<PAGE> 1
Dear Stockholders,
We are proud to report that Koss Corporation has set a new sales record
for Fiscal Year 1996.
Sales for the fiscal year ending June 30, 1996 were $36,422,377 compared
to $33,432,344 in 1995. Net income for the year was $2,360,963 compared to
$2,087,994 one year ago. Earnings per share were $0.67 in 1996 compared to
$0.58 in fiscal year 1995.
We experienced a roller-coaster retail year, opening at a peak,
rolling with trepidation through the holidays and climbing to a new sales
record at the close of the fourth quarter. A surge in sales and orders
during the first quarter was followed by a second quarter sales gain
negatively impacted by a decline in gross margins. Requests for credit and
sharper prices contributed to this margin decline which continued until the
end of the third quarter. The company rebounded with record sales for it's
fourth quarter increasing earnings more than three times for the same period
last year.
In Fiscal Year 1996, the successful licensing arrangement with Hagemeyer
was extended to encompass Western Europe. Hagemeyer's line of Koss branded
electronics products have received excellent distribution in retail outlets
throughout North America.
The new line of telecommunications headsets introduced in January
positions the company to move into several new markets. The four models of
tele-headsets include two "hands-free" products for use with standard
telephones or cellular phones and two models for computer telephony. By
expanding stereophone application outside of traditional markets, we believe
that Koss' entry into these markets will play a key role in expanding the
company's' current position as a market leader.
The beginning of Fiscal Year 1997 marked Koss' entry onto the
information superhighway with the opening of the Koss Web Site at
http://www.koss.com. We are very excited about this new mode of
communicating with our customers and have already seen an impressive number
of "hits" to the site, many involving product inquiries and catalog requests
as well as general feedback and questions from consumers. We anticipate that
the Web site will move us closer to the individual consumer, opening a new
path for us to sell direct and to provide greater consumer accessibility to
products with limited retail placement. Within the next few months, we also
expect to expand services offered at the site, including a dealer locator
service to help consumers find a Koss retailer in their area.
Currently, Koss' line of available credit is very good and our
plan to repurchase the company's shares from the market will
continue. We look forward to increased sales in FY 1997 through
the introduction of a number of new models later this year. We
expect these new introductions to expand our presence in existing
markets as well as provide us entry to other non-traditional
markets. As always, our primary focus continues to be on our base
stereophone business and we will continue to concentrate on finding
new applications for stereophone use.
We would like to thank our customers, suppliers, stockholders, and the
entire Koss team for their dedication and hard work over the past year to
ensure the continued success of Koss Corporation.
<PAGE> 2
Sincerely,
John C. Koss Michael J. Koss
Chairman President & CEO.
CONSOLIDATED STATEMENTS OF INCOME KOSS CORPORATION
<TABLE>
<CAPTION>
Year Ended June 30 1996 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $36,422,377 $33,432,344 $35,561,322
Cost of goods sold 25,241,623 22,810,037 23,686,971
- -----------------------------------------------------------------------
Gross profit 11,180,754 10,622,307 11,874,351
Selling, general and
administrative expense 8,528,098 8,376,204 8,191,504
- -----------------------------------------------------------------------
Income from operations 2,652,656 2,246,103 3,682,847
Other income (expense)
Interest income 116,503 98,090 56,461
Interest expense (156,698) (317,922) (246,911)
Royalty income 1,303,502 1,412,723 1,108,458
- -----------------------------------------------------------------------
Income before income taxes 3,915,963 3,438,994 4,600,855
Provision for income taxes 1,555,000 1,351,000 1,800,000
- -----------------------------------------------------------------------
Net income $ 2,360,963 $ 2,087,994 $ 2,800,855
=======================================================================
Number of common and common
equivalent shares used in
- -----------------------------------------------------------------------
computing earnings per share 3,502,979 3,631,364 3,751,514
=======================================================================
Earnings per common and common
- -----------------------------------------------------------------------
equivalent share: $ .67 $ .58 $ .75
=======================================================================
</TABLE>
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CONSOLIDATED BALANCE SHEETS KOSS CORPORATION
<TABLE>
<CAPTION>
As of June 30 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 27,001 $ 49,227
Accounts receivable, less allowances of
$685,107 and $289,217 respectively 8,965,213 7,242,862
Inventories 8,777,216 9,395,915
Prepaid expenses 382,137 676,874
Income taxes receivable -- 376,147
Prepaid income taxes 517,946 378,946
