight costs in prior years continued to adversely impact gross margins.
Added
E-tailer and Music and Books sales also declined $441,035 compared to the prior year. DTC and certain domestic distributors saw a combined sales increase of $860,019 for the year ended June 30, 2025, partially offsetting the overall decline.
Removed
The Company was able to maintain fairly consistent freight rates throughout the fiscal year 2024 because of the renewal of their partnership agreement with a dedicated freight forwarder, which provided access to lower freight rates even though market rates increased near the end of the fiscal year.
Added
DTC sales represent 24% of the Company’s total sales and the noteworthy increase appears to be driven by new product launches, continued page optimizations and increased online advertising efforts. Gross profit as a percentage of net sales for the year ended June 30, 2025 was 37.8% versus 34.1% for the prior fiscal year.
Removed
In addition to the legal fees and expenses of $22,141,000 incurred during the prior fiscal year to support the Company’s patent defense and litigation resolution, a bonus accrual of $334,000 and a profit-sharing payout of $576,000 were recorded in expense as a result of the increased net income for the year ended June 30, 2023.
Added
A favorable mix of higher margin sales to certain of our domestic distributors and DTC sales was coupled with a higher mix of sales to Europe which included a significant amount of sales of new product at higher margins.
Removed
Excluding the effect of these legal fees and related expenses, selling, general and administrative expenses still decreased by approximately $233,000, or 3.1%. The decrease is predominantly driven by a decrease in payroll expense due to personnel departures in the prior fiscal year whose job responsibilities were absorbed internally.
Added
This was slightly offset by the adverse impact of newly imposed tariffs included in inventory sold in the last quarter of fiscal year 2025 along with a write-off of some obsolete inventory.
Removed
There was no other income reported for the year ended June 30, 2024. Other income for the year ended June 30, 2023 consisted entirely of $33,000,000 in licensing proceeds received in the first quarter of that year. Interest income of $847,644 was recorded during the year ended June 30, 2024 mainly due to interest earned on the U.S.
Added
The negative impact of the sell-through of inventory brought in at higher freight rates in the prior year also contributed to the increase in gross margins year over year. Freight rates increased slightly throughout the year due mainly to strong demand, capacity constraints and disruptions in major ports.
Removed
Income tax expense of $317,377 for the year ended June 30, 2023 was comprised of the U.S. federal statutory rate of 21% and the blended state income tax rate of approximately 3.8%, offset by an adjustment to the valuation allowance for deferred tax assets.
Added
Rates are expected to settle back down in the first part of the coming fiscal year as the Peak Season Surcharge (PSS) imposed in the fourth quarter of fiscal year 2025 was cancelled.
Removed
The Company has recovered certain of the fees and costs that were involved with the underlying efforts to enforce this portfolio, as further described in the notes to the financial statements included in this Annual Report on Form 10-K.
Added
The Company renewed its partnership agreement with a dedicated freight forwarder, which will continue to provide access to lower freight rates even if market rates should go up, and a lane was added to a bonded warehouse which may be utilized to defer tariff spend.
Removed
Part of the litigation related to this enforcement has been dismissed and the Company received non-recurring net proceeds of nearly $11,000,000 in the 2023 fiscal year from the granting of licenses to certain of its patents.
Added
The cost of additional loading, unloading and storage at this new facility will be offset by the delayed payments to the Custom Border Patrol for product stored there until final delivery to the Company. The first shipment to the bonded warehouse occurred in August 2025, deferring the tariffs until the product arrives at the Company’s plant in Milwaukee, WI.
Removed
During fiscal year 2024, inflation, increased interest rates and higher energy costs continue to impact consumers’ discretionary spending, and in turn, the Company’s sales volumes.
Added
Selling, general and administrative expenses rose by approximately $453,000, or 7.5%, for the fiscal year ended June 30, 2025. New product compliance testing and certifications were the main driver of the increase, combined with higher online marketing spend.
Removed
Inflation may impact customer demand for our products resulting from a slowdown in consumers’ willingness to spend as disposable income decreases due to rising prices of essential items, spend through of excess savings from earlier in the pandemic and leading indicators pointing to a softening in the labor market.
Added
Legal costs incurred for a Supreme Court appeal in the Company’s continued patent litigation, along with legal fees incurred and a settlement paid related to an ADA lawsuit brought against the Koss.com website, also contributed to the year over year increase.
Removed
Freight rates continue to rise based on strong U.S. import demand and ongoing challenges shipping through the Red Sea and Suez Canal. The Company rarely uses this route so no material adverse impacts are expected, but the conflict has impacted freight traffic for the Company’s resellers.
Added
A reduction in stock-based compensation expense partially offset the increases as any remaining unvested stock options granted with the Koss Corporation 2012 Omnibus Incentive Plan (the “2012 Plan”) are nearly fully vested. 20 Table of Contents Interest income of $879,774 and $847,644 was recorded during the fiscal years ended June 30 2025 and 2024, respectively, due almost entirely to interest earned on the U.S.
Removed
Financial and credit markets around the world experienced volatility following the invasion of Ukraine by Russia in February 2022.
Added
Federal tax expense of $5,570 was recorded for the uncertain tax position related to research and development (R&D) credits taken in a prior year and state tax expense of $11,912 related mostly to minimum estimated state tax payments due.
Removed
In response to the invasion, the United States, United Kingdom, and European Union, along with others, imposed significant sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. In accordance with Executive Order 14071 signed on April 6, 2022, the Company suspended sales to Russia.
Added
The Company had $2.8 million of cash and cash equivalents, $12.9 million of short-term investments and available credit facilities of $5.0 million on June 30, 2025. U.S. tariff policy has undergone significant changes under President Donald Trump’s administration, leading to heightened global trade tensions and economic repercussions.
Removed
While there is a humanitarian crisis in Ukraine created by the war and the population continues to seek refuge in other countries, the Company did receive a sizable order from their Ukrainian distributor in the first quarter of fiscal year 2024 with potential for more orders in the new year.

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