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, 2026 and 2025 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 controlled with 41% ownership by each of the Company’s Co-Chief Executive Officers and directors of the Company and 18% by their mother, a major stockholder 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 February 17, 2026, MDC entered into a fourth amendment of the lease (the “Fourth Lease Amendment”). The Fourth Amendment, decreases the rentable square footage to 110,095, provides for minimum annual rental payments of $1,101 and extended the expiration date to January 31, 2029.

Rent expense and lease amortization costs for the three months ended September 30, 2026 and 2025 on these leases were $432 and $363 respectively, and are included in cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statement of Operations. As of September 30, 2026 and June 30, 2026, the Company had no outstanding current obligations to Vitamin Realty.  The Company has operating lease obligations of $2,475 and $2,720 with Vitamin Realty as noted in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2026 and June 30, 2026, respectively.

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

As of September 30, 2026, the Company’s right-of-use assets, lease obligations and remaining cash commitment on these leases were as follows:

As of June 30, 2026, the Company’s ROU assets, lease obligations and remaining cash commitment on these leases were as follows:

As of September 30, 2026 and June 30, 2026, the Company’s weighted average discount rate for operating leases was approximately 6.45% and 6.41%, respectively, and the remaining term on lease liabilities is approximately 2.3 years and 2.5 years, respectively.

Financed Lease Obligations. 

As of September 30, 2026, the Company’s ROU assets, lease obligations and remaining cash commitment on such leases is as follows:

As of June 30, 2026, the Company’s ROU assets, lease obligations and remaining cash commitment on such leases is as follows:

As of September 30, 2026 and June 30, 2026, the Company’s weighted average discount rate is 6.92% and 6.89% for the fiscal years then ended, respectively, and the remaining term on lease liabilities is approximately 2.2 years and 2.5 years, respectively.

Supplemental cash flows information related to leases for the three months ended September 30, 2026 is as follows:

Supplemental cash flows information related to leases for the three months ended September 30, 2025, is as follows:

Maturities of operating lease liabilities as of September 30, 2026 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.