The Company leases its facility in Milwaukee, Wisconsin from Koss Holdings, LLC, which is controlled by five equal ownership interests in trusts held by the five beneficiaries of the former Chairman’s revocable trust and includes current stockholders of the Company. On May 24, 2022, the lease was renewed for a period of five years, ending June 30, 2028 (the “Extended Term”), and is being accounted for as an operating lease. The lease extension maintained the rent at a fixed rate of $380,000 per year and included an option to renew at an increased rate of $397,000 for an additional five years ending June 30, 2033 (the “Second Extended Term”). The negotiated increase in rent slated for 2028 will be the first increase in rent since 1996. The Company is responsible for all property maintenance, insurance, taxes, and other normal expenses related to ownership.

The Company used its incremental borrowing rate as of the date of renewal, May 24, 2022, to recalculate the net present value of the operating lease ROU asset and liability. Both the Extended Term and the Second Extended Term renewal options were included in the calculation of the ROU asset and liability as the Company believes it is reasonably certain to exercise both rights to renew. The non-lease components of the agreement related to common area maintenance charges are accounted for separately.

Supplemental information related to operating lease expense and valuation of the operating lease ROU asset and liability was as follows:


		Year Ended
	2026		2025
Operating lease cost	$	387,669	$	387,669
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(380,000)	$	(380,000)
Weighted-average remaining lease term (in years)		7		8
Weighted-average discount rate		5.25%		5.25%

The maturity schedule of future minimum lease payments and reconciliation to the operating and finance lease liabilities reported on the 2026 Consolidated Balance Sheet are as follows:


Year Ending June 30,	Operating Lease		Finance Lease
2027	$	380,000	$	11,880
2028		380,000		11,880
2029		397,000		-
2030		397,000		-
2031		397,000		-
Thereafter		794,000		-
Total lease payments		2,745,000		23,760
Present value adjustment		(455,845)		(1,811)
Total lease liabilities	$	2,289,155	$	21,949

On June 19, 2025, the Company entered into a financing lease arrangement to lease a reach truck. The lease has a non-cancelable term of 36 months and requires monthly payments of $990, due on the first day of each month, beginning on July 1, 2025. The lease contains a $1 purchase option at the end of the lease term that the Company is reasonably certain to exercise, and at which time ownership of the leased lift truck will transfer to the Company.


		Year Ended
	2026		2025
Finance lease cost:
Amortization of ROU Asset	$	10,572	$	—
Principal payments on finance lease obligations	$	9,767	$	—
Interest expense	$	2,116	$	—
Finance lease liabilities arising from obtaining finance right-of-use asset	$	31,716	$	—
Weighted-average remaining lease term (in years)		2		—
Weighted-average discount rate		7.75%		—