Note 6 - Leases and Other Commitments and Contingencies

6 Months Ended

Dec. 31, 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 approximately 2 to 4 years.

The components of lease expense for the three months ended December 31, 2021 and 2020, were as follows:

	Three months ended December 31,
	2021						2020
	Related Party - Vitamin Realty		Other Leases		Totals		Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	142	$	21	$	163	$	141	$	25	$	166
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

The components of lease expense for the six months ended December 31, 2021 and 2020, were as follows:

	Six months ended December 31,
	2021						2020
	Related Party - Vitamin Realty		Other Leases		Totals		Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	283	$	47	$	330	$	283	$	49	$	332
Finance Operating Lease Costs:
Amortization of right-of use assets	$	-	$	-	$	-	$	-	$	24	$	24
Interest on operating lease liabilities		-		-		-		-		2		2
Total finance lease cost	$	-	$	-	$	-	$	-	$	26	$	26

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 executive chairman and 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 annual lease payments of $27 with annual increases plus the proportionate share of operating expenses.

Rent expense and lease amortization costs for the three months ended December 31, 2021 and 2020 on these leases were $223 and $221, respectively and $444 and $443 for the six month periods ended December 31, 2021 and 2020, respectively and are included in cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. As of December 31, 2021 and June 30, 2021, the Company had outstanding current obligations to Vitamin Realty of $69 and $65, respectively, included in accounts payable in the accompanying Condensed Consolidated Balance Sheet. Additionally, the Company has operating lease obligations of $2,086 and $2,327 with Vitamin Realty as noted in the accompany Condensed Consolidated Balance Sheet as of December 31, 2021 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 December 31, 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	$	2,083	$	494	$	1,592	$	2,255
Machinery and equipment leases		-		-		-		-
Office equipment leases		32		7		25		37
	$	2,115	$	501	$	1,617	$	2,292

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 December 31, 2021 and June 30, 2021, the Company’s weighted average discount rate and remaining term on lease liabilities were approximately 3.86% and 3.75% and 4.0 years and 4.4 years, respectively.

Supplemental cash flows information related to leases for the six months ended December 31, 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	$	283	$	47	$	330
Operating cash flows from finance leases		-		-		-
Financing cash flows from finance lease obligations		-		-		-

Supplemental cash flows information related to leases for the six months ended December 31, 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	$	283	$	48	$	331
Operating cash flows from finance leases		-		2		2
Financing cash flows from finance lease obligations		-		75		75

In the six months ended December 31, 2021, the Company renewed, for one year, an operating lease for office space with an annual commitment of $12.

Maturities of operating lease liabilities as of December 31, 2021 were as follows:

	Operating			Related Party
Year ending	Lease			Operating Lease
June 30,	Commitment			Commitment			Total
2022, remaining	$	5		$	283		$	288
2023		9			565			574
2024		9			563			572
2025		9			533			542
2026		5			311			316
Total minimum lease payments		37			2,255			2,292
Imputed interest		(5	)		(169	)		(174	)
Total	$	32		$	2,086		$	2,118

Total rent expense, lease amortization costs and interest expense, including real estate taxes and maintenance charges, was approximately $265 in each of the three months ended December 31, 2021 and 2020 and $531 and $530 for the six months ended December 31, 2021 and 2020, respectively. Rent and lease amortization is included in cost of sales, selling and administrative expenses 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.