- ------------------------------------------------------------------------------
Total current assets 18,669,513 18,119,971
- ------------------------------------------------------------------------------
Equipment and Leasehold improvements, at cost:
Leasehold improvements 673,382 585,952
Machinery, equipment, furniture and fixtures 4,442,411 4,299,822
Tools, dies, molds and patterns 7,561,969 7,309,609
- ------------------------------------------------------------------------------
12,677,762 12,195,383
Less--accumulated depreciation 10,333,421 9,911,989
- ------------------------------------------------------------------------------
2,344,341 2,283,394
Deferred Tax Asset 422,603 --
Intangible and Other Assets 568,800 569,558
- ------------------------------------------------------------------------------
$22,005,257 $20,972,923
==============================================================================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<S> <C> <C>
Current Liabilities:
Accounts payable $ 1,327,915 $ 1,726,711
Accrued liabilities 786,353 930,660
Income taxes payable 361,855 --
- ------------------------------------------------------------------------------
Total current liabilities 2,476,123 2,657,371
- ------------------------------------------------------------------------------
Long-Term Debt 470,000 570,000
Deferred Income Taxes -- 6,862
Deferred Compensation and Other Liabilities 1,022,344 907,264
Contigently Redeemable Common Stock 1,490,000 1,490,000
- ------------------------------------------------------------------------------
Stockholders' Investment:
Common stock, $.01 par value,
authorized 8,500,000 shares;
issued and outstanding 3,317,920
and 3,486,080 shares, respectively 33,179 34,861
Paid in capital 2,224,628 3,336,431
Contingently redeemable common stock (1,490,000) (1,490,000)
Cumulative translation adjustment (107,230) (65,116)
Retained earnings 15,886,213 13,525,250
- ------------------------------------------------------------------------------
Total stockholders' investment 16,546,790 15,341,426
- ------------------------------------------------------------------------------
$22,005,257 $20,972,923
==============================================================================
</TABLE>
<PAGE> 4
STOCKHOLDERS' INFORMATION KOSS CORPORATION
Koss Corporation's 1996 Annual Report is presented in a simple readable
and functional style. This Annual Report contains condensed financial
statements only. The detailed financial statements including footnotes are
included in the Form 10-K which has been provided to all stockholders along
with the 1996 Annual Report. The Company believes this manner of presentation
provides a concise summary for those who want to be kept informed while at the
same time allowing those who feel it necessary the opportunity to investigate
further.
Koss Corporation common stock is traded on the Over the Counter market and
quotations are available through the National Market System. The trading
symbol is KOSS.
For additional Annual Reports, Form 10-K's or Proxy materials write to:
Investment Relations
Koss Corporation
4129 N. Port Washington Ave.
Milwaukee, WI 53212
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Koss Corporation
We have audited, in accordance with generally accepted auditing standards,
the consolidated balance sheets of Koss Corporation and its subsidiaries as of
June 30, 1996 and 1995, and the related consolidated statements of income, of
stockholders' investment and of cash flows for each of the three years in the
period ended June 30, 1996 (not presented herein); and in our report dated July
19, 1996, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheets as of June 30, 1996 and 1995, and the
related condensed consolidated statements of income for each of the three years
in the period ended June 30, 1996, when read in conjunction with the
consolidated financial statements from which it has been derived, is fairly
stated in all material respects in relation thereto.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
July 19, 1996
<PAGE> 5
MANAGEMENT INFORMATION KOSS CORPORATION
OFFICERS AND DIRECTORS
SENIOR MANAGEMENT
John C. Koss John C. Koss
Chairman of the Board Chairman of the Board
Koss Corporation
Michael J. Koss
President Thomas L. Doerr
Chief Executive Officer President
Chief Operating Officer Doerr Corporation
Chief Financial Officer
Victor L. Hunter
John C. Koss, Jr. President
Vice President--Sales Hunter Business Direct
Daniel Esposito Michael J. Koss
Vice President--Corporate Systems President, C.E.O.,
C.O.O., C.F.O.
Sujata Sachdeva
Vice President--Finance Lawrence S. Mattson
Retired President
Richard W. Silverthorn Oster Company
Secretary
General Counsel Martin F. Stein
Chairman
Declan Hanley Eyecare One Inc.
Vice President--International Sales
John J. Stollenwerk
President
ANNUAL MEETING Allen-Edmonds Shoe Corporation
October 24, 1996
Performance Center
Koss Corporation
4129 N. Port Washington Avenue
Milwaukee, WI 53212
TRANSFER AGENT INDEPENDENT ACCOUNTANTS
Questions regarding change of address, Price Waterhouse LLP
stock transfer, lost certificate, or Milwaukee, Wisconsin
information on a particular account
should be directed in writing to:
LEGAL COUNSEL
Firstar Trust Company
Box 2077 Whyte Hirschboeck Dudek S.C.
Milwaukee, WI 53201
Attn: Mr. Eugene R. Lee
