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<SEC-DOCUMENT>0000950124-01-502987.txt : 20010823
<SEC-HEADER>0000950124-01-502987.hdr.sgml : 20010823
ACCESSION NUMBER:		0000950124-01-502987
CONFORMED SUBMISSION TYPE:	10-K405
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20010630
FILED AS OF DATE:		20010822

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			KOSS CORP
		CENTRAL INDEX KEY:			0000056701
		STANDARD INDUSTRIAL CLASSIFICATION:	HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651]
		IRS NUMBER:				391168275
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10-K405
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-03295
		FILM NUMBER:		1721038

	BUSINESS ADDRESS:	
		STREET 1:		4129 N PORT WASHINGTON AVE
		CITY:			MILWAUKEE
		STATE:			WI
		ZIP:			53212
		BUSINESS PHONE:		4149645000

	MAIL ADDRESS:	
		STREET 1:		C/O WHYTE HIRSCHBOECK DUDEK S C
		STREET 2:		111 EAST WISCONSIN AVENUE
		CITY:			MILWAUKEE
		STATE:			WI
		ZIP:			53202

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KOSS ELECTRONICS INC
		DATE OF NAME CHANGE:	19721005

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	REK O KUT CO INC
		DATE OF NAME CHANGE:	19680124
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>c64647e10-k405.txt
<DESCRIPTION>FORM 10-K PURSUANT TO ITEM 405
<TEXT>
<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

              [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended June 30, 2001
                                       OR
              [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

<TABLE>
<S>                                                                       <C>
KOSS CORPORATION                                                              Commission file number 0-3295
- ---------------------------------------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

A Delaware Corporation                                                                  391168275
- ---------------------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)             (I.R.S. Employer Identification No.)

4129 North Port Washington Avenue, Milwaukee, Wisconsin                                   53212
- ---------------------------------------------------------------------------------------------------------------
(Address of principal executive offices)                                               (Zip Code)
</TABLE>

Registrant's telephone number, including area code: (414) 964-5000
                                                    --------------

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class                   Name of Each Exchange on Which Registered
- -------------------                   -----------------------------------------
     NONE                                               NONE

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $0.01 par value (voting)
                     --------------------------------------
                                (Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.      YES  X  NO
                                            ---    ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
                                        YES  X  NO
                                            ---    ---

The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of August 1, 2001 was approximately $66,074,852 (based on the
$34.00 per share closing price of the Company's Common Stock as reported on the
NASDAQ Stock Market on August 1, 2001). In determining who are affiliates of the
Company for purposes of this computation, it is assumed that directors,
officers, and any persons who held on August 1, 2001 more than 5% of the issued
and outstanding common stock of the Company are "affiliates" of the Company. The
characterization of such directors, officers, and other persons as affiliates is
for purposes of this computation only and should not be construed as a
determination or admission for any other purpose that any of such persons are,
in fact, affiliates of the Company.

On August 1, 2001, 1,943,378 shares of voting common stock were outstanding.



<PAGE>   2


                       Documents Incorporated by Reference

Part III incorporates by reference information from Koss Corporation's Proxy
Statement for its 2001 Annual Meeting of Stockholders to be filed within 120
days of the end of the fiscal year covered by this Report.



                                     PART I

Item 1.  BUSINESS.

As used herein, the term "Company" means Koss Corporation and its consolidated
subsidiaries, unless the context otherwise requires.

The Company operates in the audio/video industry segment of the home
entertainment industry through its design, manufacture and sale of stereo
headphones, and related accessory products.

The Company's principal product is the design, manufacture, and sale of
stereophones and related accessories. The percentage of total revenues related
to the product line over the past three years was:

                                     2001       2000       1999
                                     ----       ----       ----

         Stereophones                 94%        91%        97%

The Company's products are sold through audio specialty stores, catalog
showrooms, regional department store chains, military exchanges and national
retailers under the "Koss" name and dual label. The Company has more than 1,600
domestic dealers and its products are carried in approximately 18,000 domestic
retail outlets. International markets are served by domestic sales
representatives and a sales office in Switzerland which utilizes independent
distributors in several foreign countries.

Management believes that it has sources of raw materials that are adequate for
its needs.

The Company regularly applies for registration of its trademarks in various
countries, and over the years the Company has had numerous trademarks registered
in various countries and numerous patents issued in various countries. Certain
of the Company's trademarks are of material value and importance to the conduct
of its business. Although the Company considers protection of its proprietary
developments important, the Company's business is not, in the opinion of
management, materially dependent upon any single patent.

Although retail sales of consumer electronics are predictably higher during the
holiday season, management of the Company is of the opinion that its business
and industry segment are not seasonal as evidenced by the fact that 52% of sales
occurred in the first six months of the fiscal year and 48% of sales occurred in
the latter six months of the fiscal year.

The Company's working capital needs do not differ substantially from those of
its competitors in the industry and generally reflect the need to carry
significant amounts of inventory to meet delivery requirements of its customers.
The Company provides extended payment terms for product sales to certain
customers. Based on historical trends, management does not expect these
practices to have any material effect on net sales or net income. The Company's
current backlog of orders is not material in relation to annual net sales.






                                       2

<PAGE>   3


The Company markets its products to approximately 2,000 customers worldwide.
During 2001, the Company's sales to its largest single customer, Tandy
Corporation, were approximately 18% of total net sales. Management believes that
any loss of this customer's revenues would be partially offset by a
corresponding decrease, on a percentage basis, in expenses thereby reducing the
impact on the Company's operating income. Although perhaps initially material,
management believes this impact would be offset in future years by expanded
sales to both existing and new customers. The five largest customers of the
Company accounted for approximately 51% of total net sales in 2001.

Although competition in the stereophone market has increased this past year, the
Company has maintained its competitive position as a leading marketer and
producer of high fidelity stereophones in the United States. In the stereophone
market, the Company competes directly with approximately five major competitors,
several of whom are large and diversified and have greater total assets and
resources than the Company.

The amount spent on engineering and research activities relating to the
development of new products or the improvement of existing products was $89,000
during fiscal 2001 as compared with $227,000 during fiscal 2000 and $243,000
during fiscal 1999. These activities were conducted by both Company personnel
and outside consultants. The Company relies upon its unique sound, quality
workmanship, brand identification, engineering skills and customer service to
maintain its competitive position.

As of June 30, 2001, the Company employed 111 people. The Company also utilizes
temporary personnel to meet seasonal production demands.

Foreign Sales.

International markets are serviced through manufacturers' representatives or
independent distributors with product produced in the United States. In the
opinion of management, the Company's competitive position and risks relating to
the conduct of its business in such markets are comparable to the domestic
market. For further information, see Note 9 to the consolidated financial
statements accompanying this Form 10-K.


Item 2.  PROPERTIES.

The Company leases its main plant and offices in Milwaukee, Wisconsin from its
Chairman, John C. Koss. On June 25, 1993, the lease was renewed for a period of
ten years, and is being accounted for as an operating lease. The lease extension
increased the rent from $280,000 per year to a fixed rate of $350,000 per year
for three years and $380,000 for the seven years thereafter. The lease is on
terms no less favorable to the Company than those that could be obtained from an
independent party. The Company is responsible for all property maintenance,
insurance, taxes and other normal expenses related to ownership.

All facilities are in good repair and, in the opinion of management, are
suitable for the Company's purposes.


Item 3.  LEGAL PROCEEDINGS.

Neither Koss nor its subsidiaries are subject to any material legal proceedings
in management's opinion.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of stockholders during the fourth quarter of
the fiscal year ended June 30, 2001.









                                       3


<PAGE>   4


                                     PART II


Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION ON COMMON STOCK

The Company's common stock is traded on The NASDAQ Stock Market under the
trading symbol "KOSS". There were approximately 951 holders of the Company's
common stock as of August 1, 2001. No dividends have been paid for the years
ended June 30, 2001, 2000, and 1999. The quarterly high and low sale prices of
the Company's common stock for the last two fiscal years are shown below.

<TABLE>
<CAPTION>
                                 Fiscal Year 2001               Fiscal Year 2000
                                -----------------               -----------------
Quarter                          High       Low                  High       Low
- -------                         -----------------               -----------------

<S>                            <C>        <C>                  <C>        <C>
First                           $20.375   $15.125               $15.000   $10.625
Second                          $31.750   $18.875               $15.750   $ 9.125
Third                           $31.000   $20.250               $16.000   $13.750
Fourth                          $40.000   $27.563               $18.250   $13.000

</TABLE>


The Company paid no cash dividends on its stock for the periods set forth above;
however, on July 25, 2001, the Company issued a press release announcing the
Company's intent to begin paying quarterly dividends beginning with the quarter
ending September 30, 2001. The full text of the Form 8-K and the press release
are incorporated herein by reference.

Item 6.  SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>

                                          2001            2000             1999            1998             1997
- ----------------------------------------------------------------------------------------------------------------------
<S>                                    <C>              <C>             <C>              <C>             <C>
Net sales                               $38,609,335      $35,401,533     $33,776,039      $41,311,207     $40,413,509

Net income                               $5,687,521       $4,953,461      $4,318,189       $5,477,629      $3,587,688

Earnings per common share:
  Basic                                       $2.70            $1.95           $1.41            $1.68           $1.09
  Diluted                                     $2.56            $1.90           $1.39            $1.65           $1.07

Total assets                            $21,496,328      $25,044,307     $25,721,696      $32,028,769     $26,332,923

Long-term debt                                   $0               $0              $0       $2,746,000      $1,221,000

</TABLE>



Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

FINANCIAL CONDITION AND LIQUIDITY

During 2001, cash provided by operations was $8,923,853. Working capital was
$14,725,834 at June 30, 2001. The decrease in working capital of $5,948,534 from
the balance at June 30, 2000 represents primarily the net effect of a decrease
in cash and inventories and an increase in payables.




                                       4

<PAGE>   5


Capital expenditures for new property and equipment including production tooling
were $814,851, $349,620, and $421,251, in 2001, 2000, and 1999, respectively.
Depreciation charges totaled $599,526, $654,916, and $614,184, for the same
fiscal years. Budgeted capital expenditures for fiscal year 2002 are $1,240,000.
The Company expects to generate sufficient funds through operations to fund
these expenditures.

Stockholders' investment decreased to $14,939,429 at June 30, 2001 from
$20,493,633 at June 30, 2000. The decrease reflects primarily the effect of the
purchase and retirement of common stock offset by current year income and the
exercise of stock options during the year. No cash dividends have been paid
since the first quarter of fiscal 1984. On July 25, 2001, the Company announced
a quarterly cash dividend of $0.25 per share for stockholders of record on
September 30, 2001, to be paid October 15, 2001.

The Company amended its existing credit facility in December 1999, extending the
maturity date of the unsecured line of credit to November 1, 2001. This credit
facility provides for borrowings up to a maximum of $10,000,000. The Company can
use this credit facility for working capital purposes or for the purchase of its
own stock pursuant to the Company's stock repurchase program. Borrowings under
this credit facility bear interest at the bank's prime rate, or LIBOR plus
1.75%. This credit facility includes certain financial covenants that require
the Company to maintain a minimum tangible net worth and specified current,
interest coverage, and leverage ratios. There was no utilization of this credit
facility at June 30, 2001, June 30, 2000, and June 30, 1999.

In April of 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. In January of 1996, the Board of Directors
approved an increase in the stock repurchase program from $2,000,000 to
$3,000,000. In July of 1997, the Board of Directors again approved an increase
in the stock repurchase program from $3,000,000 to $5,000,000. In January of
1998, the Board of Directors approved an increase of an additional $2,000,000,
increasing the total stock repurchase program from $5,000,000 to $7,000,000. In
August of 1998, the Board of Directors approved an increase of $3,000,000 in the
Company's stock repurchase program, thereby increasing the total amount of stock
repurchases from $7,000,000 to $10,000,000. In April of 1999, the Board of
Directors again approved an increase in the stock repurchase program from
$10,000,000 to $15,000,000. In October of 1999, the Board of Directors increased
the stock repurchase program by another $5,000,000, up to a maximum of
$20,000,000, and in July of 2000 the Board increased the program by an
additional $5,000,000, for a maximum of $25,000,000. In January of 2001 the
Board of Directors approved an increase in the stock repurchase program from
$25,000,000 to $28,000,000, another increase in April of 2001 of an additional
$3,000,000, and an additional increase of $3,000,000 in July of 2001 for a
maximum of $34,000,000. The Company intends to effectuate all stock purchases
either on the open market or through privately negotiated transactions, and
intends to finance all stock purchases through its own cash flow or by borrowing
for such purchases. For the fiscal year ended June 30, 2001, the Company
purchased 462,241 shares of its common stock at an average gross price of $25.14
per share (and an average net price of $23.36 per share), and retired all such
shares.

