Note

Leases and other Commitments and Contingencies

(a) Leases.

The Company has operating and finance leases for its corporate and sales offices, warehousing and packaging facilities and certain machinery and equipment, including office equipment. The Company’s leases have remaining terms of less than

year to less than

years.

The components of lease expense for the

three

months ended

September 30, 2018

were as follows:

	Related Party - Vitamin Realty		Other Leases		Totals

Operating lease costs	$	-	$	19	$	19

Finance Operating Lease Costs:
Amortization of right-of use assets	$	107	$	5	$	112
Interest on operating lease liabilities		35		1		36
Total finance lease cost	$	142	$	6	$	148

Operating Lease Liabilities

Related Party

Operating

ase

Liabilities

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 of his family members, who are also executive officers and directors of the Company. On

January 5, 2012,

MDC 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 was to expire 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, lease amortization costs and interest expense for the

three

months ended

September 30, 2018

and

2017

on these leases were

$202

and

$201

respectively, and are included in cost of sales, selling and administrative expenses and interest expense in the accompanying Condensed Consolidated Statements of Operations. As of

September 30, 2018

and

June 30, 2018,

the Company had outstanding current obligations to Vitamin Realty of

$763

and

$827,

respectively, included in accounts payable, accrued expenses and other liabilities and long term debt in the accompanying Condensed Consolidated Balance Sheet. Additionally, the Company has operating lease obligations of

$3,569

with Vitamin Realty as noted in the accompany Condensed Consolidated Balance Sheet.

Other

Operating

Lease

Liabilities

The Company has entered into certain non-cancelable operating lease agreements expiring up through

May, 2023,

related to machinery and equipment and office equipment.

As of

September 30, 2018,

the Company’s right-of-use assets, lease obligations and remaining cash commitment on these leases is as follows:

	Right-of-use Assets		Operating Lease Obligations		Remaining Cash Commitment

Vitamin Realty Leases	$	3,561	$	3,569	$	4,092
Machinery and equipment leases		34		34		36
Office equipment leases		31		31		33
	$	3,626	$	3,634	$	4,161

The Company’s weighted average discount rate and remaining term on lease liabilities is approximately

3.76%

and

7.1

years, respectively.

Supplemental cash flows information related to leases for the

three

months ended

September 30, 2018

is as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	-	$	19	$	19
Operating cash flows from finance leases		94		5		99
Financing cash flows from capital lease obligations		-		50		50

The Company did

not

enter into any lease commitments in the

three

months ended

September 30, 2018.

Maturities of operating lease liabilities as of

September 30, 2018

were as follows:

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

2019, remaining	$	18		$	424		$	442
2020		22			565			587
2021		21			565			586
2022		8			565			573
2023		-			565			565
2024		-			564			564
Thereafter		-			844			844
Total minimum lease payments		69			4,092			4,161
Imputed interest		(4	)		(523	)		(527	)
Total	$	65		$	3,569		$	3,634

Total rent expense, lease amortization costs and interest expense, including real estate taxes and maintenance charges, was approximately

$239

and

$242

for the

three

months ended

September 30, 2018

and

2017,

respectively. Rent and lease amortization and interest expense is included in cost of sales, selling and administrative expenses and interest expense in the accompanying Condensed Consolidated Statements of Operations.

(

) 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

November 9, 2018,

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.