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The Company operates in the audio/video industry segment of the home entertainment and communication industry through its design, manufacture and sale of stereo headphones and related accessory products.
−Removed: The Company reports its results as a single reporting segment, as the Company’s only business line is the design, manufacture and sale of stereo headphones and related accessories.
+Added: The Company reports its results as a single reporting segment, as the Company’s only business line is the design, manufacture and sale of stereo headphones and related personal listening accessories.
The Company’s products are sold through U.S.
−Removed: distributors, international distributors, audio specialty stores, the internet, national retailers, grocery stores, electronics retailers, military exchanges and prisons under the “Koss” name as well as private label.
+Added: distributors, international distributors, audio specialty stores, the internet, national retailers, grocery stores, electronics retailers, and prisons under the “Koss” name as well as private label.
The Company also sells products to distributors for resale to school systems, and directly to other manufacturers for inclusion with their own products.
−Removed: As of June 30, 2022, the Company had approximately 90 domestic dealers and its products were carried in approximately 2,000 domestic retail outlets and numerous retailers worldwide.
International markets are served by domestic sales representatives and sales personnel in the Netherlands and the Caucasus region.
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Approximately 80% of the Company’s fiscal year 2023 sales were from stereo headphones used for listening to music.
−Removed: The remaining approximately 24% of the Company’s sales were from headphones used in communications, education settings, and in conjunction with metal detectors, as well as to original equipment manufacturers (“OEM”).
+Added: The remaining approximately 20% of the Company’s sales were from headphones used in communications, education settings, and in conjunction with metal detectors, as well as sold to original equipment manufacturers (“OEM”).
The products are not significantly differentiated by their retail sales channel or application with the exception of products sold to school systems, prisons, and OEM customers.
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The Company has contracted several independent manufacturers’ representatives as part of its distribution efforts.
−Removed: The Company typically signs one-year contracts with these manufacturers’ representatives.
The arrangements with foreign distributors do not contemplate that the Company pays any compensation other than any profit the distributors make upon their sale of the Company’s products.
INTELLECTUAL PROPERTY
−Removed: Koss is recognized for creating the stereo headphone industry with the first SP/3 stereo headphone in 1958.
+Added: Koss is recognized for creating the personal listening industry with the first Koss SP/3 stereo headphone in 1958.
The Company regularly applies for registration of its trademarks in many countries around the world, and over the years the Company has had numerous trademarks registered and patents issued in North America, South America, Asia, Europe, Africa, and Australia.
−Removed: As of June 30, 2022, the Company had 427 trademarks registered in 90 countries around the world and 153 patents in 25 countries.
+Added: As of June 30, 2023, the Company had over 400 trademarks registered in approximately 90 countries around the world and over 160 patents in approximately 25 countries.
The Company has trademarks to protect the brand name, Koss, and its logo on its products.
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however, the Company’s business is not, in the opinion of management, materially dependent upon any single trademark or patent.
−Removed: Given the significance of the Company’s intellectual property to its business, in 2019 the Company launched a program to enforce its intellectual property rights and protects its patent portfolio.
−Removed: As part of this enforcement program, the Company has filed and pursued lawsuits against a number of companies that the Company believes are infringing upon its patents, and may enter into licensing agreements or initiate additional lawsuits.
+Added: Given the significance of the Company’s intellectual property to its business, in 2019 the Company launched a program to enforce its intellectual property rights and protect its patent portfolio.
+Added: As part of this enforcement program, the Company has filed and pursued lawsuits against a number of companies that the Company believes have infringed or are infringing upon its patents and may enter into licensing agreements or initiate additional lawsuits.
The Company considers protecting its intellectual property rights to be central to its business model and competitive position in the stereo headphone industry.
−Removed: Although retail sales of consumer electronics have historically been higher during the holiday season, sales of stereo headphones have recently increased throughout the year.
−Removed: Management believes that the Company’s business is not seasonal as evidenced by the fact that the Company’s net sales for the last couple of years, including the year ended June 30, 2022, were almost equally split between the first and second halves of the year.
+Added: Although retail sales of consumer electronics have historically been higher during the holiday season, sales of stereo headphones have smoothed throughout the year.