From the commencement of the Company's stock repurchase program through June 30,
2001, the Company has purchased and retired a total of 2,277,739 shares for a
total gross purchase price of $33,160,608 (representing an average gross
purchase price of $14.56 per share) and a total net purchase price of
$29,437,035 (representing an average net purchase price of $12.92 per share).
The difference between the total gross purchase price and the total net purchase
price is the result of the Company purchasing from certain employees shares of
the Company's stock acquired by such employees pursuant to the Company's stock
option program. In determining the dollar amount available for additional
purchases under the stock repurchase program, the Company uses the total net
purchase price paid by the Company for all stock purchases, as authorized by the
Board of Directors.









                                       5

<PAGE>   6


2001 RESULTS COMPARED WITH 2000

Net sales for 2001 were $38,609,335 compared with $35,401,533 in 2000, an
increase of $3,207,802 or 9%. The increase was the result of higher sales volume
of current products as well as the introduction of new products.

Gross profit was $15,572,208 or 40% in 2001 compared with $13,558,016 or 38.3%
in 2000. The improved gross profit is the result of product mix and favorable
raw material prices.

Selling, general and administrative expenses for 2001 were $7,446,119 compared
with $6,947,013 in 2000, an increase of $499,106 or 7%. This increase was a
result of the Company experiencing higher expenses associated with higher sales
for the fiscal year.

Income from operations was $8,126,089 in 2001 compared with $6,611,003 in 2000,
an increase of 22.9%. Interest income was $85,423 in 2001 compared with $102,139
in 2000, a decrease of 16.4%. Interest income fluctuates in relation to cash
balances on hand throughout the year. Interest expense for 2001 was $15,465
compared with $24,244 in 2000.

Royalty income was $1,010,026 in 2001 compared with $1,283,563 in 2000, a
decrease of 21.3%. The decrease in royalty income was a result of a reduction of
territories under certain royalty agreements.

The Company has a License Agreement with Jiangsu Electronics Industries Limited
("Jiangsu"), a subsidiary of Orient Power Holdings Limited, by way of an
assignment of a previously existing License Agreement with Trabelco N.V. Orient
Power is based in Hong Kong and has an extensive portfolio of audio and video
products. This License Agreement covers the United States, Canada, and Mexico,
and has been renewed through December 31, 2002. Pursuant to this License
Agreement, Jiangsu has agreed to meet certain minimum royalty amounts each year.
The products covered by this License Agreement include various consumer
electronics products.

Effective July 1, 1998, the Company entered into a License Agreement and an
Addendum thereto with Logitech Electronics Inc. ("Logitech") of Ontario, Canada
whereby the Company licensed to Logitech the right to sell multimedia/computer
speakers under the Koss brand name. This License Agreement covers North America
and certain countries in South America and Europe, requiring royalty payments by
Logitech through June 30, 2008, subject to certain minimum annual royalty
amounts.

Income taxes are discussed in Note 5 to the consolidated financial statements.














                                       6


<PAGE>   7


2000 RESULTS COMPARED WITH 1999

Net sales for 2000 were $35,401,533 compared with $33,776,039 in 1999, an
increase of $1,625,494 or 5%. The increase was the result of higher sales volume
of current products as well as the introduction of new products.

Gross profit was $13,558,016 or 38.3% in 2000 compared with $12,855,894 or 38.1%
in 1999.

Selling, general and administrative expenses for 2000 were $6,947,013 compared
with $7,225,340 in 1999, a decrease of $278,327 or 3.9%. This decrease was a
result of the Company realizing lower bad debt expenses as compared to last
year.

Income from operations was $6,611,003 in 2000 compared with $5,630,554 in 1999,
an increase of 17.4%. Interest income was $102,139 in 2000 compared with $33,373
in 1999, an increase of 206.1%. Interest income fluctuates in relation to cash
balances on hand throughout the year. Interest expense for 2000 was $24,244
compared with $67,932 in 1999. This decrease was due to decreased levels of
borrowings during the fiscal year.

Royalty income was $1,283,563 in 2000 compared with $1,403,194 in 1999, a
decrease of 8.5%. The decrease in royalty income was a result of the expiration
of a licensing agreement with Trabelco N.V. on December 31, 1998.

The Company has a License Agreement with Jiangsu Electronics Industries Limited
("Jiangsu"), a subsidiary of Orient Power Holdings Limited, by way of an
assignment of a previously existing License Agreement with Trabelco N.V. Orient
Power is based in Hong Kong and has an extensive portfolio of audio and video
products. This License Agreement covers North America, Central America, and
South America. Pursuant to this License Agreement, Jiangsu has agreed to make
royalty payments through December 31, 2000, subject to certain minimum royalty
amounts due each year. The products covered by this License Agreement include
various consumer electronics products. This License Agreement is subject to
renewal for additional 3 year periods.

Effective July 1, 1998, the Company entered into a License Agreement and an
Addendum thereto with Logitech Electronics Inc. ("Logitech") of Ontario, Canada
whereby the Company licensed to Logitech the right to sell multimedia/computer
speakers under the Koss brand name. This License Agreement covers North America
and certain countries in South America and Europe. This License Agreement
extends for 5 years and includes a 5 year renewal option at the Company's
discretion. This License Agreement requires royalty payments by Logitech through
June 30, 2003, subject to certain minimum royalty amounts due each year.

Income taxes are discussed in Note 5 to the consolidated financial statements.










                                       7

<PAGE>   8


RECENTLY ISSUED FINANCIAL ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (FAS) No. 141, "Business Combinations" and No.
142, "Goodwill and Other Intangible Assets." The statements eliminate the
pooling-of-interests method of accounting for business combinations and require
that goodwill and certain intangible assets not be amortized. Instead, these
assets will be reviewed for impairment annually with any related losses
recognized in earnings when incurred. The statements will be effective for the
Company as of July 1, 2002 for existing goodwill and intangible assets and for
business combinations initiated after June 30, 2001. The adoption of these
statements is not expected to have a material effect on the Company's financial
position or results of operations.

In April 2001, the Emerging Issues Task Force ("EITF") reached a consensus on
EITF Issue No. 00-25, "Accounting for Consideration from a Vendor to a Retailer
in Connection with the Purchase or Promotion of the Vendor's Products." This
issue requires that consideration from a vendor to a retailer (a) in connection
with the retailer's purchase of the vendor's products or (b) to promote sales of
the vendor's products by the retailer be classified as a reduction of net sales
unless the consideration meets certain criteria. EITF No. 00-25 is effective for
the Company's fiscal quarters beginning on January 1, 2002 and requires
reclassification of prior periods. The Company is currently evaluating the
impact of implementing EITF No. 00-25.


MANAGEMENT'S REPORT

The consolidated financial statements and related financial information included
in this report are the responsibility of management as to preparation,
presentation and reliability. Management believes that the financial statements
have been prepared in conformity with accounting principles generally accepted
in the United States of America appropriate under the circumstances and
necessarily include amounts that are based on best estimates and judgments.

The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that the books and records
reflect the authorized transactions of the Company.

Oversight of management's financial reporting and internal accounting control
responsibilities is exercised by the Board of Directors, through an Audit
Committee that is comprised solely of non-employee directors. The Audit
Committee is also responsible for the selection and appointment of the
independent auditors and reviews the scope of their audit and their findings.
The independent auditors have direct access to the Audit Committee, with or
without the presence of management representatives, to discuss the scope and the
results of their audit work.

The independent auditors provide an objective assessment of the degree to which
management meets its responsibility for fairness of financial reporting. They
evaluate the system of internal accounting controls in connection with their
audit and perform such tests and procedures as they deem necessary to reach and
express an opinion on the fairness of the financial statements.









                                       8


<PAGE>   9
Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Consolidated financial statements of the Company at June 30, 2001 and 2000 and
for each of the three years in the period ended June 30, 2001 and the notes
thereto, and the report of independent accountants thereon are set forth on
pages 13 to 24.

Selected unaudited quarterly financial data is as follows:

<TABLE>
<CAPTION>


                                                                          Quarter
                                                                          -------
2001                                             First          Second            Third           Fourth
- ----                                             -----          -------           -----           ------
<S>                                            <C>             <C>              <C>             <C>
Net sales                                       $ 9,879,638     $10,348,476      $ 8,195,114     $10,186,107
Gross profit                                      3,952,247       4,078,142        3,416,187       4,125,632
Net income                                        1,383,991       1,374,951        1,235,702       1,692,877
Earnings per common share:
   Basic (1)                                          $ .62           $ .64            $ .59           $ .86
   Diluted (1)                                          .59             .61              .56             .81

<Caption>
                                                                          Quarter
                                                                          -------
2000                                             First          Second            Third           Fourth
- ----                                             -----          -------           -----           ------
<S>                                            <C>             <C>              <C>             <C>
Net sales                                       $ 8,505,393     $ 8,700,959      $ 8,449,773     $ 9,745,408
Gross profit                                      3,479,976       3,296,049        3,540,816       3,241,175
Net income                                        1,183,617       1,139,209        1,102,648       1,527,987
Earnings per common share:
   Basic (1)                                          $ .44           $ .43            $ .45           $ .64
   Diluted (1)                                          .43             .42              .44             .62

</TABLE>

(1)  Due to the use of weighted average shares outstanding each quarter for
     computing net income per share, the sum of the quarterly per share amounts
     does not equal the per share amount for the year.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

None.



                                       9



<PAGE>   10

                                    PART III


Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information relating to the directors of Koss Corporation is incorporated herein
by reference from the "ELECTION OF DIRECTORS -- Information As To Nominees" and
the "ELECTION OF DIRECTORS -- Executive Officers" contained in the Koss
Corporation Proxy Statement for its 2001 Annual Meeting of Stockholders (the
"2001 Proxy Statement"), which 2001 Proxy Statement is to be filed within 120
days of the end of the fiscal year covered by this Report pursuant to General
Instruction G(3) of Form 10-K.

Item 11.  EXECUTIVE COMPENSATION.

Information relating to executive compensation is incorporated herein by
reference from the "ELECTION OF DIRECTORS -- Executive Compensation And Related
Matters" section of the 2001 Proxy Statement.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information relating to the security ownership of certain beneficial owners and
management is incorporated herein by reference from the "ELECTION OF DIRECTORS
- -- Beneficial Ownership Of Company Securities" section of the 2001 Proxy
Statement.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information relating to related transactions is incorporated herein by reference
from the "ELECTION OF DIRECTORS -- Executive Compensation And Related Matters"
and "ELECTION OF DIRECTORS -- Related Transactions" sections of the 2001 Proxy
Statement.


                                     PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.


a.      The following documents are filed as part of this report:

        1.   Financial Statements
             The following consolidated financial statements of Koss
             Corporation are set forth on pages 13 to 24:
<TABLE>
       <S>                                                                                                  <C>
                Report of Independent Accountants............................................................13
                Consolidated Statements of Income for the Years
                     Ended June 30, 2001, 2000, and 1999.....................................................14
                Consolidated Balance Sheets as of June 30, 2001 and 2000.....................................15
                Consolidated Statements of Cash Flows
                     for the Years Ended June 30, 2001, 2000, and 1999.......................................16
                Consolidated Statements of Stockholders' Investment
                     for the Years Ended June 30, 2001, 2000, and 1999.......................................17
                Notes to Consolidated Financial Statements...................................................18

</TABLE>







                                       10

<PAGE>   11


        2.   Financial Statement Schedules
             All schedules have been omitted because the information is not
             applicable or is not material or because the information
             required is included in the financial statements or the notes
             thereto.

        3.   Exhibits Filed

              3.1     Certificate of Incorporation of Koss Corporation.

              3.2     By-Laws of Koss Corporation.

              4.1     Certificate of Incorporation of Koss Corporation.

              4.2     By-Laws of Koss Corporation.

             10.1     Officer Loan Policy.

             10.3     Supplemental Medical Care Reimbursement Plan.

             10.4     Death Benefit Agreement with John C. Koss.

             10.5     Stock Repurchase Agreement with John C. Koss.

             10.6     Salary Continuation Resolution for John C. Koss.

             10.7     1983 Incentive Stock Option Plan.

