Contingencies

3 Months Ended

Mar. 31, 2021

Contingencies

Contingencies

11. Contingencies

The Company is involved from time to time in various legal proceedings, regulatory investigations and claims incident to the normal conduct of business, which may include proceedings that are specific to us and others generally applicable to business practices within the industries in which we operate. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and on the results of operations in a particular quarter or year.

The Company establishes reserves for litigation and similar matters when those matters present material loss contingencies that management determines to be both probable and reasonably estimable in accordance with ASC 450, “Contingencies.” These amounts are not reduced by amounts that may be recovered under insurance or claims against

third parties, but undiscounted receivables from insurers or other third parties may be accrued separately. The Company regularly revises such accruals in light of new information. The Company discloses the nature of the contingency when management believes it is reasonably possible the outcome may be significant to the Company’s consolidated financial statements and, where feasible, an estimate of the possible loss. For purposes of our litigation contingency disclosures, “significant” includes material matters as well as other items that management believes should be disclosed. Management’s judgment is required related to contingent liabilities because the outcomes are difficult to predict.

Litigation Relating to the Merger — Seven complaints were filed by purported stockholders of the Company challenging the merger (the “Complaints”).   The Complaints generally allege, among other things, that the Company and the Board of Directors authorized the filing of a materially incomplete and misleading proxy statement with the SEC.  While the Company believes that the disclosures set forth in the proxy statement comply fully with applicable law, and vigorously denies any wrongdoing or liability with respect to the allegations and claims asserted, or which could have been asserted, in the Complaints, the Company voluntarily supplemented the proxy statement on March 15, 2021 with additional disclosures (the “Supplemental Disclosures”).  The seven plaintiffs who filed suit have advised the Company that they intend to dismiss their claims in light of the Supplemental Disclosures, subject to plaintiffs’ right to seek a mootness fee payment and the Company’s right to oppose such a request.  The Company believes that the Complaints are without merit, but is unable to predict the outcome of the ultimate resolution of the lawsuits or the potential loss, if any, that may result.