Note 8 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2012

Commitments and Contingencies Disclosure [Text Block]

Note 8. Commitments and Contingencies

(a) Leases

Related Party Leases. Warehouse and office facilities are leased from Vitamin Realty, which is 90% owned by the Chairman of the Company’s Board of Directors, a director and majority shareholder and certain of his family members.  On January 5, 2012, InB: Manhattan Drug Company, Inc., a wholly-owned subsidiary of the Company, entered into a second amendment of lease (the “Second Amendment”) with Vitamin Realty for its office and warehouse space in New Jersey increasing its rentable square footage from an aggregate of 74,898 square feet to 76,161 square feet and extending the expiration date to January 31, 2026.  This Second Amendment provides for minimum annual rental payments of $533, plus increases in real estate taxes and building operating expenses.  Also on January 5, 2012, AgroLabs entered into a lease agreement with Vitamin Realty for an additional 2,700 square feet of warehouse space in New Jersey, the term of which expires on January 31, 2019.  This additional lease provides for minimum lease payments of $27 with annual increases plus the proportionate share of operating expenses.

Rent expense for the three months ended March 31, 2012 and 2011 on these leases were $194 and $202, respectively, and $549 and $570 for the nine months ended March 31, 2012 and 2011, respectively, and are included in cost of sales in the accompanying Condensed Consolidated Statements of Operations. As of March 31, 2012 and June 30, 2011, the Company had an outstanding obligation of $706 and $738, respectively, included in accounts payable and accrued expenses in the accompanying Condensed Consolidated Balance Sheet.  In accordance with the Company’s negotiations with the Note Payable Holders, the Company is not permitted to pay Vitamin Realty past due rent payments owed in the aggregate amount of $686.

Other Lease Commitments. The Company has entered into certain non-cancelable operating lease agreements expiring up through January 31, 2026, related to office and warehouse space, equipment and vehicles.

The minimum rental commitment for long-term non-cancelable leases is as follows:

			Related Party
Year ending	Lease		Lease
June 30,	Commitment		Commitment		Total
2012, remaining	$	105	$	422	$	527
2013		33		563		596
2014		17		563		580
2015		12		563		575
2016		10		563		573
Thereafter		-		4,904		4,904
Total	$	177	$	7,578	$	7,755

Total rent expense, including real estate taxes and maintenance charges, was approximately $288 and $295 for the three months ended March 31, 2012 and 2011, respectively, and $833 and $851 for the nine months ended March 31, 2012 and 2011, respectively.  Rent expense is included in cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.

(b) Legal Proceedings.

The Company is subject, from time to time, to claims by third parties under various legal theories.  The defense of such claims, or any adverse outcome of any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows.  The Company believes that there are no significant legal matters pending that would have a material effect on the Company’s liquidity, financial condition or cash flows.