             10.8     Assignment of Lease to John C. Koss.

             10.9     Addendum to Lease.

             10.10    1990 Flexible Incentive Plan.

             10.12    Loan Agreement, effective as of February 17, 1995.

             10.13    Amendment to Loan Agreement dated June 15, 1995, effective
                      as of February 17, 1995.

             10.14    Amendment to Loan Agreement dated April 29, 1999.

             10.15    Amendment to Loan Agreement dated December 15, 1999.

             10.16    License Agreement dated November 15, 1991 between Koss
                      Corporation and Trabelco N.V. (a subsidiary of Hagemeyer
                      N.V.) for North America, Central America and South America
                      (including Amendment to License Agreement dated November
                      15, 1991; Renewal Letter dated November 18, 1994; and
                      Second Amendment to License Agreement dated September 29,
                      1995).

             10.17    License Agreement dated September 29, 1995 between Koss
                      Corporation and Trabelco N.V. (a subsidiary of Hagemeyer
                      N.V.) for Europe (including First Amendment to License
                      Agreement dated December 26, 1995).

             10.18    Third Amendment and Assignment of License Agreement to
                      Jiangsu Electronics Industries Limited dated March 31,
                      1997.


                                       11

<PAGE>   12
             10.19    Fourth Amendment to License Agreement dated as of May 29,
                      1998.

             10.20    Fifth Amendment to License Agreement dated March 30, 2001.

             10.21    Sixth Amendment to License Agreement dated August 15,
                      2001.

             10.22    License Agreement dated June 30, 1998 between Koss
                      Corporation and Logitech Electronics Inc. (including
                      Addendum to License Agreement dated June 30, 1998).

             10.23    Consent of Directors (Supplemental Executive Retirement
                      Plan for Michael J. Koss dated March 7, 1997).

             10.24    Amendment to Lease.

             10.25    Partial Assignment, Termination and Modification of Lease.

             10.26    Restated Lease.

             22       List of Subsidiaries of Koss Corporation.

b.     No reports on Form 8-K were filed by the Company during the last quarter
       of the period covered by this report; however, the Company filed a report
       on Form 8-K on July 27, 2001 announcing the Company's intent to begin
       paying quarterly dividends beginning with the quarter ending September
       30, 2001.

























                                       12
<PAGE>   13


REPORT OF INDEPENDENT ACCOUNTANTS


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF KOSS CORPORATION

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 10 present fairly, in all material
respects, the financial position of Koss Corporation and its subsidiaries at
June 30, 2001 and 2000, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 2001, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.



PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
July 10, 2001, except for Note 12 for
  which the date is July 25, 2001















                                       13



<PAGE>   14
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Year Ended June 30,                                              2001              2000             1999
- -------------------------------------------------------------------------------------------------------------
<S>                                                          <C>               <C>              <C>
Net sales                                                     $38,609,335       $35,401,533      $33,776,039
Cost of goods sold                                             23,037,127        21,843,517       20,920,145
- -------------------------------------------------------------------------------------------------------------
Gross profit                                                   15,572,208        13,558,016       12,855,894
Selling, general, and
  administrative expense                                        7,446,119         6,947,013        7,225,340
- -------------------------------------------------------------------------------------------------------------
Income from operations                                          8,126,089         6,611,003        5,630,554
Other income (expense)
  Royalty income                                                1,010,026         1,283,563        1,403,194
  Interest income                                                  85,423           102,139           33,373
  Interest expense                                               (15,465)          (24,244)         (67,932)
- -------------------------------------------------------------------------------------------------------------
Income before income taxes                                      9,206,073         7,972,461        6,999,189
Provision for income taxes (note 5)                             3,518,552         3,019,000        2,681,000
- -------------------------------------------------------------------------------------------------------------
Net income                                                    $ 5,687,521       $ 4,953,461      $ 4,318,189
=============================================================================================================
Earnings per common share:
  Basic                                                             $2.70             $1.95            $1.41
  Diluted                                                           $2.56             $1.90            $1.39
=============================================================================================================
Dividends per common share                                           None              None             None
=============================================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.














                                       14



<PAGE>   15
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
As of June 30,                                                                        2001                         2000
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                        <C>
ASSETS
Current Assets:
  Cash                                                                             $    181,678                 $  3,164,401
  Accounts receivable, less allowances of
    $301,252 and $252,194, respectively (note 11)                                     8,247,045                    8,228,185
  Inventories                                                                         8,496,010                    9,414,036
  Prepaid expenses                                                                      593,961                      562,028
  Income taxes receivable                                                               480,322                      244,755
  Deferred income taxes (note 5)                                                        340,973                      638,973
- -----------------------------------------------------------------------------------------------------------------------------
    Total current assets                                                             18,339,989                   22,252,378
- -----------------------------------------------------------------------------------------------------------------------------
Equipment and Leasehold Improvements, at cost:
  Leasehold improvements                                                              1,031,574                      852,096
  Machinery, equipment, furniture, and fixtures                                       5,012,089                    4,910,652
  Tools, dies, molds, and patterns                                                    9,062,776                    8,689,732
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                     15,106,439                   14,452,480
  Less--accumulated depreciation                                                     13,415,811                   12,888,178
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                      1,690,628                    1,564,302
Deferred Income Taxes (note 5)                                                          557,135                      488,135
Other Assets                                                                            908,576                      739,492
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                   $ 21,496,328                 $ 25,044,307
=============================================================================================================================

LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
  Accounts payable                                                                 $  2,062,476                 $    570,567
  Accrued liabilities (note 6)                                                        1,551,679                    1,007,443
- -----------------------------------------------------------------------------------------------------------------------------
    Total current liabilities                                                         3,614,155                    1,578,010
- -----------------------------------------------------------------------------------------------------------------------------
Contingently Redeemable Equity Interest (note 4)                                      1,490,000                    1,490,000
- -----------------------------------------------------------------------------------------------------------------------------
Deferred Compensation                                                                 1,015,390                    1,045,310
- -----------------------------------------------------------------------------------------------------------------------------
Other Liabilities                                                                       437,354                      437,354
- -----------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (note 10)
- -----------------------------------------------------------------------------------------------------------------------------
Stockholders' Investment (note 4):
  Common stock, $.01 par value,
    authorized 8,500,000 shares;
    issued and outstanding 1,943,378
    and 2,349,369 shares, respectively                                                   19,434                       23,494
  Contingently redeemable common stock                                               (1,490,000)                  (1,490,000)
  Undistributed retained earnings                                                    16,409,995                   21,960,139
- -----------------------------------------------------------------------------------------------------------------------------
Total  stockholders' investment                                                      14,939,429                   20,493,633
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                   $ 21,496,328                 $ 25,044,307
=============================================================================================================================

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.












                                       15



<PAGE>   16
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended June 30,                                                   2001                   2000                   1999
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                    <C>                    <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
  Net income                                                        $5,687,521             $4,953,461             $4,318,189
  Adjustments to reconcile net
    income to net cash provided by
    operating activities:
      Depreciation and amortization                                    600,819                663,422                638,897
      Deferred income taxes                                            229,000               (294,027)                87,000
      Deferred compensation                                            115,080                115,080                115,080
      Other                                                            (61,001)                71,322                     --
      Net changes in operating assets and
        liabilities (note 7)                                         2,352,434              2,545,344              4,893,225
- -----------------------------------------------------------------------------------------------------------------------------
        Net cash provided by
          operating activities                                       8,923,853              8,054,602             10,052,391
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
  Acquisition of equipment
    and leasehold improvements                                        (814,851)              (349,620)              (421,251)
- -----------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM
FINANCING ACTIVITIES:
  Repayments under line of credit agreement                                 --                     --             (9,443,000)
  Borrowings under line of credit agreement                                 --                     --              6,697,000
  Exercise of stock options                                            535,798                774,262                214,365
  Purchase and retirement of treasury stock                        (11,627,523)            (6,486,347)            (5,942,779)
- -----------------------------------------------------------------------------------------------------------------------------
      Net cash used in
        financing activities                                       (11,091,725)            (5,712,085)            (8,474,414)
- -----------------------------------------------------------------------------------------------------------------------------
  Net (decrease) increase in cash                                   (2,982,723)             1,992,897              1,156,726
  Cash at beginning of year                                          3,164,401              1,171,504                 14,778
- -----------------------------------------------------------------------------------------------------------------------------
  Cash at end of year                                               $  181,678             $3,164,401             $1,171,504
=============================================================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.











                                       16



<PAGE>   17


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

<TABLE>
<CAPTION>
                                                                                                        Accumulated
                                                           Common Stock             Undistributed          Other
                                                           ------------               Retained         Comprehensive
                                                      Shares          Amount          Earnings              Loss
- ------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>              <C>             <C>
Balance, June 30, 1998                                 3,177,269        $ 31,773      $  24,120,709           $ (71,322)
  Net income                                                  --              --          4,318,189                  --
  Purchase and retirement of treasury stock             (488,650)         (4,887)        (5,937,892)                 --
  Exercise of stock options                               22,500             225            214,140                  --
- ------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1999                                 2,711,119          27,111         22,715,146             (71,322)
  Net income                                                  --              --          4,953,461                  --
  Purchase and retirement of treasury stock             (435,500)         (4,355)        (6,481,992)                 --
  Exercise of stock options                               73,750             738            773,524                  --
  Foreign currency translation adjustment                     --              --                 --              71,322
- ------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2000                                 2,349,369          23,494         21,960,139                  --
  Net income                                                  --              --          5,687,521                  --
  Purchase and retirement of treasury stock             (462,241)         (4,622)       (11,622,901)                 --
  Exercise of stock options                               56,250             562            385,236                  --
- ------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2001                                 1,943,378        $ 19,434      $  16,409,995           $      --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.



















                                       17

<PAGE>   18


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ACCOUNTING POLICIES

CONCENTRATION OF CREDIT RISK--The Company operates in the audio/video industry
segment of the home entertainment industry through its design, manufacture, and
sale of stereo headphones and related accessory products. The Company's products
are sold through audio specialty stores, catalog showrooms, regional department
store chains, military exchanges and national retailers under the "Koss" name
and dual label. The Company has more than 1,600 domestic dealers and its
products are carried in approximately 18,000 domestic retail outlets.
International markets are served by domestic sales representatives and a sales
office in Switzerland, which utilizes independent distributors in several
foreign countries. The Company grants credit to its domestic and Canadian
customers. Collection is dependent on the retailing industry economy.
International customers outside of Canada are sold on a cash against documents
or letter of credit basis. Approximately 14% and 9% of the Company's accounts
receivable at June 30, 2001 and 2000, respectively, were foreign receivables.

BASIS OF CONSOLIDATION--The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are wholly-owned. All
significant intercompany accounts and transactions have been eliminated.

REVENUE RECOGNITION--Revenue is recognized by the Company when all of the
following criteria are met: persuasive evidence of an arrangement exists;
delivery has occurred; the seller's price to the buyer is fixed or determinable;
and collectibility is reasonably assured. These criteria are satisfied, and
accordingly, revenue is recognized upon shipment by the Company.

ROYALTY INCOME--The Company recognizes royalty income when earned under terms of
license agreements, which expire in 2002 and 2008. These agreements require
minimum annual royalty payments.

INVENTORIES--Substantially all of the Company's inventories were valued at the
lower of last-in, first-out (LIFO) cost or market. If the first-in, first-out
(FIFO) method of inventory accounting had been used by the Company for
inventories valued at LIFO, inventories would have been $981,018 and $1,076,111
higher than reported at June 30, 2001 and 2000, respectively.

The components of inventories at June 30 are as follows:


<TABLE>
<CAPTION>
                                          2001              2000
        -------------------------------------------------------------
      <S>                             <C>               <C>
        Raw materials and
          work in process              $ 2,516,999       $ 3,903,626
        Finished goods                   5,979,011         5,510,410
        -------------------------------------------------------------
                                       $ 8,496,010       $ 9,414,036
        =============================================================
</TABLE>




During 2001 and 2000, the Company liquidated certain LIFO layers, the effect of
which did not have a significant impact on operating income.

PROPERTY AND EQUIPMENT--Depreciation is provided on a straight-line basis over
the estimated useful life of the asset as follows:

             Leasehold Improvements            10-15 years
             Machinery, Equipment,
              Furniture, and Fixtures           3-10 years
             Tools, Dies, Molds,
              and Patterns                       4-5 years

RESEARCH AND DEVELOPMENT--Research and development expenditures charged to
operations amounted to approximately $89,000 in 2001, $227,000 in 2000, and
$243,000 in 1999.




