In July 2023, pursuant to the recommendation of the Board of Directors, the shareholders approved the creation of the Koss Corporation 2023 Equity Incentive Plan (the “2023 Plan”). Concurrently with the adoption of the new plan, the Koss Corporation 2012 Omnibus Incentive Plan (the “2012 Plan”) was terminated. The Compensation Committee of the Board of Directors administers the 2023 Plan and provides for the granting of various stock-based incentive awards to eligible participants, primarily officers and certain key employees of the Company. 2,000,000 shares of common stock were authorized for issuance under the 2023 Plan, plus any shares subject to awards remaining outstanding under the 2012 Plan that expired or are otherwise forfeited, canceled, or terminated. The Company’s Board of Directors will determine the terms and conditions under which an option will become exercisable but expects that stock options granted under the 2023 Plan will vest over a three-to-five-year period from the date of grant. An option will expire no more than ten years from its grant date, with the exception of incentive stock options held by a 10% stockholder, which will expire no more than five years from the grant date. As with the 2012 Plan, pursuant to the 2023 Plan, new shares will be issued upon exercise of stock options.

The fair value of each stock option grant under the 2023 Plan was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. Forfeitures are accounted for as they occur. The expected term of awards granted was determined based on historical experience with similar awards, giving consideration to the expected term and vesting schedules. The expected volatility was determined based on the Company’s historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate was based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award.

During the year ended June 30, 2026, the Company granted 200,000 stock options under the 2023 Plan with a weighted average grant-date fair value of $2.84 per option. The options vest over four or five years with contractual terms of five or ten years. The Company recognized $24,933 of stock-based compensation expense related to the awards granted under the 2023 Plan during the fiscal year. No stock-based compensation expense related to the 2023 Plan was recognized in the prior fiscal year. As of June 30, 2026, total unrecognized compensation cost related to unvested awards under the 2023 Plan was approximately $545,012 and is expected to be recognized over a weighted average period of 4.33 years. During the years ended June 30, 2026 and 2025, $1,473 and $31,782, respectively, of stock-based compensation expense related to the 2012 Plan was recognized and as of June 30, 2026, no unrecognized compensation cost related to stock options granted under the 2012 Plan remained. These expenses were included in selling, general and administrative expenses.

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The following table identifies options granted, exercised, canceled, or available for exercise pursuant to the 2012 and 2023 Plans:  

The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of the Company's stock on any given date and the exercise price, multiplied by the number of in-the-money outstanding and exercisable stock options.

A summary of intrinsic value and cash received from stock option exercises and fair value of vested stock options for the fiscal years ended June 30, 2026 and 2025 is as follows: 

A summary of the Company’s non-vested stock option activity and related weighted-average grant date fair values for the fiscal years ended June 30, 2026 and 2025 is as follows: