Note 10 - Lease Commitments and Contingencies

12 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 10. Lease 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 7 years.

The components of lease expense for the fiscal year ended June 30, 2024 and 2023 were as follows:

	2024						2023
	Related Party - Vitamin Realty		Other Leases		Totals		Related Party - Vitamin Realty		Other Leases		Totals
Operating Lease Costs	$	842	$	163	$	1,005	$	842	$	88	$	930
Finance Operating Lease Costs:
Amortization of right-of use assets	$	-	$	12	$	12	$	-	$	12	$	12
Total Finance Lease Costs	$	-	$	12	$	12	$	-	$	12	$	12

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

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 estate of the Company’s former 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 to the 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 provided for minimum annual rental payments of $533, plus increases in real estate taxes and building operating expenses.  On July 15, 2022, MDC entered into a third amendment to the lease (the “Third Lease Amendment”) with Vitamin Realty, increasing its rentable square footage to 116,175.  This Third Lease Amendment provided for minimum annual rental payments of $842, plus increases in real estate taxes and the building operating expenses allocation percentage and is effective as of July 1, 2022.

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 provided for minimum lease payments of $27 with annual increases plus the proportionate share of operating expenses.  The AgroLabs Lease was mutually terminated on July 15, 2022 with an effective date of July 1, 2022.

Rent expense, lease amortization costs and imputed interest costs on these related party leases were $1,292 and $1,269 for the fiscal years ended June 30, 2024 and 2023, respectively, and are included in cost of sales and selling and administrative expenses in the accompanying Consolidated Statements of Operations. As of June 30, 2024 and 2023, the Company had no outstanding current obligations to Vitamin Realty.  Additionally, as of June 30, 2024 and 2023, the Company has operating lease obligations of $1,289 and $2,061, respectively, 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 2027, related to machinery and equipment and office equipment. 

As of June 30, 2024, 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	$	1,289	$	804	$	485	$	1,334
Warehouse Lease		433		116		317		494
Transportation Lease		55		17		39		63
Office equipment leases		13		8		5		14
	$	1,790	$	945	$	846	$	1,905

As of June 30, 2023, 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	$	2,061	$	772	$	1,289	$	2,176
Warehouse Lease		541		108		433		631
Office equipment leases		21		8		13		23
	$	2,623	$	888	$	1,735	$	2,830

As of June 30, 2024 and 2023, the Company’s weighted average discount rate is 5.00% and 4.41%, for the fiscal years then ended, respectively, and the remaining term on lease liabilities is approximately 2.0 years and 2.9 years, respectively.

Financed Lease Obligation. 

On June 15, 2022, the Company entered into a financed lease obligation with LEAF Capital Funding, LLC in the amount of $85, which lease is secured by certain machinery and equipment and matured on August 15, 2024.  The lease payment in the amount of approximately $4 was payable monthly, beginning September 15, 2022 and has a stated interest rate of 0.0%.

As of each June, 2024 and 2023, the Company’s weighted average discount rate for the outstanding finance lease obligation is 0% and the remaining term on finance lease obligation is approximately 0.2 years and 1.2 years, respectively.  The ROU asset related to the finance lease obligation is included in Property and equipment, net in the accompanying Consolidated Balance Sheet.

Supplemental cash flows information related to leases for the fiscal year ended June 30, 2024 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	$	842	$	219	$	1,061
Operating cash flows from finance lease obligations		-		-		-
Financing cash flows from finance lease obligations		-		42		42

Supplemental cash flows information related to leases for the fiscal year ended June 30, 2023 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	$	842	$	147	$	989
Operating cash flows from finance lease obligations		-		-		-
Financing cash flows from finance lease obligations		-		35		35

In the fiscal year ended June 30, 2024, the Company entered into a four year operating lease for transportation equipment with an annual commitment of $21.

Maturities of operating lease liabilities as of June 30, 2024 were as follows:

Year ending June 30,	Operating Lease Commitment			Related Party Operating Lease Commitment			Finance Lease Obligation		Total
2025	$	169		$	842		$	7	$	1,018
2026		169			492			-		661
2027		169			-			-		169
2028		64			-			-		64
Total minimum lease payments		571			1,334			7		1,912
Imputed interest		(70	)		(45	)		-		(115	)
Total	$	501		$	1,289		$	7	$	1,797

(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.