                                       18

<PAGE>   19


USE OF ESTIMATES--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.

SHIPPING AND HANDLING FEES AND COSTS--During the fourth quarter of fiscal year
2001, the Company adopted the provisions of the Emerging Issues Task Force
("EITF") Issue No. 00-10 "Accounting for Shipping and Handling Fees and Costs."
In accordance with the provisions of EITF No. 00-10, certain shipping and
handling fees and costs which the Company had previously recorded on a net basis
as a component of net sales are reflected in cost of goods sold, as appropriate.

ACCOUNTING PRONOUNCEMENTS--In July 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (FAS) No. 141,
"Business Combinations" and No. 142, "Goodwill and Other Intangible Assets." The
statements eliminate the pooling-of-interests method of accounting for business
combinations and require that goodwill and certain intangible assets not be
amortized. Instead, these assets will be reviewed for impairment annually with
any related losses recognized in earnings when incurred. The statements will be
effective for the Company as of July 1, 2002 for existing goodwill and
intangible assets and for business combinations initiated after June 30, 2001.
The adoption of these statements is not expected to have a material effect on
the Company's financial position or results of operations.

In April 2001, the EITF reached a consensus on EITF Issue No. 00-25, "Accounting
for Consideration from a Vendor to a Retailer in Connection with the Purchase or
Promotion of the Vendor's Products." This issue requires that consideration from
a vendor to a retailer (a) in connection with the retailer's purchase of the
vendor's products or (b) to promote sales of the vendor's products by the
retailer be classified as a reduction of net sales unless the consideration
meets certain criteria. EITF No. 00-25 is effective for the Company's fiscal
quarters beginning after December 15, 2001 and requires reclassification of
prior periods. The Company is currently evaluating the impact of implementing
EITF No. 00-25.

RECLASSIFICATIONS--Certain amounts in the prior year financial statements have
been reclassified to conform to current year presentation.

2.  EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

Basic earnings per share are computed based on the weighted average number of
common shares outstanding. The weighted average number of common shares
outstanding for the fiscal years ended June 30, 2001, 2000, and 1999, were
2,104,041, 2,542,768, and 3,072,500, respectively. When dilutive, stock options
are included in earnings per share as share equivalents using the treasury stock
method. Common stock equivalents of 121,200, 59,716, and 39,327 related to stock
option grants were included in the computation of the average number of shares
outstanding for diluted earnings per share for the fiscal years ended June 30,
2001, 2000, and 1999, respectively.

3.  LONG-TERM DEBT

The Company amended its existing credit facility in December 1999, extending the
maturity date of the unsecured line of credit to November 1, 2001. This credit
facility provides for borrowings up to a maximum of $10,000,000. The Company can
use this credit facility for working capital purposes or for the purchase of its
own common stock pursuant to the Company's stock repurchase program. Borrowings
under this credit facility bear interest at the bank's prime rate, or LIBOR plus
1.75%. This credit facility includes certain financial covenants that require
the Company to maintain a minimum tangible net worth and specified current,
interest coverage, and leverage ratios. There was no utilization of this credit
facility at June 30, 2001 and 2000.




                                       19

<PAGE>   20
4.  STOCK OPTIONS AND STOCK PURCHASE AGREEMENTS

In 1990, pursuant to the recommendation of the Board of Directors, the
stockholders ratified the creation of the Company's 1990 Flexible Incentive Plan
(the "1990 Plan"). The 1990 Plan is administered by a committee of the Board of
Directors and provides for the granting of various stock-based awards including
stock options to eligible participants, primarily officers and certain key
employees. A total of 225,000 shares of common stock were available in the first
year of the Plan's existence. Each year thereafter additional shares equal to
 .25% of the shares outstanding as of the first day of the applicable fiscal year
were reserved for issuance pursuant to the 1990 Plan. On July 22, 1992, the
Board of Directors authorized the reservation of an additional 250,000 shares
for the 1990 Plan, which was approved by the stockholders. In 1993, the Board of
Directors authorized the reservation of an additional 300,000 shares for the
1990 Plan, which was approved by the stockholders. In 1997, the Board of
Directors authorized the reservation of an additional 300,000 shares for the
1990 Plan, which was approved by the stockholders.

The following table identifies options granted, exercised, cancelled, or
available for exercise pursuant to the above mentioned Plan:

<TABLE>
<CAPTION>

                                                                              Range of Exercise            Weighted
                                                              Number of              Prices per             Average
                                                                 Shares                   Share      Exercise Price
        ------------------------------------------------------------------------------------------------------------
       <S>                                                   <C>               <C>                   <C>
        Shares under option at July 1, 1998                     190,000            $5.32-$11.91               $9.02
               Granted                                          110,000           $10.00-$11.83              $11.42
               Exercised                                        (22,500)           $5.32-$10.83               $8.36
               Cancelled                                         (8,750)           $5.32-$10.83               $9.86
        ------------------------------------------------------------------------------------------------------------
        Shares under option at June 30, 1999                    268,750            $5.32-$11.91              $10.03
               Granted                                           60,000           $13.45-$14.80              $14.24
               Exercised                                        (73,750)           $5.32-$10.83               $7.85
               Cancelled                                         (7,500)                 $10.00              $10.00
        ------------------------------------------------------------------------------------------------------------
        Shares under option at June 30, 2000                    247,500            $5.32-$14.80              $11.70
               Granted                                           80,000           $33.51-$36.86              $35.60
               Exercised                                        (56,250)           $5.32-$13.45               $9.45
        ------------------------------------------------------------------------------------------------------------
        Shares under option at June 30, 2001                    271,250           $10.20-$36.86              $19.22
        ============================================================================================================
        Options exercisable at June 30, 2001                     83,750           $10.20-$14.80              $12.00
        ============================================================================================================

</TABLE>

The weighted average fair value at date of grant for options whose exercise
price exceeded the market price of the stock on the grant date during 2001, 2000
and 1999 was $10.61, $6.66 and $4.82, respectively. The weighted average fair
value at date of grant for options whose exercise price was less than the market
price of the stock on the grant date during 2001, 2000 and 1999 was $15.80,
$9.28 and $7.07, respectively. The weighted average remaining contractual life
of these options approximates 5 years.

The Company currently accounts for its stock-based compensation plans using the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25). In 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS
123). Under the provisions of FAS 123, companies can elect to account for
stock-based compensation plans using a fair-value-based method or continue
measuring compensation expense for those plans using the intrinsic value method
prescribed in APB 25. FAS 123 requires that companies electing to continue using
the intrinsic value method must make pro forma disclosures of net income and
earnings per share as if the fair-value-based method of accounting had been
applied. The Company has adopted the disclosure-only provisions of FAS 123;
accordingly, no compensation cost has been recognized for options granted under
the stock-based compensation plan. Had compensation cost been determined based
on the fair value at the grant date for awards in 2001, 2000, and 1999
consistent with the provisions of FAS 123, the Company's pro forma net income
and earnings per share would have been as presented below:




                                       20


<PAGE>   21

<TABLE>
<CAPTION>

                                                                            2001           2000            1999
                                                                     ----------------------------------------------

   <S>                                                               <C>              <C>             <C>
        Net income - as reported                                         $5,687,521     $4,953,461      $4,318,189
        Net income - pro forma                                            5,238,951      4,602,345       4,073,710
        Earnings per common share - as reported
           Basic                                                              $2.70          $1.95           $1.41
           Diluted                                                             2.56           1.90            1.39
        Earnings per common share - pro forma
           Basic                                                              $2.49          $1.81           $1.33
           Diluted                                                             2.35           1.77            1.31

</TABLE>


The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
                                                                            2001           2000            1999
                                                                     ----------------------------------------------

    <S>                                                              <C>               <C>             <C>
        Expected stock price volatility                                      50.41%         56.09%          60.00%
        Risk free interest rate                                               4.97%          6.54%           5.17%
        Expected life of options                                         5.13 years     5.25 years      4.95 years

</TABLE>


The Company has an agreement with its Chairman to repurchase common stock from
his estate in the event of his death. The repurchase price is 95% of the fair
market value of the common stock on the date that notice to repurchase is
provided to the Company. The total number of shares to be repurchased shall be
sufficient to provide proceeds which are the lesser of $2,500,000 or the amount
of estate taxes and administrative expenses incurred by his estate. The Company
is obligated to pay in cash 25% of the total amount due and to execute a
promissory note at a prime rate of interest for the balance. The Company
maintains a $1,150,000 life insurance policy to fund a substantial portion of
this obligation.

5.  INCOME TAXES

The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which requires use of the liability method of
accounting for income taxes. The liability method measures the expected tax
impact of future taxable income and deductions implicit in the consolidated
balance sheet.

The provision for income taxes in 2001, 2000, and 1999 consists of the
following:

<TABLE>
<CAPTION>
         Year Ended June 30,                              2001                 2000                 1999
         ----------------------------------------------------------------------------------------------------
<S>                                                     <C>                  <C>                  <C>
         Current:
           Federal                                      $2,716,552           $2,788,027           $2,200,000
           State                                           573,000              525,000              394,000
         Deferred                                          229,000             (294,027)              87,000
         ----------------------------------------------------------------------------------------------------
                                                        $3,518,552           $3,019,000           $2,681,000
         ====================================================================================================
</TABLE>







                                       21



<PAGE>   22


The 2001, 2000, and 1999 tax provision results in an effective rate different
than the federal statutory rate due to the following:

<TABLE>
<CAPTION>


         Year Ended June 30,                              2001                 2000                 1999
         ----------------------------------------------------------------------------------------------------

      <S>                                              <C>                  <C>                  <C>
         Federal income tax at
           statutory rate                               $3,130,000           $2,711,000           $2,380,000
         State income taxes, net of
           federal tax benefit                             378,000              346,000              260,000
         Other                                              10,552              (38,000)              41,000
         ----------------------------------------------------------------------------------------------------
         Total provision for
           income taxes                                 $3,518,552           $3,019,000           $2,681,000
         ====================================================================================================
</TABLE>




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

<TABLE>
<CAPTION>
                                                                          2001                      2000
         -----------------------------------------------------------------------------------------------------
      <S>                                                                <C>                       <C>
         Deferred Tax Assets
           Deferred compensation                                           $385,000                $  400,000
           Accrued expenses and reserves                                    357,000                   612,000
           Package design and trademarks                                    193,000                   190,000
           Other                                                              9,000                     9,000
         -----------------------------------------------------------------------------------------------------
                                                                            944,000                 1,211,000

         Deferred Tax Liabilities
           Royalties receivable/deferred                                    (11,000)                  (56,000)
           Equipment and leasehold improvements                             (35,000)                  (28,000)
         -----------------------------------------------------------------------------------------------------
         Net deferred tax asset                                            $898,000                $1,127,000
         =====================================================================================================
</TABLE>

The net deferred tax asset at June 30, 2001 is comprised of a current asset of
$340,973 and a long term asset of $557,135. The net deferred tax asset at June
30, 2000 is comprised of a current asset of $638,973 and a long term asset of
$488,135.

6.  ACCRUED LIABILITIES

Accrued liabilities at June 30 consist of the following:

<TABLE>
<CAPTION>
                                                                            2001                      2000
         -----------------------------------------------------------------------------------------------------
      <S>                                                                <C>                       <C>
         Salaries and wages                                              $  584,435                $  325,302
         Cooperative advertising
           and promotion allowances                                         463,314                   305,126
         Payroll taxes and
           employee benefits                                                186,738                   180,216
         Other                                                              317,192                   196,799
         -----------------------------------------------------------------------------------------------------
                                                                         $1,551,679                $1,007,443
         =====================================================================================================
</TABLE>








                                       22



<PAGE>   23
7.  ADDITIONAL CASH FLOW INFORMATION

The net changes in cash as a result of changes in operating assets and
liabilities consist of the following:

<TABLE>
<CAPTION>
                                                      2001                 2000                  1999
         -------------------------------------------------------------------------------------------------
<S>                                                <C>                <C>                      <C>
         Accounts receivable                        $  (18,860)          $ (820,646)         $    980,300
         Inventories                                   918,026            3,541,082             6,530,940
         Prepaid expenses                              (31,933)             (48,128)               34,992
         Income taxes                                 (235,567)              21,574              (943,856)
         Other assets                                 (170,377)             (43,371)             (120,750)
         Accounts payable                            1,491,909             (221,218)           (1,165,092)
         Accrued liabilities                           399,236              116,051              (423,309)
         -------------------------------------------------------------------------------------------------
         Net change                                 $2,352,434           $2,545,344          $  4,893,225
         =================================================================================================

<CAPTION>
                                                           2001                 2000                  1999
                                                           ----                 ----                  ----
Net cash paid during the year for:
       <S>                                          <C>                  <C>                   <C>
         Interest                                       $15,465              $24,244               $93,135
         Income taxes                                $3,675,119           $3,291,453            $3,563,054

</TABLE>

8.  EMPLOYEE BENEFIT PLANS

Substantially all domestic employees are participants in the Company's Employee
Stock Ownership Plan and Trust under which an annual contribution in either cash
or common stock may be made at the discretion of the Board of Directors. The
expense recorded for such contributions approximated $94,000 in 2001, $0 in
2000, and $200,000 in 1999.

