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, 2019

and

2018,

were as follows:

	2019						2018
	Related Party - Vitamin Realty		Other Leases		Totals		Related Party - Vitamin Realty		Other Leases		Totals

Operating lease costs	$	135	$	39	$	174	$	141	$	22	$	163

Finance Operating Lease Costs:
Amortization of right-of use assets	$	-	$	27	$	27	$	-	$	17	$	17
Interest on operating lease liabilities		-		5		5		-		4		4
Total finance lease cost	$	-	$	32	$	32	$	-	$	21	$	21

Operating

Lease

Liabilities

Related Party

Operating

ase

Liabilities

Warehouse and office facilities are leased from Vitamin Realty Associates, LLC (“Vitamin Realty”), which is

100%

owned by the Company’s chairman, and a major stockholder and certain of his family members, who are the Co-Chief 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 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, 2019

and

2018

on these leases were

$207

and

$202

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, 2019

and

June 30, 2019,

the Company had outstanding current obligations to Vitamin Realty of

$71

and

$67,

respectively, included in accounts payable in the accompanying Condensed Consolidated Balance Sheet. Additionally, the Company has operating lease obligations of

$3,132

and

$3,243

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

September 30, 2019

and

June 30, 2019,

respectively.

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, 2019,

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

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

Vitamin Realty Leases	$	3,126	$	454	$	2,678	$	3,527
Machinery and equipment leases		24		11		13		25
Office equipment leases		19		9		11		20
	$	3,169	$	474	$	2,702	$	3,572

As of

June 30, 2019,

the Company’s ROU assets, lease obligations and remaining cash commitment on these leases were as follows:

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

Vitamin Realty Leases	$	3,236	$	450	$	2,793	$	3,668
Machinery and equipment leases		26		11		15		27
Office equipment leases		22		9		14		24
	$	3,284	$	470	$	2,822	$	3,719

As of

September 30, 2019

and

June 30, 2019,

the Company’s weighted average discount rate and remaining term on lease liabilities were approximately

3.75%

and

3.76%

and

6.1

years and

6.4

years, respectively.

Supplemental cash flows information related to leases for the

three

months ended

September 30, 2019,

is was 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	$	141	$	24	$	165
Operating cash flows from finance leases		-		5		5
Financing cash flows from finance lease obligations		-		60		60

Supplemental cash flows information related to leases for the

three

months ended

September 30, 2018,

is was 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	$	94	$	24	$	118
Operating cash flows from finance leases		-		4		4
Financing cash flows from finance lease obligations		-		50		50

The Company did

not

enter into any lease commitments in the

three

months ended

September 30, 2019.

Maturities of operating lease liabilities as of

September 30, 2019

were as follows:

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

2020, remaining	$	27		$	424		$	144		$	595
2021		21			565			90			676
2022		8			565			-			573
2023		-			565			-			565
2024		-			563			-			563
2025		-			533			-			533
Thereafter		-			311			-			311
Total minimum lease payments		56			3,526			234			3,816
Imputed interest		(2	)		(394	)		(25	)		(421	)
Total	$	54		$	3,132		$	209		$	3,395

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

$257

and

$245

for the

three

months ended

September 30, 2019

and

2018,

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.