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Koss(KOSS) - 2024 Q4 - Annual Report
KOSSKoss(KOSS)2024-08-29 21:58

Sales Performance - Approximately 77% of the Company's fiscal year 2024 sales were from stereo headphones used for listening to music, while 23% were from communication and educational settings[16]. - The Company's net sales for the fiscal year 2024 were 12,265,069,adecreasefrom12,265,069, a decrease from 13,099,651 in fiscal year 2023[29]. - The Company's largest sales concentration was from direct-to-consumer offerings via the Amazon portal, accounting for approximately 17% of net sales in fiscal year 2024[23]. - The Company’s five largest customers accounted for approximately 46% of net sales in fiscal year 2024, down from 51% in fiscal year 2023[23]. - Direct-to-Consumer sales through the Amazon marketplace accounted for over 17% of net sales in fiscal year 2024, down from 20% in fiscal year 2023, indicating a potential risk if this sales channel is lost[50]. - Sales to Russia accounted for approximately 2% of the Company's total sales prior to sanctions, with no sales recorded during the fiscal years ended June 30, 2024 and 2023[60]. - Sales to Ukraine resumed during the current fiscal year, with expectations for more sales in the future[60]. Financial Condition - Research and development expenses for fiscal year 2024 were 238,086,downfrom238,086, down from 288,231 in fiscal year 2023, with ongoing costs expected for new product offerings[25]. - The Company faces inflationary pressures affecting commodities, packaging materials, wages, and transportation costs, which could impact profitability if prices charged to customers do not increase correspondingly[56]. - The gross margin for low-priced products, particularly those below 10,isunderpressure,whichcouldleadtoreducedprofitcontributionsifsalesshifttowardstheselower−marginitems[41].−SupplierpriceincreasesandsupplychaindisruptionscouldmateriallyimpacttheCompany′sfinancialconditionandoperationalresults[37].−TheCompanyisexposedtorisksfromthefinancialconditionofitsretailersanddistributors,whichcouldleadtouncollectiblereceivablesandreducedsales[48].−TheCompanyreliesoncontractmanufacturinginChina,whereincreasedwagesortraderestrictionscouldadverselyaffectprofitmarginsandsourcingcapabilities[58].−TheCompanycontinuouslymonitorsitssupplychaintomitigaterisks,butdisruptionscanstillnegativelyimpactresultsandprofitability[39].MarketEnvironment−Theconsumerelectronicsindustryishighlycompetitive,withsignificantpressureongrossmarginsduetoaggressivepricingandrapidmarketchanges[43].−TheCompanyexperiencedasignificantrelianceonforeignsuppliers,particularlyfromChinaandTaiwan,whichmayleadtoincreasedcostsandshipmentdelaysduetogeopoliticaltensions[35].−AsignificantportionoftheCompany′ssalesandprofitscomesfromEurope,makingitvulnerabletocurrencyexchangeratefluctuations[64].−TheCompanyisexposedtorisksrelatedtoforeignoperations,includingpoliticalinstabilityandcurrencyfluctuations,whichcouldadverselyaffectfinancialresults[63].InventoryandSupplyChainManagement−TheCompanymaintainsfinishedgoodsinventoryinitsU.S.facilitytomitigaterisksassociatedwithsupplychaindisruptions,aimingforanaverageofapproximately90daysdemandperitem[30].−TheCompanyexpectstointroducenewproductofferingsregularly,particularlyinBluetooth®andtraditionalwiredheadphones,despiteincreasingcostsrelatedtocompliancetesting[25].OwnershipandStockPerformance−TheCompany′sstockpricefluctuatedbetweenahighof10, is under pressure, which could lead to reduced profit contributions if sales shift towards these lower-margin items[41]. - Supplier price increases and supply chain disruptions could materially impact the Company's financial condition and operational results[37]. - The Company is exposed to risks from the financial condition of its retailers and distributors, which could lead to uncollectible receivables and reduced sales[48]. - The Company relies on contract manufacturing in China, where increased wages or trade restrictions could adversely affect profit margins and sourcing capabilities[58]. - The Company continuously monitors its supply chain to mitigate risks, but disruptions can still negatively impact results and profitability[39]. Market Environment - The consumer electronics industry is highly competitive, with significant pressure on gross margins due to aggressive pricing and rapid market changes[43]. - The Company experienced a significant reliance on foreign suppliers, particularly from China and Taiwan, which may lead to increased costs and shipment delays due to geopolitical tensions[35]. - A significant portion of the Company's sales and profits comes from Europe, making it vulnerable to currency exchange rate fluctuations[64]. - The Company is exposed to risks related to foreign operations, including political instability and currency fluctuations, which could adversely affect financial results[63]. Inventory and Supply Chain Management - The Company maintains finished goods inventory in its U.S. facility to mitigate risks associated with supply chain disruptions, aiming for an average of approximately 90 days demand per item[30]. - The Company expects to introduce new product offerings regularly, particularly in Bluetooth® and traditional wired headphones, despite increasing costs related to compliance testing[25]. Ownership and Stock Performance - The Company's stock price fluctuated between a high of 6.95 on May 14, 2024, and a low of $2.27 on April 17, 2024, indicating significant volatility[65]. - Daily trading volume of the Company's common stock ranged from a low of 2,000 shares on April 30, 2024, to a high of 19,694,200 shares on May 14, 2024[65]. - Michael Koss, the President and CEO, owned 4,018,410 shares, representing 42.5% of shares outstanding as of August 1, 2024, indicating significant concentration of ownership[70]. - The Company has no restrictions on the right of employees, directors, and officers to sell their unrestricted shares of common stock, which may impact stock price[71]. Internal Controls and Reporting - The Company has effective disclosure controls and procedures as of June 30, 2024, ensuring timely and accurate financial reporting[135]. - Management concluded that internal control over financial reporting was effective as of June 30, 2024, with no material changes reported[137].