The Company maintains a retirement savings plan under Section 401(k) of the
Internal Revenue Code. This plan covers all employees of the Company who have
completed six months of service. Matching contributions can be made at the
discretion of the Board of Directors. For calendar years 2001, 2000, and 1999,
the matching contribution was 100% of employee contributions to the plan, not to
exceed 10% of the employee's annual compensation. Vesting of Company
contributions occurs immediately. Contributions for the years ended June 30,
2001, 2000, and 1999 were $180,000, $180,000, and $182,155, respectively.


9.  INDUSTRY SEGMENT INFORMATION, FOREIGN OPERATIONS AND SIGNIFICANT CUSTOMERS

The Company has one line of business--the design, manufacture, and sale of
stereophones and related accessories.

The Company's export sales amounted to $3,575,021 during 2001, $3,129,872 during
2000, and $2,845,529 during 1999.

Sales to one customer, Tandy Corporation, were approximately 18% of total sales
for the year ended June 30, 2001, and 16% and 17% for the years ended June 30,
2000, and 1999, respectively.








                                       23

<PAGE>   24
10.  COMMITMENTS AND CONTINGENCIES

The Company leases its main plant and offices in Milwaukee, Wisconsin from its
Chairman. On June 25, 1993, the lease was renewed for a period of ten years, and
is being accounted for as an operating lease. The lease extension increases the
rent from $280,000 per year to a fixed rate of $350,000 per year for three years
and $380,000 for the seven years thereafter. The lease is on terms no less
favorable to the Company than those that could be obtained from an independent
party. The Company is responsible for all property maintenance, insurance,
taxes, and other normal expenses related to ownership. Rent expense, which
includes this lease, approximated $424,000 in 2001, $454,000 in 2000, and
$428,000 in 1999.

11.  SUPPLEMENTARY INFORMATION

Changes in the allowance for doubtful accounts for the years ended June 30,
2001, 2000, and 1999 are summarized as follows:

<TABLE>
<CAPTION>


     Year        Balance at Beginning         Charges Against/                                 Balance at End of
    Ending             of Period             (Credits To) Income          Deductions*               Period
    ------             ---------             -------------------          -----------               ------
<S>             <C>                         <C>                          <C>                   <C>
     2001               $252,194                   $ 52,238                 $ 3,180                $301,252
     2000               $447,644                  ($ 37,178)                $158,272               $252,194
     1999               $556,290                   $254,000                 $362,646               $447,644

</TABLE>

  *Represents charges against the allowance, net of recoveries.

The amounts included for advertising in selling, general, and administrative
expenses in the accompanying statements of income were $207,776 in 2001,
$235,257 in 2000, and $331,890 in 1999. Such costs are expensed as incurred.

12.  SUBSEQUENT EVENT

On July 25, 2001, the Company declared a quarterly cash dividend of $0.25 per
share for stockholders of record on September 30, 2001 to be paid October 15,
2001.

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS


This Annual Report on Form 10-K contains forward-looking statements within the
meaning of that term in the Private Securities Litigation Reform Act of 1995(the
"Act") (Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934). Additional written or oral forward-looking
statements may be made by the Company from time to time in filings with the
Securities Exchange Commission, press releases, or otherwise. Statements
contained in this Form 10-K that are not historical facts are forward-looking
statements made pursuant to the safe harbor provisions of the Act.
Forward-looking statements may include, but are not limited to, projections of
revenue, income or loss and capital expenditures, statements regarding future
operations, anticipated financing needs, compliance with financial covenants in
loan agreements, plans for acquisitions or sales of assets or businesses, plans
relating to products or services of the Company, assessments of materiality,
predictions of future events, the effects of pending and possible litigation,
and assumptions relating to the foregoing. In addition, when used in this Form
10-K, the words "anticipates," "believes," or "estimates," "expects," "intends,"
"plans" and variations thereof and similar expressions are intended to identify
forward-looking statements.




                                       24

<PAGE>   25


Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified based on current expectations.
Consequently, future events and actual results could differ materially from
those set forth in, contemplated by, or underlying the forward-looking
statements contained in this Form 10-K, or in other Company filings, press
releases, or otherwise. In addition to the factors discussed in this Form 10-K,
other factors that could contribute to or cause such differences include, but
are not limited to, developments in any one or more of the following areas:
future fluctuations in economic conditions, the receptivity of consumers to new
consumer electronics technologies, the rate and consumer acceptance of new
product introductions, competition, pricing, the number and nature of customers
and their product orders, production by third party vendors, foreign
manufacturing, sourcing and sales (including foreign government regulation,
trade and importation concerns), borrowing costs, changes in tax rates, pending
or threatened litigation and investigations, and other risk factors which may be
detailed from time to time in the Company's Securities and Exchange Commission
filings.

Readers are cautioned not to place undue reliance on any forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unexpected
events.


















                                       25



<PAGE>   26


                                   SIGNATURES


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

KOSS CORPORATION


By: /s/ Michael J. Koss                                        Dated: 8/15/01
   ------------------------------                                     -------
   Michael J. Koss,
   Vice Chairman
   President
   Chief Executive Officer
   Chief Operating Officer and
   Chief Financial Officer

By: /s/ Sujata Sachdeva                                        Dated: 8/15/01
   -----------------------------                                      -------
   Sujata Sachdeva,
   Vice President - Finance
   Principal Accounting Officer


        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:



/s/ John C. Koss                                 /s/ Michael J. Koss
- ------------------------                         -------------------
John C. Koss, Director                           Michael J. Koss, Director
Dated: 8/15/01                                   Dated: 8/15/01
       -------                                          -------

/s/ Martin F. Stein                              /s/ Victor L. Hunter
- -------------------                              --------------------
Martin F. Stein, Director                        Victor L. Hunter, Director
Dated: 8/16/01                                   Dated: 8/15/01
       -------                                          -------

/s/ John J. Stollenwerk
- -----------------------                          --------------------
John J. Stollenwerk, Director                    Lawrence S. Mattson, Director
Dated: 8/15/01                                   Dated:
       -------                                          -------

/s/ Thomas L. Doerr
- -----------------------
Thomas L. Doerr, Director
Dated: 8/16/01







The signatures of the above directors constitute a majority of the Board of
Directors of Koss Corporation.








                                       26


<PAGE>   27
<TABLE>
<CAPTION>
OFFICERS AND                                                      DIRECTORS
SENIOR MANAGEMENT
<S>                                                             <C>
John C. Koss                                                      John C. Koss
Chairman of the Board                                             Chairman of the Board
                                                                  Koss Corporation
Michael J. Koss
Vice Chairman                                                     Thomas L. Doerr
President                                                         President
Chief Executive Officer                                           Doerr Corporation
Chief Operating Officer
Chief Financial Officer                                           Victor L. Hunter
                                                                  President
John C. Koss, Jr.                                                 Hunter Business Group, LLC
Vice President-Sales
                                                                  Michael J. Koss
Sujata Sachdeva                                                   Vice Chairman, President,
Vice President-Finance                                            C.E.O., C.O.O., C.F.O.
                                                                  Koss Corporation
Jill McCurdy
Vice President-Product Development                                Lawrence S. Mattson
                                                                  Retired President
Lenore Lillie                                                     Oster Company
Vice President-Operations
                                                                  Martin F. Stein
Cheryl Mike                                                       Chairman
Vice President-Human Resources/Customer Relations                 Eyecare One Inc.

Declan Hanley                                                     John J. Stollenwerk
Vice President-International Sales                                President
                                                                  Allen-Edmonds Shoe Corporation


ANNUAL MEETING

October 18, 2001
Performance Center
Koss Corporation
4129 N. Port Washington Avenue                                    INDEPENDENT ACCOUNTANTS
Milwaukee, WI 53212
                                                                  PricewaterhouseCoopers LLP
TRANSFER AGENT                                                    Milwaukee, Wisconsin

Questions regarding change of address,                            LEGAL COUNSEL
stock transfer, lost certificate, or
information on a particular account                               Richard W. Silverthorn
should be directed in writing to:                                 General Counsel
                                                                  Whyte Hirschboeck Dudek S.C.
Firstar Trust Company
Box 2077
Milwaukee, WI  53201
Attn: Philip Meyer

</TABLE>



                                       27


<PAGE>   28


                                  EXHIBIT INDEX

The Company will furnish a copy of any exhibit described below upon request and
upon reimbursement to the Company of its reasonable expenses of furnishing such
exhibit, which shall be limited to a photocopying charge of $0.25 per page and,
if mailed to the requesting party, the cost of first-class postage.

<TABLE>
<CAPTION>
Designation                                                                  Incorporation
of Exhibit     Exhibit Title                                                 by Reference
- ----------     -------------                                                 ------------
<S>            <C>                                                          <C>
 3.1           Certificate of Incorporation of Koss Corporation, as in
               effect on September 25, 1996 ...............................       (1)

 3.2           By-Laws of Koss Corporation, as in effect on
               September 25, 1996..........................................       (2)

 4.1           Certificate of Incorporation of Koss Corporation, as in
               effect on September 25, 1996 ...............................       (1)

 4.2           By-Laws of Koss Corporation, as in effect on
               September 25, 1996 .........................................       (2)

10.1           Officer Loan Policy ........................................       (3)

10.3           Supplemental Medical Care Reimbursement Plan ...............       (4)

10.4           Death Benefit Agreement with John C. Koss ..................       (5)

10.5           Stock Purchase Agreement with John C. Koss .................       (6)

10.6           Salary Continuation Resolution for John C . Koss ...........       (7)

10.7           1983 Incentive Stock Option Plan ...........................       (8)

10.8           Assignment of Lease to John C. Koss ........................       (9)

10.9           Addendum to Lease ..........................................       (10)

10.10          1990 Flexible Incentive Plan ...............................       (11)

10.12          Loan Agreement, effective as of February 17, 1995 ..........       (12)

10.13          Amendment to Loan Agreement dated June 15, 1995,
               effective as of February 17, 1995 ..........................       (13)

10.14          Amendment to Loan Agreement dated April 29, 1999 ...........       (14)

10.15          Amendment to Loan Agreement dated December 15,
               1999 .......................................................       (15)

</TABLE>





                                       28


<PAGE>   29
<TABLE>
<S>          <C>                                                                   <C>
10.16         License Agreement dated November 15, 1991 between
              Koss Corporation and Trabelco N.V. (a subsidiary
              of Hagemeyer N.V.) for North America, Central
              America and South America (including Amendment
              to License Agreement dated November 15, 1991;
              Renewal Letter dated November 18, 1994; and Second
              Amendment to License Agreement dated September 29,
              1995) ......................................................           (16)

10.17         License Agreement dated September 29, 1995 between
              Koss Corporation and Trabelco N.V. (a subsidiary
              of Hagemeyer N.V.) for Europe (including First
              Amendment to License Agreement dated December 26,
              1995) ......................................................           (17)

10.18         Third Amendment and Assignment of License Agreement
              to Jiangsu Electronics Industries Limited dated as of
              March 31, 1997 .............................................           (18)

10.19         Fourth Amendment to License Agreement dated as of
              May 29, 1998 ...............................................           (19)

10.20         Fifth Amendment to License Agreement dated
              March 30, 2001 .............................................           (20)

10.21         Sixth Amendment to License Agreement dated
              August 15, 2001 ............................................           (21)

10.22         License Agreement dated June 30, 1998 between Koss
              Corporation and Logitech Electronics Inc. (including
              Addendum to License Agreement dated June 30, 1998) .........           (22)

10.23         Consent of Directors (Supplemental Executive Retirement
              Plan for Michael J. Koss dated March 7, 1997) ..............           (23)

