Note 15 - Leases

12 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

15. LEASES

The Company leases its facility in Milwaukee, Wisconsin from Koss Holdings, LLC, which is wholly-owned by the former Chairman.  On 

January 5, 2017

, the lease was renewed for a period of

five

years, ending 

June 30, 2023

, 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 the same rate for an additional

five

years ending 

June 30, 2028

. 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

July 1, 2017,

the retrospective date of adoption of ASU

2016

-

02

(Topic

842

) Leases, to calculate the net present value of the operating lease ROU asset and liability. The

five

year renewal option was included in the calculation of the ROU asset and liability as the Company believes it is more likely than

not

to exercise its right to renew. The non-lease components of the agreement related to common area maintenance charges are accounted for separately.

Adoption of the standard related to leases impacted the Company's previously reported results by adding the following line items to the Company's Consolidated Balance Sheets:

Balance Sheet	As
June 30, 2018	Adjusted
Assets:
Operating lease right-of-use asset	$	3,102,263
Current liabilities:
Operating lease liability		254,418
Long-term liabilities:
Operating lease liability	$	2,847,845

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

	Year Ended
	2019			2018
Operating lease cost	$	380,000		$	380,000
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)		9			10
Weighted-average discount rate		4.25	%		4.25	%

The maturity schedule of future minimum lease payments and reconciliation to the operating lease

liabilities

reported on the Consolidated Balance Sheet is as follows:

Year Ending June 30,
2020	$	380,000
2021		380,000
2022		380,000
2023		380,000
2024		380,000
Thereafter		1,520,000
Total lease payments		3,420,000
Present value adjustment		(572,155	)
Total lease liabilities	$	2,847,845