+Added: Management believes that the Company’s business is not seasonal as evidenced by the fact that the Company’s net sales for the last three years, including the year ended June 30, 2023, were almost equally split between the first and second halves of the year.
Management believes that the reason for this level performance of sales to retailers and distributors is related to the fact that consumers are increasingly purchasing stereo headphones throughout the year as replacements for older or lower quality headphones to improve the quality of their listening experience as it relates to portable electronic products.
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WORKING CAPITAL AND BACKLOG
−Removed: 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.
−Removed: While limited, the Company does offer 90-120 day terms to certain customers such as Amazon Vendor Central, computer retailers and office supply stores.
−Removed: From time to time, although rarely, the Company may also extend payment terms to its customers for a special promotion.
+Added: 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 sufficient amounts of inventory to meet delivery requirements of its customers.
+Added: On a limited basis, the Company does offer 90-120 day payment terms to certain customers and may, on a rare occasion, extend payment terms to its customers for a special promotion.
Based on historical trends, management does not expect these practices to have a material effect on net sales or net income.
−Removed: The Company’s backlog of orders as of June 30, 2022, is minimal in relation to net sales during fiscal year 2022.
+Added: As of June 30, 2023, the Company’s backlog of orders was approximately $320,000, which the Company considers minimal in relation to net sales during fiscal year 2023 or projected sales for fiscal year 2024 net sales.
The Company markets a line of products used by consumers to listen to music, to work and study from home, and to listen to other audio-related media.
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and independent distributors throughout the rest of the world.
−Removed: Additionally, the Company fills direct-to-consumer orders on its website.
−Removed: The Company markets its products through approximately 2,000 domestic retail outlets and numerous retailers worldwide.
+Added: Additionally, the Company fills direct-to-consumer (DTC) orders on its website.
+Added: The Company markets its products through many domestic retail outlets and numerous retailers worldwide.
The Company also markets products directly to several original equipment manufacturers for use in their products.
−Removed: Sales to this customer base have been growing in recent years.
−Removed: In the year ended June 30, 2022, the Company’s largest customer was Amazon Seller Central .
−Removed: In the year ended June 30, 2021, the largest customer was Ingram Micro.
−Removed: The Company’s sales to Amazon Seller Central, were approximately 13% and 3% of net sales in fiscal year 2022 and 2021, respectively.
−Removed: Ingram sales were approximately 10% and 18% of net sales in fiscal year 2022 and 2021, respectively.
+Added: In the years ended June 30, 2023 and 2022, the Company’s largest sales concentration was represented by its own DTC offerings via the Amazon portal and were approximately 20% and 16% of net sales in fiscal year 2023 and 2022, respectively.
+Added: The Company’s products have broad distribution worldwide across many channels including distributors, specialty stores, mass merchants, and electronics stores.
The Company is dependent upon its ability to retain a base of retailers and distributors to sell the Company’s line of products.
−Removed: A material loss of retailers or distributors would result in a loss of product placement and have an adverse effect on the Company’s financial results.
−Removed: The Company has broad distribution across many channels including specialty stores, mass merchants, and electronics stores.
−Removed: Management believes that any loss of revenues would be partially offset by a corresponding decrease, on a percentage basis, in expenses, thereby partially reducing the impact on the Company’s income from operations.
+Added: A material loss of retailers and/or distributors could result in a loss of product placement and have an adverse effect on the Company’s financial results, however, management believes that the impact of any such loss could be partially alleviated by a corresponding decrease, on a limited basis, in expenses.
The Company’s five largest customers accounted for approximately 51% and 45% of net sales in fiscal years 2023 and 2022, respectively.
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In the stereo headphone market, the Company competes with all major competitors, many of which are large and diversified and have greater total assets and resources than the Company.
−Removed: The extent to which retailers and consumers view the Company as an innovative vendor of high quality stereo headphone products, and a provider of excellent after-sales customer service, is the extent to which the Company maintains a competitive advantage.
−Removed: The Company relies upon its unique sound, quality workmanship, brand identification, engineering skills, and customer service, as well as its intellectual property portfolio, to maintain its competitive position.
