Note

. Commitments and Contingencies

(a) Leases

Related Party Leases.

Warehouse and office facilities are leased from Vitamin Realty, which is

100%

owned by the Company’s chairman, Chief Executive Officer and major stockholder and certain family members, who are also executive officers and directors of the Company. On

January 5, 2012,

MDC, a wholly-owned subsidiary of the Company, entered into a

second

amendment of lease (the “Second Lease 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 Lease Amendment provides for minimum annual rental payments of

$533,

plus increases in real estate taxes and building operating expenses. On

May 19, 2014,

AgroLabs entered into an Amendment to the lease agreement entered into on

January 5, 2012,

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,

to extend the expiration date to

January 1, 2024.

This additional lease provides for minimum lease payments of

$27

with annual increases plus the proportionate share of operating expenses.

Rent expense for the fiscal years ended

June 30, 2017

and

2016

on these leases were

$819

and

$813,

respectively, and are included in both cost of sales and selling and administrative expenses in the accompanying Consolidated Statements of Operations. For the fiscal years ended

June 30, 2017

and

2016,

the Company had outstanding rent obligations to Vitamin Realty of

$0.8

million and

$1.1

million, respectively, included in accounts payable and long term debt in the accompanying Consolidated Balance Sheet. (See Note

Senior Credit Facility, Subordinated Convertible Note Payable, net - CD Financial, LLC and other Long Term Debt).

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 (inclusive of the related party lease with Vitamin Realty).

The minimum rental and lease commitments for long-term non-cancelable leases are as follows:

	Operating		Related Party
Year ending	Lease		Lease
June 30,	Commitments		Commitments		Total

2018	$	45	$	563	$	608
2019		27		563		590
2020		22		563		585
2021		21		563		584
2022		8		563		571
Thereafter		-		1,955		1,955
Total	$	123	$	4,770	$	4,893

Total rent expense, including real estate taxes and maintenance charges, was approximately

$967

and

$975

in the fiscal years ended

June 30, 2017

and

2016,

respectively.

(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 relating to any such claims, could have a material adverse effect on the Company

’s liquidity, financial condition and cash flows.

May 15, 2012,

Cedarburg Pharmaceuticals, Inc. ("Cedarburg") sent

the Company a letter (the "Demand Letter") setting forth a demand for indemnification under the Stock Purchase Agreement, dated

March 17, 2009 (

the "Cedarburg SPA"), by and among Cedarburg, InB: Hauser Pharmaceutical Services, Inc., InB: Paxis Pharmaceuticals, Inc. and the Company. In the Demand Letter, Cedarburg demanded payment by the Company of

$600

in respect of the Company's indemnification obligations under the Cedarburg SPA. In addition, in the Demand Letter, Cedarburg informed the Company that there are also environmental issues pending which

may

lead to additional costs to Cedarburg which will likely be in excess of

$300.

May 30, 2012,

the Company sent a letter responding to the Demand Letter and setting forth the Company’s position that it has

obligation to indemnify Cedarburg as demanded. On

June 18, 2012,

Cedarburg responded to the Company’s letter and, on

July 27, 2012,

the Company sent another letter to Cedarburg reiterating its position that the Company has

obligation to indemnify Cedarburg as demanded. On

December 18, 2012,

Cedarburg responded to the Company’s letter and, on

January 15, 2013,

the Company sent another letter to Cedarburg reiterating its position that the Company has

obligation to indemnify Cedarburg as demanded. As of

September 1, 2017,

the Company has

not

received any further communication from Cedarburg with respect to its demand for indemnification as set forth in the Demand Letter. The Company intends to vigorously contest Cedarburg's demand as set forth in the Demand Letter.