10.24         Amendment to Lease .........................................           (24)

10.25         Partial Assignment, Termination and Modification of
              Lease ......................................................           (25)

10.26         Restated Lease .............................................           (26)

22            List of Subsidiaries of Koss Corporation ...................           (27)

</TABLE>

(1)           Incorporated by reference from Exhibit 3.1 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)

(2)           Incorporated by reference from Exhibit 3.2 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)

(3)           Incorporated by reference from Exhibit 10.1 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)



                                       29

<PAGE>   30
(4)           Incorporated by reference from Exhibit 10.3 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)

(5)           Incorporated by reference from Exhibit 10.4 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)

(6)           Incorporated by reference from Exhibit 10.5 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)

(7)           Incorporated by reference from Exhibit 10.6 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)

(8)           Incorporated by reference from Exhibit 10.7 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)

(9)           Incorporated by reference from Exhibit 10.7 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1988
              (Commission File No. 0-3295)

(10)          Incorporated by reference from Exhibit 10.8 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1988
              (Commission File No. 0-3295)

(11)          Incorporated by reference from Exhibit 25 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1990
              (Commission File No. 0-3295)

(12)          Incorporated by reference from Exhibit 10 to the Company's
              Quarterly Report on Form 10-Q for the quarter ended March 31,
              1995 (Commission File No. 0-3295)

(13)          Incorporated by reference from Exhibit 10.13 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1995
              (Commission File No. 0-3295)

(14)          Incorporated by reference from Exhibit 10.14 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1999
              (Commission File No. 0-3295

(15)          Incorporated by reference from Exhibit 10.15 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 2000
              (Commission File No. 0-3295)

(16)          Incorporated by reference from Exhibit 10.14 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)

(17)          Incorporated by reference from Exhibit 10.15 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1996
              (Commission File No. 0-3295)


                                       30

<PAGE>   31




(18)          Incorporated by reference from Exhibit 10.1 to the Company's
              Quarterly Report on Form 10-Q for the quarter ended March 31,
              1997 (Commission File No. 0-3295)

(19)          Incorporated by reference from Exhibit 10.17 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1998
              (Commission File No. 0-3295)

(20)          Incorporated by reference from the sole Exhibit to the
              Company's Quarterly Report on Form 10-Q for the quarter ended
              March 31, 2001 (Commission File No. 0-3295)

(21)          Filed herewith

(22)          Incorporated by reference from Exhibit 10.18 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1998
              (Commission File No. 0-3295)

(23)          Incorporated by reference from Exhibit 10.2 to the Company's
              Quarterly Report on Form 10-Q for the quarter ended March 31,
              1997 (Commission File No. 0-3295)

(24)          Incorporated by reference from Exhibit 10.22 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 2000
              (Commission File No. 0-3295)

(25)          Filed herewith

(26)          Filed herewith

(27)          Incorporated by reference from Exhibit 22 to the Company's
              Annual Report on Form 10-K for the year ended June 30, 1988
              (Commission File No. 0-3295)















                                       31




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>4
<FILENAME>c64647ex10-21.txt
<DESCRIPTION>SIXTH AMENDMENT TO LICENSE AGREEMENT, 8/15/2001
<TEXT>
<PAGE>   1

                      SIXTH AMENDMENT TO LICENSE AGREEMENT

         THIS SIXTH AMENDMENT TO LICENSE AGREEMENT ("Sixth Amendment") is made
and entered into this 15th day of August, 2001, effective as of June 30, 2001,
by and between KOSS CORPORATION, a Delaware corporation ("LICENSOR"), and
JIANGSU ELECTRONICS INDUSTRIES LIMITED, a British Virgin Islands company
("LICENSEE").

                                    RECITALS

         WHEREAS, LICENSOR and LICENSEE (by way of assignment) are parties to a
certain License Agreement between LICENSOR and Trabelco N.V. dated November 15,
1991 ("Original License Agreement"), as amended by an Amendment to License
Agreement dated November 15, 1991 ("First Amendment"), a Second Amendment to
License Agreement dated September 29, 1995 ("Second Amendment"), a Third
Amendment and Assignment of License Agreement dated as of March 31, 1997 ("Third
Amendment"), a Fourth Amendment to License Agreement dated May 29, 1998 ("Fourth
Amendment"), and a Fifth Amendment to License Agreement dated March 30, 2001
("Fifth Amendment") (the Original License Agreement, the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, and the Fifth
Amendment are hereinafter collectively referred to as the "License Agreement");
and

         WHEREAS, the parties now desire to further amend certain terms and
provisions of the License Agreement and to renew the License Agreement as
hereinafter provided; and

         WHEREAS, as an inducement to LICENSOR to amend the License Agreement
and enter into this Sixth Amendment, Orient Power Holdings Limited, a Bermuda
company, desires to reaffirm its guarantee of the obligations of LICENSEE under
the License Agreement and this Sixth Amendment by executing the Consent of
Guarantor in the form of Exhibit F attached hereto.

                                    AGREEMENT

         NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

         1. The parties hereto agree to renew the License Agreement for the
Contract Year starting January 1, 2002 and ending December 31, 2002.

         2. Section 7.3 of the License Agreement (as amended by the Third
Amendment, the Fourth Amendment and the Fifth Amendment) is hereby deleted in
its entirety and the following inserted in its place.


<PAGE>   2



                  7.3      LICENSEE shall pay to LICENSOR the following Minimum
                           Royalties for the Contract Years set forth below:
<TABLE>
<CAPTION>
                             Year                           Minimum Royalties
                             ----                           -----------------
<S>                                                         <C>
                             2001                               $500,000
                             2002                               $500,000
</TABLE>
                           If the sum of the total Royalties paid with respect
                           to a Contract Year does not equal or exceed the
                           Minimum Royalties for such Contract Year, the
                           difference between the Minimum Royalties and the
                           Royalties for such Contract Year shall be due and
                           payable on each January 20 following such Contract
                           Year.

         3. The parties hereto agree that this Sixth Amendment has been jointly
drafted by the parties, that the language used in this Sixth Amendment reflects
their mutual intent, and that no term or provision shall be construed more or
less favorably to either party hereto on the grounds that it was drafted or
authorized by such party.

         4. Except as hereby amended, the License Agreement shall remain in full
force and effect.

         IN WITNESS WHEREOF, the parties hereto have duly executed this Sixth
Amendment on the day and year first above written.


                                KOSS CORPORATION



                                By:  /s/ Michael J. Koss
                                     -------------------
                                Print  Name: Michael J. Koss
                                Title: President/CEO


                                JIANGSU ELECTRONICS INDUSTRIES LIMITED



                                By: /s/ Poon Ka Hung
                                    ----------------
                                Print Name:  Poon Ka Hung
                                Title:  Chief Executive Officer











                                       2
<PAGE>   3
                                                                       EXHIBIT F

                              CONSENT OF GUARANTOR

         The undersigned, Orient Power Holdings Limited, a Bermuda company
("Orient Power"), for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby consents to the foregoing
Sixth Amendment to License Agreement ("Sixth Amendment") and reaffirms its
guarantee of the performance by Jiangsu Electronics Industries Limited ("Jiangsu
Electronics") or any sublicensee of Jiangsu Electronics (Jiangsu Electronics and
any sublicensee are hereinafter collectively referred to as "Jiangsu") of all of
Jiangsu's obligations under (a) the Sixth Amendment and (b) that certain License
Agreement between Koss Corporation, as Licensor, and Trabelco N.V., as Licensee,
dated November 15, 1991, as amended by an Amendment to License Agreement dated
November 15, 1991, and a Second Amendment to License Agreement dated September
29, 1995, and a Third Amendment and Assignment of License Agreement dated as of
March 31, 1997 between Trabelco N.V., Jiangsu Electronics, Hagemeyer Electronics
(N.A.), Inc., Hagemeyer Consumer Products, Inc. d/b/a/ Koss Electronics
Products, KCP Limited and Koss Corporation, and a Fourth Amendment to License
Agreement dated May 29, 1998, and a Fifth Amendment to License Agreement dated
March 30, 2001 (collectively, that certain License Agreement and the amendments
thereto are hereinafter collectively referred to as the "License Agreement").
Orient Power also guarantees the payment to Koss Corporation of any and all
amounts owed to Koss Corporation by Jiangsu under the Sixth Amendment and the
License Agreement, including but not limited to, the royalty obligations and
indemnity obligations of Jiangsu thereunder.

                                             ORIENT POWER HOLDINGS LIMITED


Dated: 08/15/01                              By:  /s/ Poon Ka Hung
                                                  ----------------
                                             Name:  Poon Ka Hung
                                             Title:  Chief Executive Officer






































                                       3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.25
<SEQUENCE>5
<FILENAME>c64647ex10-25.txt
<DESCRIPTION>AMENDMENT TO LEASE
<TEXT>
<PAGE>   1
                                                                   EXHIBIT 10.25



            PARTIAL ASSIGNMENT, TERMINATION AND MODIFICATION OF LEASE


         THIS PARTIAL ASSIGNMENT, TERMINATION AND MODIFICATION OF LEASE (this
"MODIFICATION") is made by and among JOHN C. KOSS, an individual resident of the
State of Wisconsin ("ASSIGNOR"), KOSS CORPORATION, a Delaware corporation
("TENANT") and HOME DEPOT U.S.A., INC., a Delaware corporation ("ASSIGNEE") as
of the 20th day of January, 1999.

                                    RECITALS

         A. By Building Lease dated December 31, 1985, Hi-Tran, Inc. as landlord
and Tenant entered into a written lease (the "BUILDING LEASE") for certain
premises commonly known as 4129 and 4189 North Port Washington Road and legally
described on EXHIBIT A attached hereto (the "ORIGINAL PREMISES").

         B. The Building Lease was subsequently amended by: (i) that certain
Amendment to Lease dated February 28, 1986 between Junior House, Inc. (as
successor to Hi-Tran, Inc. by merger) and Tenant (the "FIRST AMENDMENT"); (ii)
that certain Addendum to Lease dated December ___, 1987 (the foregoing date
intentionally left blank to reflect the exact reference to the date in said
document) between Assignor (as successor by assignment to Junior House, Inc.)
and Tenant (the "SECOND AMENDMENT"); and (iii) that certain Third Lease
Amendment dated as of June 25, 1993 between Assignor and Tenant (the "THIRD
AMENDMENT" which, together with the Building Lease, the First Amendment and the
Second Amendment is sometimes collectively referred to herein as the "LEASE").

         C. The landlord's rights under the Lease are now vested in Assignor,
the current owner of the Original Premises.

         D. Assignor previously granted Assignee an option to purchase a portion
of the Original Premises consisting of approximately 15.211 acres, legally
described on EXHIBIT B attached hereto (the "HD PARCEL") and approximately as
depicted on the site plan attached hereto as EXHIBIT C (the "SITE PLAN"). The HD
Parcel consists of all of Parcel 2 and a portion of Parcel 1 from Exhibit A.
Following the closing of the sale transaction contemplated under said option
(the "CLOSING"), the remaining portion of the Original Premises owned by
Assignor shall sometimes be referred to herein as the "KOSS PARCEL". The option
contemplated that certain access, parking and signage rights on and over the HD
Parcel would be reserved for the benefit of the Koss Parcel.

         E. In connection with Tenant's use of the Original Premises, there are
two existing signs which, following the Closing, will be located on the HD
Parcel approximately as shown on the Site Plan consisting of: (i) an existing
billboard sign located in the northwesterly portion of the HD Parcel (the "KOSS
BILLBOARD SIGN"); and (ii) an existing monument sign located in the southwest
corner of the HD Parcel (the "KOSS SOUTH SIGN" which, together with the Koss
Billboard Sign is collectively referred to herein as the "KOSS SIGNS"). In
connection with the Closing, Assignee has agreed to permit Tenant to continue to
maintain the Koss Signs in their present locations as more particularly
hereinafter described.


<PAGE>   2

         F. In the Third Amendment, Assignor reserved the right to sell portions
of Parcel 2 of Exhibit A (and to delete same from the Original Premises)
provided that certain parking rights were reserved thereon for the use of Tenant
and its employees and customers. In connection with the Closing, Assignor and
Assignee are concurrently herewith entering into a Reciprocal Easement Agreement
("REA") to, among other things, reserve certain parking rights on the HD Parcel
for the benefit of the Koss Parcel and the owner and occupant thereof from time
to time.

