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 December 31, 2025 and 2024, were as follows:

The components of lease expense for the six months ended December 31,2025 and 2024, were as follows:

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 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 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 of the lease (the “Third Lease Amendment”) with Vitamin Realty, increasing its rentable square footage to 116,175.  The Third Lease Amendment provides 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.

Rent expense and lease amortization costs for the three months ended December 31, 2025 and 2024 on this lease was $347 and $324, respectively, and for the six months ended December 31,2025 and 2024 was $710 and $652, 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, 2025 and June 30, 2025, the Company had no current obligations to Vitamin Realty.  Additionally, the Company has operating lease obligations of $70 and $485 with Vitamin Realty, as noted in the accompanying Condensed Consolidated Balance Sheet as of December 31, 2025 and June 30, 2025, respectively.

As of February 11, 2026, MDC continues to occupy and use its existing warehouse and office space in a holdover tenancy and will continue to pay rent on a month-to-month basis until such time it completes the negotiations with Vitamin Realty for a long-term lease renewal.

Other Operating Lease Liabilities. The Company has entered into certain non-cancelable operating lease agreements expiring up through May 9, 2027, related to office equipment.

As of December 31, 2025, the Company’s right-of-use assets, lease obligations and remaining cash commitment on these leases were as follows:

As of June 30, 2025, the Company’s ROU assets, lease obligations and remaining cash commitment on these leases were as follows:

As of December 31, 2025 and June 30, 2025, the Company’s weighted average discount rate and remaining term on operating lease liabilities were approximately 6.29% and 5.31% and 1.6 years and 1.4 years, respectively. 

Financed Lease Obligations. 

As of December 31, 2025, the Company’s ROU assets, lease obligations and remaining cash commitment on such leases is as follows:

As of June 30, 2025, the Company’s ROU assets, lease obligations and remaining cash commitment on such leases is as follows:

As of December 31, 2025 and June 30, 2025, the Company’s weighted average discount rate is 6.88% and 4.51% for the fiscal years then ended, respectively, and the remaining term on lease liabilities is approximately 2.9 years and 3.4 years, respectively.

Supplemental cash flows information related to leases for the six months ended December 31, 2025, is as follows:

Supplemental cash flows information related to leases for the six months ended December 31, 2024, is as follows:

Maturities of operating lease liabilities as of December 31, 2025 were as follows:

(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.