The Company is subject to various litigation actions in the ordinary course of business. Although it is not possible to determine with certainty at this point in time what liability, if any, the Company will have as a result of such litigation, based on consultation with legal counsel, management does not anticipate that the ultimate liability, if any, resulting from such litigation will have a material effect on the Company’s financial condition and results of operations.

Tariff Matter

In February 2026, the U.S. Supreme Court issued a ruling that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") on goods imported into the United States were unauthorized. Following that ruling, the U.S. Court of International Trade ("CIT") issued an order directing U.S. Customs and Border Protection ("CBP") to process refunds of the IEEPA tariffs, although the CIT immediately suspended the order while CBP develops and implements the refund process. The IEEPA tariffs and related refund framework remain subject to ongoing litigation, including potential appeals, as well as regulatory and administrative developments.

As previously disclosed, tariffs imposed under the IEEPA on goods imported into the United States remain subject to ongoing litigation, including appeals of the applicable court rulings, as well as related regulatory and administrative actions. During the six months ended June 30, 2026, the Company received refunds representing a portion of the IEEPA tariffs previously paid. The Company continues to seek recovery of additional IEEPA tariffs; however, the ultimate amount, timing, and final resolution of any additional refunds remain uncertain pending the outcome of the ongoing litigation and related administrative processes.

The Company has elected to use a gain contingency model to account for recoveries of previously paid IEEPA tariffs, in accordance with ASC 450-30 "Gain Contingencies". Under this model, a gain contingency is not recognized in the financial statements until the gain is realized or realizable. As of June 30, 2026, the Company has recognized only those refunds received as of the balance sheet date. Tariff recoveries are reflected as a reduction of cost of goods sold for inventory that has already been sold. Subsequent to June 30, 2026, the Company received refunds for IEEPA tariffs previously paid totaling approximately $3.2 million, including an immaterial amount of interest. As of June 30, 2026 these amounts were not deemed to be realized or realizable and, accordingly, these amounts were not recognized in the condensed consolidated financial statements for the period ending June 30, 2026. As of June 30, 2026, the impact to the Company of these subsequently received IEEPA tariff refunds remains uncertain due to uncertainty around customer and vendor refunds, rebates, as well as the final resolution of pending litigation and appeals.

During the quarter ended June 30, 2026, the Company reassessed the appropriate accounting model for its tariff refund claims. Based on further analysis of the applicable accounting guidance and the nature of the claims, management concluded that the claims represent gain contingencies subject to ASC 450-30. (As previously disclosed in the Company's March 31, 2026 interim financial information, no tariff amounts were recorded as of March 31, 2026.)