         G. In connection with the Closing and in consideration of the rights
reserved for the benefit of the Koss Parcel pursuant to the REA, this
Modification and the Restated Lease (as hereinafter defined), Assignor, Tenant
and Assignee now desire to enter into this Modification for purposes of: (i)
terminating the Lease as to all portions of the HD Parcel except for the Koss
Signs and the real estate beneath the Koss Signs as shown on the Site Plan
(collectively, the "KOSS SIGN PADS" which, together with the Koss Signs are
sometimes collectively referred to herein as the "KOSS SIGN PREMISES"); (ii)
Assignor's assignment to Assignee of its rights and obligations as landlord
under the Lease with respect to the Koss Sign Premises; (iii) ratifying the
terms of the Lease between Assignor and Tenant with respect to the Koss Parcel,
as modified herein; and (iv) the agreement of Tenant and Assignee to certain
modifications of the Lease with respect to the Koss Sign Premises as provided in
the Restated Lease executed concurrently herewith. For purposes of this
Modification, the term "KOSS LEASE" shall refer to the Lease, as modified
herein, as between Assignor and Tenant with respect to the Koss Parcel, and the
term "HD LEASE" shall refer to the Lease, as modified and partially assigned
herein and in the Restated Lease, as between Assignee and Tenant with respect to
the Koss Sign Premises.

         NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor, Tenant and Assignee hereby agree as follows:

         1. Assignor and Tenant agree, as between themselves and to and for the
benefit of Assignee, that (i) the Lease and all of Tenant's rights thereunder
are hereby terminated as to all portions of the HD Parcel except for the Koss
Sign Premises, (ii) the HD Parcel (excluding the Koss Sign Premises) is hereby
deleted from the Original Premises, (iii) for purposes of the Koss Lease, the
use of the term "Leased Premises" shall refer only to the Koss Parcel, (iv)
concurrently herewith they shall enter into an amendment to the Koss Lease (the
"KOSS LEASE AMENDMENT") to, among other things, grant Tenant the benefit of
certain access and parking easements established under the REA as a Permittee
thereunder (as that term is defined in the REA), (v) except as modified herein
and in the Koss Lease Amendment, the Koss Lease shall remain in full force and
effect with respect to the Koss Parcel only, and all terms, covenants,
conditions, agreements and provisions thereof are hereby ratified, confirmed and
approved, and (vi) Assignee shall have no obligations or liabilities of any kind
whatsoever under the Koss Lease with respect to the Koss Parcel.

         2. Assignor hereby assigns to Assignee all of its right, title and
interest as landlord under the Lease with respect to the Koss Sign Premises
only, and acknowledges and agrees that following the Closing, Assignor shall
have no further right, title or interest in and to the HD Parcel except pursuant
to the REA as the Owner of the Koss Parcel (as that term is defined in the REA).
Assignee hereby accepts the foregoing partial assignment, and Tenant hereby



                                       2


<PAGE>   3


acknowledges and consents to such partial assignment, and Assignee and Tenant
hereby agree that (i) the term "Leased Premises" for purposes of the HD Lease
shall refer only to the Koss Sign Premises, (ii) concurrently herewith they
shall enter into that certain Restated Lease attached hereto as EXHIBIT D (the
"RESTATED LEASE") for purposes of amending and restating the HD Lease as to the
Koss Sign Premises, (iii) except as modified herein and in the Restated Lease,
the HD Lease shall remain in full force and effect with respect to the Koss Sign
Premises only, and all terms, covenants, conditions, agreements and provisions
thereof are hereby ratified, confirmed and approved, and (iv) Assignee shall
have no obligations or liabilities of any kind whatsoever under the HD Lease
with respect to any portion of the HD Parcel, except for the Koss Sign Premises
as expressly provided in the Restated Lease and the REA.

         3. Each of the parties hereto represents, warrants and covenants unto
the other that: (i) this Modification has been duly authorized, executed and
delivered, is a valid and binding obligation of such party and is enforceable
against such party in accordance with its terms; (ii) to the best of their
knowledge as of the date of execution hereof, there exist no agreements, leases,
licenses, certificates, documents, instruments, governing charter, operating
agreement or by-laws, actions, proceedings, judgments, legal requirements or any
other matter or thing to which each such party is a party to or otherwise bound
by, or to which they have received notice of, that in any way would be deemed to
limit, modify or otherwise adversely affect any of the terms of this
Modification; and (iii) other than the Mortgagee Consent attached hereto and the
parties hereto, there exist no other parties possessing any applicable right,
title or interest in and to any portion of the Original Premises that is
required to be a party to this Modification in order to render any of the terms
hereof effective and binding as to such party or which has or may have any right
to consent or approve the terms hereof.

         4. In the event of any conflict between the terms of the Lease and the
terms of this Modification, the terms of this Modification shall in all
instances govern and control.

         5. If any provision of this Modification, or portion thereof, or the
application thereof to any person or circumstances, shall, to any extent be held
invalid, inoperative or unenforceable, the remainder of this Modification, or
the application of such provision or portion thereof to any other persons or
circumstances, shall not be affected thereby; it shall not be deemed that any
such invalid provision affects the consideration for this Modification; and each
provision of this Modification shall be valid and enforceable to the fullest
extent permitted by law.

         6. This Modification shall be construed in accordance with the laws of
the State of Wisconsin.

         7. This Modification shall be binding upon and inure to the benefit of
the successors and assigns of the parties hereto.

         8. This Modification may be executed in several counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same document.




                                       3

<PAGE>   4


         IN WITNESS WHEREOF, this Modification has been executed by the parties
is made as of the date first above written.



         ASSIGNOR:                    /s/ John C. Koss
                                      -----------------
                                      JOHN C. KOSS


         TENANT:                    KOSS CORPORATION



                                    By:  /s/ Michael J. Koss
                                         -------------------------------------
                                         Michael Koss, Chief Executive Officer


         ASSIGNEE:                  HOME DEPOT U.S.A., INC.


                                    By: /s/ Kathryn E. Lee
                                        ------------------
                                    Print Name: Kathryn E. Lee
                                    Title: Senior Corporate Counsel







                                       4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>6
<FILENAME>c64647ex10-26.txt
<DESCRIPTION>RESTATED LEASE
<TEXT>
<PAGE>   1
                                                                   EXHIBIT 10.26



                                 RESTATED LEASE


         THIS RESTATED LEASE (this "RESTATED LEASE") is made by and between KOSS
CORPORATION, a Delaware corporation ("TENANT") and HOME DEPOT U.S.A., INC., a
Delaware corporation ("LANDLORD") as of the 20th day of January, 1999.

                                    RECITALS

         A. By Building Lease dated December 31, 1985, Hi-Tran, Inc. as landlord
and Tenant entered into a written lease (the "BUILDING LEASE") for certain
premises commonly known as 4129 and 4189 North Port Washington Road and legally
described on Exhibit A attached thereto as Parcels 1 and 2. The Building Lease
was subsequently amended by: (i) that certain Amendment to Lease dated February
28, 1986 between Junior House, Inc. (as successor to Hi-Tran, Inc. by merger)
and Tenant (the "FIRST AMENDMENT"); (ii) that certain Addendum to Lease dated
December ___, 1987 (the foregoing date intentionally left blank to reflect the
exact reference to the date in said document) between John C. Koss ("KOSS") (as
successor by assignment to Junior House, Inc.) and Tenant (the "SECOND
AMENDMENT"); and (iii) that certain Third Lease Amendment dated as of June 25,
1993 between Koss and Tenant (the "THIRD AMENDMENT" which, together with the
Building Lease, the First Amendment and the Second Amendment is sometimes
collectively referred to herein as the "LEASE").

         B. In conjunction with the sale of a portion of the original premises
demised under the Lease from Koss to Landlord, Koss, Landlord and Tenant have
concurrently herewith entered into a Partial Assignment, Termination and
Modification of Lease (the "ASSIGNMENT"). For purposes of this Restated Lease,
all terms used herein with initial capital letters which are defined in the
Assignment shall have the same meaning herein as are ascribed to such terms in
the Assignment unless otherwise defined herein or the context dictates
otherwise. The purpose of the Assignment was, among other things, to: (i)
terminate the Lease as to all portions of the HD Parcel except for the Koss Sign
Premises; and (ii) memorialize the partial assignment of Koss' rights and
obligations as landlord under the Lease with respect to the Koss Sign Premises
to Landlord.

         C. In connection with the foregoing sale transaction, Koss and Landlord
have also concurrently herewith executed a Reciprocal Easement Agreement ("REA")
which, among other things, contained various rights and obligations concerning
the Koss Signs. Tenant executed a consent to the REA whereby, among other
things, Tenant consented to and agreed to be bound by all applicable terms,
conditions and provisions of the REA, subject to the limitations contained in
such consent.

         D. Pursuant to the terms of the Assignment, Landlord and Tenant agreed
to execute this Restated Lease with respect to the HD Lease, and now desire to
enter into this Restated Lease for purposes of better describing the parties
respective rights and obligations with respect to the Koss Sign Premises. For
purposes of this Restated Lease, the term "this Restated Lease" shall in all
instances refer to the HD Lease, as amended, supplemented and clarified by the
terms of this Restated Lease.



<PAGE>   2

         NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant hereby agree as follows:

         1. LEASE. Landlord and Tenant mutually ratify and confirm Tenant's
continued leasehold rights in and to the Koss Sign Premises (consisting of the
Koss Signs and the Koss Sign Pads located on the HD Parcel legally described on
EXHIBIT A attached hereto and as approximately shown on the Site Plan attached
hereto as EXHIBIT B upon and subject to the terms of this Restated Lease. For
purposes of this Restated Lease, (i) all references in the Lease to the terms
"this Lease" or "the Lease" or "hereof" or "herein" or words of similar import
referring to the Lease shall refer to this Restated Lease, (ii) all references
in the Lease to the terms "Premises," or "Leased Premises," or "demised
premises" or any words of similar import shall refer to the Koss Sign Premises;
and (iii) all references in the Lease to the term "Landlord" shall refer to Home
Depot U.S.A., Inc. or its grantees, successors or assigns, as the case may be.

         2. TERM, PURPOSE AND POSSESSION.

         (a) The term of this Restated Lease is hereby extended so as to expire
upon the earlier to occur of (i) the cessation of Tenant's use of the Koss
Parcel for electronics manufacturing and related business, or (ii) December 31,
2098, unless sooner terminated as provided in the Restated Lease. Upon the
expiration or earlier termination of this Restated Lease, Tenant agrees, upon
not less than fifteen (15) days' prior written notice, to sign an instrument in
recordable form to be provided by Landlord releasing all of Tenant's right,
title and interest in and to the HD Parcel as Landlord or its title insurer may
reasonably require to insure over Tenant's leasehold rights pursuant hereto.

         (b) Subject to the terms of this Restated Lease, the Koss Sign Premises
may be used by Tenant for purposes of the maintenance, operation, repair and
replacement (including the periodic changing of the billboard advertising
signage) of the Koss Signs and for no other purpose. Landlord and Tenant
acknowledge and agree that any physical changes to the structure of the Koss
Signs shall be subject to the prior written consent of Landlord as more
particularly set forth in Section 8 of the Building Lease; provided, however,
Landlord hereby agrees that such consent shall not be unreasonably withheld or
delayed. In no event may the Koss Signs be used (i) to identify any of
Landlord's competitors, (ii) to advertise any product or service for or on
behalf of any owner or operator of a home improvement center or hardware store
(other than Landlord) or for any other item described in Section 3.01(f) of the
REA (unless first approved by Landlord), or (iii) to communicate any negative or
derogatory material concerning Landlord, its home improvement centers or any
products or services sold by Landlord. In connection with Tenant's use of the
Koss Sign Premises, Tenant agrees that it will not do, suffer or permit, or
agree to do anything that would in any way interfere with or delay or increase
the cost of the development or operation of the HD Parcel or Landlord's business
operated thereon.

         (c) Tenant acknowledges that as of the date hereof, Tenant is in
possession of the entire Koss Sign Premises, and: (i) Tenant hereby accepts the
Koss Sign Premises in their "AS-IS CONDITION AND AS-BUILT CONFIGURATION" subject
to all easements, covenants, conditions or other matters of record; and (ii)
Landlord shall not be required to install, or

                                       2


<PAGE>   3

contribute toward the cost of any alterations, additions or improvements to the
Koss Sign Premises for Tenant's occupancy during the term of this Restated
Lease, except for Landlord's obligations pursuant to Sections 2.03(e) and (f) of
the REA.