+Added: The extent to which retailers and consumers view the Company as a pioneer in the creation of the personal listening industry, an innovative vendor of high-quality stereo headphone products, and a provider of excellent after-sales customer service, is the extent to which the Company offers a competitive advantage.
+Added: The Company relies upon its unique sound, quality workmanship, brand identification, engineering skills, and customer service, as well as its intellectual property portfolio, to support its competitive position.
RESEARCH AND DEVELOPMENT
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The Company expects to incur on-going research and development costs related to its Bluetooth® and traditional wired headphones as it is planning to introduce new product offerings on a regular basis.
+Added: The increasing costs related to worldwide certification of these technologies by country has increased the costs of regional compliance testing and has impacted the time to market on these wireless items.
ENVIRONMENTAL MATTERS
The Company believes that it has materially complied with all currently existing federal, state and local statutes and regulations regarding environmental standards and occupational safety and health matters to which it is subject.
−Removed: During fiscal years 2022 and 2021, the amounts incurred in complying with federal, state and local statutes and regulations pertaining to environmental standards
−Removed: and occupational safety and health laws and regulations did not materially affect the Company’s operating results or financial condition.
+Added: During fiscal years 2023 and 2022, the amounts incurred in complying with federal, state and local statutes and regulations pertaining to environmental standards and occupational safety and health laws and regulations did not materially affect the Company’s operating results or financial
+Added: The increased public awareness and concern regarding climate change has resulted in increased regulations which are rapidly evolving.
+Added: The Company continues to monitor the evolving regulations, as well as related required disclosures, to ensure that we will be conformant.
+Added: It is unclear as to whether any emerging and evolving regulations will have a material impact on the Company's results of operations.
As of June 30, 2023, the Company employed 31 non-union employees, 3 of which were part-time employees.
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The Company’s competitive position and risks relating to its business in foreign markets are comparable to those in the domestic market.
−Removed: In addition, the governments of foreign nations may elect to erect trade barriers on imports.
+Added: In addition, the governments of the United States and foreign nations may elect to erect trade barriers on exports and/or imports, respectively.
The creation of additional barriers would reduce the Company’s net sales and net income.
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The Company has sales personnel currently located in the Netherlands and the Caucasus region to service the international export marketplace.
−Removed: Loss of these personnel would result in a transfer of sales and marketing responsibility.
+Added: The loss of these personnel would result in a transfer of sales and marketing responsibility.
The Company sells its products to independent distributors in countries and regions outside the United States including Europe, the Middle East, Africa, Asia, Australia, South America, Latin America, the Caribbean, Canada and Mexico.
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Czech Republic
−Removed: Russian Federation
+Added: Korea, Republic of
All other countries
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Sales to Ukraine have also been impacted as a result of the humanitarian crisis there due to the ongoing hostilities.
−Removed: Neither Russia nor Ukraine represents a significant portion of the Company’s business;
−Removed: in the aggregate, less than 3.4% of net sales for the year ended June 30, 2022.
+Added: In the prior two fiscal years, neither Russia nor Ukraine represented a significant portion of the Company’s export business and, in the aggregate, was less than 3.4% of net sales for the year ended June 30, 2022.
The Company is uncertain, however, how the conflict will impact future sales.
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The Company’s information systems, or those of its third-party service providers, could also be penetrated by outside parties’ intent on extracting information, corrupting information or disrupting business processes.
−Removed: Such unauthorized access could disrupt the Company’s business, increase costs and/or could result in the loss of assets.
+Added: Such unauthorized access could disrupt the Company’s business, increase costs and/or result in the loss of assets.
Cybersecurity attacks are becoming more sophisticated and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, corruption or destruction of data and other manipulation or improper use of systems or networks.
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The Company has programs in place intended to address and mitigate the cybersecurity risks.
−Removed: These programs include regular monitoring of outside threats, continuous updating of software to mitigate risk and education of employees to the risks of external threats, and simplification of infrastructure to minimize servers.
+Added: These programs include regular monitoring of outside threats, continuous updating of software to mitigate risk, education of employees to the risks of external threats, and simplification of infrastructure to minimize servers.
Additionally, the Company seeks to minimize its risk by keeping the number of physical servers at the HQ location and its exposure to public systems to a minimum.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.