Note 10 - Commitments and Contingencies

12 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

1

0

. 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

8

years.

The components of lease expense for the fiscal year ended

June 30, 2019

were as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Operating Lease Costs	$	563	$	112	$	675
Finance Operating Lease Costs:
Amortization of right-of use assets	$	-	$	91	$	91
Interest on operating lease liabilities		-		18		18
Total Finance Lease Costs	$	-	$	109	$	109

Operating

Lease

Liabilities

Related Party

Operating

L

e

ase

Liabilities

.

Warehouse and office facilities are leased from 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 imputed interest costs on these related party leases were

$754

and

$840

for the fiscal years ended

June 30, 2019

and

2018,

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

June 30, 2019

and

2018,

the Company had outstanding current obligations to Vitamin Realty of

$67

and

$827,

respectively, included in accounts payable, accrued expenses and other liabilities and long term debt in the accompanying Consolidated Balance Sheets. Additionally, as of

June 30, 2019,

the Company has operating lease obligations of

$3,243

with Vitamin Realty as noted in the accompany 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

June 30, 2019,

the Company’s ROU assets, lease obligations and remaining cash commitment on these leases is 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

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

3.76%

and

6.4

years, respectively.

Supplemental cash flows information related to leases for the fiscal year ended

June 30, 2019

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	$	565	$	92	$	657
Operating cash flows from capital lease obligations		-		18		18
Financing cash flows from capital lease obligations		-		233		233

The Company entered into a sales/lease back commitment in the fiscal year ended

June 30, 2019

in the amount of

$233,

see Note

5

- Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt.

Maturities of operating lease liabilities as of

June 30, 2019

were as follows:

Year ending June 30,	Operating Lease Commitment			Related Party Operating Lease Commitment			Capitalized Lease Obligations			Total
2020	$	39		$	565		$	206		$	810
2021		22			565			77			664
2022		9			565			-			574
2023		-			565			-			565
2024		-			563			-			563
Thereafter		-			845			-			845
Total minimum lease payments		70			3,668			283			4,021
Imputed interest		(2	)		(424	)		(14	)		(440	)
Total	$	68		$	3,244		$	269		$	3,581

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

$1,013

and

$1,005

for the fiscal year ended

June 30, 2019

and

2018,

respectively. Rent and lease amortization and lease costs are included in cost of sales and selling and administrative expenses in the accompanying Consolidated Statements of Operations.

(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.