Note 6 - Leases and Other Commitments and Contingencies

15 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 6. 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 1 year to less than 5 years.

The components of lease expense for the three months ended September 30, 2021 and 2020, were as follows:

	2021						2020
	Related Party - Vitamin Realty		Other Leases		Totals		Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	141	$	26	$	167	$	141	$	24	$	165
Finance Operating Lease Costs:
Amortization of right-of use assets	$	-	$	-	$	-	$	-	$	12	$	12
Interest on operating lease liabilities		-		-		-		-		1		1
Total finance lease cost	$	-	$	-	$	-	$	-	$	13	$	13

Operating Lease Liabilities

Related Party Operating Lease 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, 2020 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, 2021 and 2020 on these leases were $221 and $222 respectively, and are included in cost of sales, selling and administrative expenses and interest expense in the accompanying Condensed Consolidated Statements of Income. As of September 30, and June 30, 2021, the Company had outstanding current obligations to Vitamin Realty of $75 and $65, respectively, included in accounts payable in the accompanying Condensed Consolidated Balance Sheet. Additionally, the Company has operating lease obligations of $2,207 and $2,327 with Vitamin Realty as noted in the accompany Condensed Consolidated Balance Sheet as of September 30, and June 30, 2021, 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, 2021, 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	$	2,203	$	489	$	1,718	$	2,396
Machinery and equipment leases		2		2		-		2
Office equipment leases		34		8		26		40
	$	2,239	$	499	$	1,744	$	2,438

As of June 30, 2021, 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	$	2,322	$	485	$	1,842	$	2,537
Machinery and equipment leases		5		5		-		5
Office equipment leases		38		10		28		44
	$	2,365	$	500	$	1,870	$	2,586

As of September 30, and June 30, 2021, the Company’s weighted average discount rate is approximately 3.86% and 3.75%, respectively, and the remaining term on lease liabilities is approximately 4.1 years and 4.4 years, respectively.

Supplemental cash flows information related to leases for the three months ended September 30, 2021, 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	$	141	$	26	$	167
Operating cash flows from finance leases		-		-		-
Financing cash flows from finance lease obligations		-		-		-

Supplemental cash flows information related to leases for the three months ended September 30, 2020, 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	$	141	$	24	$	165
Operating cash flows from finance leases		-		1		1
Financing cash flows from finance lease obligations		-		37		37

The Company did not enter into any lease commitments in the three months ended September 30, 2021.

Maturities of operating lease liabilities as of September 30, 2021 were as follows:

Year	Operating			Related Party
ending	Lease			Operating Lease
June 30,	Commitment			Commitment			Total
2022, remaining	$	10		$	424		$	434
2023		9			565			574
2024		9			563			572
2025		9			533			542
2026		5			311			316
Total minimum lease payments		42			2,396			2,438
Imputed interest		(6	)		(189	)		(195	)
Total	$	36		$	2,207		$	2,243

Total rent expense, lease amortization costs and interest expense, including real estate taxes and maintenance charges, was approximately $266 and $265 for the three months ended September 30, 2021 and 2020, 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 Income.

(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.