An investor in Koss Corp. (KOSS) shares filed a lawsuit in the United States District Court for the Eastern District of Wisconsin on behalf of investors in Koss Corporation (Public, NASDAQ:KOSS) securities, who purchased or otherwise acquired the stock of Koss Corporation ("Koss" or the "Company") (NASDAQ: KOSS) between July 12, 2005 and December 21, 2009, against Koss Corp. over alleged violations of Federal securities laws.

According to the complaint the plaintiff alleges that that Koss Corp and certain of its current and former executive officers violated federal securities laws by issuing between July 12, 2005 and December 21, 2009 false and/or misleading statements and/or failed to disclose material information. On December 21, 2009, Koss Corp. announced that NASDAQ halted trading of Koss Corp. stock at the its request after it discovered certain unauthorized transactions at Koss Corp., and the Board of Directors had appointed a special committee of independent directors to lead an internal investigation to determine the effect of the transactions on Koss’s financial statements. Then on December 24, 2009, Koss Corp. announced that it had discovered these “unauthorized transactions” potentially totaling as much as $31 million. As a result of this discovery, Sujata Sachdeva, the Company’s Vice President of Finance and Secretary, was terminated and two members of the Company’s accounting staff were placed on unpaid administrative leave. The company has further disclosed its shareholders should not rely on financial statements since the end of its 2005 fiscal year and that it plans restatements for at least its last three fiscal years.

According to reports, the two dismissed employees charged millions of dollars worth of merchandise to personal credit card accounts which they paid using several large wire transfers originating from a Koss bank account. The Koss Corp’s Chief Executive Officer reportedly found several large piles of merchandise in the office of at least one of the two dismissed employees. Koss Corporation, located in Milwaukee, WI, is engaged in the design, manufacture and sale of stereo headphones and related accessory products. The Company’s products are sold through audio specialty stores, the Internet, direct mail catalogs, regional department store chains, discount department stores, military exchanges, prisons and national retailers under the Koss name and dual label. On January 11, 2009, when trading in Koss stock resumed, shares of Koss Corp.’s stock (KOSS) declined $1.32 per share, approximately 24%, to close on January 11, 2010, at $4.19 per share. Koss Corporation reported on June 30, 2008 for the past 12 months a Total Revenue of $46.94million with a Net Income of $4.49million and on June 30, 2009 for the past 12 months a Total Revenue of $38.18million with a Net income of $1.98million. Shares of Koss Corp. traded recently at $5.51 per share, down from its 52weekHigh of $8.12 per share, over $10 per share in 2007, and over $14 per share in 2006.