         3. RENT. Landlord acknowledges that annual rent in the amount of Ten
Dollars (10.00) per year for the entire term of this Restated Lease has been
prepaid, the receipt and sufficiency of which are acknowledged by Landlord and
that except as referenced in Section 4 hereof, no other consideration is due
Landlord from Tenant throughout the term under this Restated Lease with respect
to the use of the Koss Sign Premises without in any way otherwise limiting,
modifying or affecting Tenant's obligations and liabilities under this Restated
Lease.

         4. MAINTENANCE AND TAXES.

         (a) Tenant shall, at its sole cost and expense (i) repair and maintain
(including necessary replacements) the Koss Signs (including, without
limitation, the physical sign structures as well as all signfaces thereon) in
good condition and repair so as to keep same in a safe, sightly and functional
condition at all times in accordance with and subject to the applicable terms of
Section 2.03 of the REA including, without limitation, all applicable
ordinances, statutes, regulations and all other local, state, and federal laws
applicable to the Koss Signs, and (ii) be responsible for all utility
consumption charges in connection with the illumination of the Koss Signs, which
utility line or lines are now or shall be connected to a meter or submeter which
shall be billed directly to the Koss Parcel. It is the intention of the parties
hereto that (1) Tenant shall perform and satisfy all of the obligations of the
Owner of the Koss Parcel (as defined in the REA) with respect to the Koss Signs,
and (2) Landlord shall maintain the Koss Sign Pads in accordance with and
subject to the terms of Article II of the REA.

         (b) Landlord shall be responsible for payment of all real estate taxes
attributable to the HD Parcel (including the Koss Sign Premises) without
reimbursement from Tenant, and Tenant shall not have the right to contest any
real estate taxes with respect thereto notwithstanding anything to the contrary
in the Lease.

         5. ACCESS. In connection with the exercise of any rights available to
Tenant with respect to the Koss Sign Premises or the performance of any
obligations required of Tenant with respect to the Koss Sign Premises under this
Restated Lease or under the REA, Tenant shall have the right to enter upon the
HD Parcel as reasonably necessary to perform such obligations or exercise such
rights. Any entry onto the HD Parcel shall be made subject to all of the terms
of this Restated Lease and the REA including, without limitation, Tenant's
covenant to perform any work expeditiously, in a good workmanlike manner and so
as to not interfere with the business operation conducted on the HD Parcel and
to timely pay for all such work so as to prevent any lien claims from arising on
the HD Parcel. All insurance and indemnification provisions contained in the
Building Lease shall apply as fully with respect to Tenant's use of the Koss
Sign Premises pursuant to this Restated Lease as if they were set forth herein
in their entirety.

         6. DESTRUCTION. If either or both of the Koss Signs are partially or
wholly damaged or destroyed by fire or other casualty or occurrence, Tenant
shall have the option, to be exercised in writing to Landlord within sixty (60)
days following the date of any such fire or other


                                       3

<PAGE>   4

casualty, to (i) repair, replace or restore the Koss Signs (or the applicable
damaged sign, as the case may be), in which case this Restated Lease shall
continue in full force and effect for the remainder of the unexpired term
hereof, or (ii) terminate this Restated Lease by written notice to Landlord,
whereupon subject to Tenant's removal of the Koss Signs if so required by
Landlord, the parties shall have no further rights or obligations hereunder,
except for any obligations or liabilities which have previously accrued under
this Restated Lease which shall survive the termination hereof. If Tenant fails
to furnish a written election within said 60-day period, Tenant shall be deemed
to have elected to repair, replace or restore the Koss Signs (or the applicable
damaged sign, as the case may be). Upon the expiration or earlier termination of
this Restated Lease as to one or both of the Koss Signs, upon written request by
Landlord, Tenant shall, at its expense, remove the applicable sign(s) from the
Koss Sign Premises (and the HD Parcel) leaving the Koss Sign Premises (and
adjacent areas on the HD Parcel) in a safe and sightly condition, at grade with
adjacent areas on the HD Parcel and free of all sign materials and improvements,
holes, piles of dirt or other materials or debris caused by such removal,
repairing any damage to any portion of the HD Parcel caused thereby. If Tenant
elects or is deemed to have elected to repair, replace or restore the Koss Signs
pursuant to this Section 6, Tenant shall commence such repair, replacement or
restoration within ninety (90) days following the date of damage or destruction
(subject to reasonable extension due to force majeure) and shall diligently
prosecute such repair, replacement or restoration work, as the case may be, to
completion within one hundred eighty (180) days following the date of damage or
destruction (subject to reasonable extension due to force majeure), failing
which, in either case of failure to commence or complete in accordance herewith,
this Restate Leased shall terminate with respect to the applicable sign(s) so
damaged or destroyed. If, following any substantial damage or destruction, such
repair, restoration or rebuilding is prohibited by applicable law, then this
Restated Lease shall terminate as provided herein with respect to the applicable
sign(s). Any restoration or replacement of the Koss Signs shall be built solely
on the Koss Sign Pads in accordance with and subject to all applicable terms of
this Restated Lease and shall be substantially similar in size and height to the
sign which was damaged or destroyed. Except as provided in the following
sentence, Tenant hereby waives any right of recovery and releases all claims
against Landlord with respect to any damage or destruction to the Koss Signs
from any cause whatsoever to the extent of the proceeds payable under any
policies of insurance maintained by Tenant pursuant to the Restated Lease or
which would have been payable had the required insurance coverage been
maintained, whether or not such damage or loss shall have been caused by any
acts or omissions of Landlord or its directors, officers, employees, agents,
tenants or occupants. Notwithstanding the terms of the preceding sentence, if
the Koss Signs or either of them are materially damaged or destroyed as a result
of an intentional act of Landlord, and if the restoration or reconstruction of
the affected sign(s) is then prohibited by law, then the foregoing waiver and
release shall not apply with respect to any claim or right of recovery for
direct (and not consequential, special or indirect) damages that Tenant may have
against Landlord in connection with such damage or destruction.

         7. RECIPROCAL EASEMENT AGREEMENT. The REA and this Restated Lease shall
be construed together with the intent of giving full force and effect to each
and every term and provision of each agreement.

         8. NOTICES. Notices required or desired to be given under this Restated
Lease shall be in writing and delivered by nationally recognized overnight
courier with evidence of receipt to

                                       4


<PAGE>   5

the parties at the addresses below or such other addresses as one or more
parties may from time to time designate by like notice. Delivery shall be deemed
effective on the date of delivery as shown by the delivery ticket of the courier
evidencing receipt thereof. The initial addresses of the parties are as follows:

(a)      If to Tenant        Koss Corporation
                             Attention: Michael Koss
                             4129 North Port Washington Road
                             Milwaukee, Wisconsin 53212

         with copy to:       Richard W. Silverthorn
                             Whyte Hirschboeck Dudek, S.C.
         .                   111 E. Wisconsin Avenue, Suite 2100
                             Milwaukee, Wisconsin 53202

         If to Landlord:     Home Depot U.S.A., Inc.
                             1400 West Dundee Road
                             Arlington Heights, Illinois 60004
                             Attention:  Michael LaFerle
                                         Midwest Real Estate Manager

         with copies to:     Home Depot U.S.A., Inc.
                             2455 Paces Ferry Road
                             Building C, 20th Floor
                             Atlanta, Georgia 30339
                             Attention: Senior Corporate Counsel - Real Estate

                             and

                             Altman, Kritzer & Levick, Ltd.
                             1101 Perimeter Road
                             Suite 700
                             Schaumburg, Illinois 60173
                             Attention: Gregg M. Dorman, Esq.

         9. TENANT AGREEMENTS. Anything in the Lease to the contrary
notwithstanding, Tenant acknowledges and agrees that:

                  (a) Landlord has no obligations or liabilities with respect to
         the Koss Sign Premises except as expressly provided in this Restated
         Lease or the REA;

                  (b) Landlord has no obligations or liabilities of any kind or
         nature whatsoever with respect to or arising out of (i) the Lease prior
         to the effective date of the Assignment and this Restated Lease
         (including, without limitation, any obligations, debts or liabilities
         of Koss as landlord under the Lease, if any), or (ii) the Koss Parcel
         or the condition thereof, or (iii) any other agreements (verbal or
         written) between Koss and Tenant with


                                       5


<PAGE>   6


         respect to the Koss Sign Premises, the HD Parcel or any other matter or
         thing, and Tenant does hereby release Landlord from any such
         obligations or liabilities and waives all claims against Landlord in
         connection therewith;

                  (c) Landlord is not making and has not made any
         representations or warranties of any kind or nature concerning the Koss
         Sign Premises including, without limitation, the condition thereof or
         whether the Koss Signs are or will be in compliance with or permitted
         by applicable laws;

                  (d) the covenant of quiet enjoyment set forth in the Lease
         with respect to the Koss Sign Premises shall only apply with respect to
         matters caused by Landlord, its agents, employees or contractors, or
         anyone claiming by or through Landlord;

                  (e) the indemnity set forth in Section 9(D) of the Building
         Lease shall also include Tenant's indemnification of Landlord with
         respect to any liabilities, claims, losses, damages, demands, fines,
         penalties, interest, liens, costs or expenses (including, without
         limitation, reasonable attorneys' fees and litigation expenses) arising
         out of the failure of the Koss Signs to comply with all applicable laws
         or with respect to the continued maintenance of the Koss Signs
         following notice from any applicable governmental authority that such
         signs are prohibited under applicable law; and

                  (f) In addition to any other applicable rights or remedies
         available to Landlord at law or in equity, Landlord shall have all
         rights and remedies available under Section 14 of the Building Lease in
         the event of Tenant's default under this Restated Lease.

         10. AUTHORITY. Each of the parties hereto represents, warrants and
covenants unto the other that this Restated Lease has been duly authorized,
executed and delivered, is a valid and binding obligation of such party and is
enforceable against such party in accordance with its terms.

         11. AMENDMENT; CONFLICT. Except as terminated, partially assigned,
amended and restated in the Modification and this Restated Lease, all terms,
covenants, conditions, agreements and provisions set forth in the Lease are
ratified, confirmed and approved. In the event of any conflict between the Lease
and the terms of the Modification and this Restated Lease, the terms of the
Modification and this Restated Lease shall in all instances govern and control.

         12. MEMORANDUM AND RELEASE. Landlord and Tenant agree that a Memorandum
of this Restated Lease in the form attached hereto as EXHIBIT C shall be
executed and acknowledged by the parties hereto concurrently with the execution
of this Restated Lease and recorded at Tenant's expense. Upon the expiration or
earlier termination of this Restated Lease, Tenant agrees, upon not less than
fifteen (15) days' prior written notice from Landlord, to sign a release with
respect to the Memorandum of Restated Lease in recordable form as Landlord or
its title insurer may reasonably require to further confirm and evidence such
expiration or termination.




                                       6

<PAGE>   7


         13.      MISCELLANEOUS.

         (a) If any provision of this Restated Lease, or portion thereof, or its
application to any person or circumstances is held invalid, inoperative or
unenforceable, the remainder of this Restated Lease shall be unaffected and
enforced to the fullest extent permitted by law.

         (b) This Restated Lease shall be construed and enforced in accordance
with the laws of the State of Wisconsin.

         (c) This Restated Lease shall be binding upon and inure to the benefit
to the named parties and each successor and assign thereof; provided, however,
nothing herein shall in way be deemed to limit, modify or adversely affect the
terms of Section 12 of the Building Lease.

         (d) This Restated Lease may only be amended, modified or terminated by
a written instrument executed by Landlord and Tenant or the respective
successors or assigns.

         (e) This Restated Lease may be executed in several counterparts, each
of which shall be deemed an original and which, when taken together, shall
constitute one and the same document.

         TEXT OF RESTATED LEASE ENDS HERE; SIGNATURE PAGE TO FOLLOW














                                       7

<PAGE>   8


         IN WITNESS WHEREOF, this Restated Lease has been executed by the
parties as of the date first above written.

TENANT:                    KOSS CORPORATION



                           By:  /s/ Michael J. Koss
                                --------------------
                                Michael Koss, Chief Executive Officer




LANDLORD:                  HOME DEPOT U.S.A., INC.



                           By: /s/ Kathryn E. Lee
                                ------------------------------------
                           Print Name: Kathryn E. Lee
                                       -----------------------------
                           Title:  Senior Corporate Counsel
                                   ---------------------------------






                                       8

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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