Commitments and Contingencies

In the normal course of business, the Company may be involved in ordinary, routine legal actions. The Company cannot reasonably estimate future costs, if any, related to these matters; however, it does not believe any such matters are material to its financial condition or results of operations. The Company maintains various liability insurance coverages to protect its assets from losses arising out of or involving activities associated with ongoing and normal business operations; however, it is possible that the Company’s future operating results could be affected by future costs of litigation.

On December 26, 2018, a subsidiary of the Company, Quality Aluminum Forge, LLC ("Orange") experienced a fire at its manufacturing facility, causing damage to one of three manufacturing buildings. The building that was damaged housed six of the eight presses on site. The Company is fully insured and actively working with its insurance carrier to restore the site to full service as safely and quickly as possible. As of June 30, 2019, the Company has received insurance proceeds of $8,244. The fire also destroyed a leased building, which in accordance with its lease agreement, the Company is responsible to restore the property to full replacement value. With the Company being fully insured, the restoration of the property is covered and the insurance carrier has separately funded a partial payment of insurance proceeds as of June 30, 2019 to the landlord for the restoration of the damaged building as prescribed under the lease arrangement in the amount of $378. The table below reflects the receipt of proceeds and how they were expended as of June 30, 2019. Any additional recoveries in excess of recognized losses are treated as gain contingencies and will be recognized when the gain is realized or realizable. The Company also maintains business interruption insurance coverage and continues to work with the insurance company to reach an agreement on the recoverable amounts of business interruption expenses. As noted within the table below, a payment of $619 was made towards this coverage as of June 30, 2019 and is reflected within the cost of goods sold line within the consolidated condensed financial statements as of June 30, 2019.



Balance sheet (Other receivable):

September 30, 2018		$	—
	Cash proceeds	(8,244		)
	Capital expenditures (equipment)	5,574
	Other expenses	2,051
	Business interruption	619
June 30, 2019		$	—

The tables below reflect how the proceeds received impacted the consolidated condensed statements of operations for the nine month and three months ended June 30, 2019:



	Nine Months Ended June 30, 2019
	Balance without insurance proceeds			Insurance recoveries			Balance with insurance proceeds
Cost of goods sold	77,789			(2,670		)	75,119
Loss (gain) on insurance proceeds received	1,106			(5,574		)	(4,468		)
Net loss	$	(18,155	)	$	(8,244	)	$	(9,911	)



	Three Months Ended June 30, 2019
	Balance without insurance proceeds			Insurance recoveries			Balance with insurance proceeds
Cost of goods sold	24,560			(1,074		)	23,486
Loss (gain) on insurance proceeds received	—			(3,304		)	(3,304		)
Net loss	$	(11,748	)	$	(4,378	)	$	(7,370	)

For the long-lived assets that were not damaged as a result of the fire, the Company performed a separate evaluation of these assets. In accordance to Topic 360, the fire resulted in a triggering event as of December 31, 2018, requiring an interim assessment to determine if the carrying amount of long-lived assets are recoverable. As noted within Topic 360, an impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The results of management's analysis indicated that the remaining long-lived assets as of December 31, 2018 were recoverable and continue to be as of June 30, 2019.

Orange is currently a defendant in a lawsuit filed by Avco Corporation (“Avco”) in the United States District Court for the District of Rhode Island, alleging that certain forged pistons delivered by the Orange plant failed to meet material specifications required by Avco. Orange disagrees with the allegations made by Avco. No specific amount of damages was claimed by Avco and no discovery has occurred at this time. Although the Company records reserves for legal disputes and other matters in accordance with GAAP, the ultimate outcomes of these types of matters are inherently uncertain. Actual results may differ significantly from current estimates. Given the current status of this matter, the Company has not recorded a loss, as the Company does not have a reasonable basis on which to establish an estimate.

The Company is a defendant in a purported class action lawsuit filed in the Superior Court of California, County of Orange, arising from employee wage-and-hour claims under California law for alleged meal period, rest break, hourly and overtime wage calculation, timely wage payment and necessary expenditure indemnification violations; failure to maintain required wage records and furnish accurate wage statements; and unfair competition. As mentioned previously, the Company records reserves for legal disputes and other matters in accordance with GAAP, the ultimate outcomes of these types of matters are inherently uncertain. Actual results may differ significantly from current estimates. Given the current status of this matter, the Company has not recorded a loss as the Company does not have a reasonable basis on which to establish an estimate.