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

December 31, 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	$	7	$	114
Interest on operating lease liabilities		33		1		34
Total finance lease cost	$	140	$	8	$	148

The components of lease expense for the

six

months ended

December 31, 2018

were as follows:

	Related Party - Vitamin Realty		Other Leases		Totals

Operating lease costs	$	-	$	38	$	38

Finance Operating Lease Costs:
Amortization of right-of use assets	$	214	$	12	$	226
Interest on operating lease liabilities		68		2		70
Total finance lease cost	$	282	$	14	$	296

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

June 1, 2024.

This additional lease provides for minimum annual lease payments of

$27

with annual increases plus the proportionate share of operating expenses.

Rent expense, lease amortization costs and interest expense on these related party leases were

$219

and

$214

for the

three

months ended

December 31, 2018

and

2017,

and

$421

and

$415

for the

six

months ended

December 31, 2018

and

2017,

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

December 31, 2018

and

June 30, 2018,

the Company had outstanding current obligations to Vitamin Realty of

$761

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

$3,462

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

December 31, 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	$	3,454	$	3,462	$	3,951
Machinery and equipment leases		31		31		33
Office equipment leases		28		28		30
	$	3,513	$	3,521	$	4,014

We have other operating lease agreements with commitments of less than

one

year or that are

not

significant and the Company elected the practical expedient option and as such these lease payments are expensed as incurred.

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

3.76%

and

6.9

years, respectively.

Supplemental cash flows information related to leases for the

six

months ended

December 31, 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	$	-	$	37	$	37
Operating cash flows from finance leases		285		12		297
Financing cash flows from capital lease obligations		-		108		108

The Company did

not

enter into any lease commitments in the

six

months ended

December 31, 2018.

Maturities of operating lease liabilities as of

December 31, 2018

were as follows:

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

2019, remaining	$	24		$	283		$	307
2020		39			565			604
2021		22			565			587
2022		9			565			574
2023		-			565			565
2024		-			563			563
Thereafter		-			845			845
Total minimum lease payments		94			3,951			4,045
Imputed interest		(4	)		(489	)		(493	)
Total	$	90		$	3,462		$	3,552

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

$256

and

$254

and

$507

and

$496

for the

three

months and

six

months ended

December 31, 2018

and

2017,

respectively. Rent and lease amortization and interest expense are 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.