During fiscal 2026, the Company received $1.0 million in refunds of previously paid import tariffs following judicial decisions affecting certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The Company concluded that the gain contingency had been resolved and the amounts are no longer subject to repayment so the Company recognized the refund in the current year. Of the total, $753,000 was recognized as a reduction in cost of sales for inventory previously sold and $233,000 was recorded as a reduction of the carrying value of inventory to the extent the inventory is still on hand. The amount also included approximately $41,000 of interest, which was recorded as interest income in the Consolidated Statement of Operations for the current fiscal year. The Company recognized the refunds received as collection is no longer subject to significant uncertainty. The Company has also submitted claims for an additional $77,000 in potential refunds that have not been recognized as assets because the recognition criteria for gain contingencies have not been met.

The Company also received approximately $76,000 from U.S. Customs and Border Protection for which the Company cannot clearly match to claims. Because the Company's right to retain the amounts has not been finally established, the Company has not recognized the payments as a reduction of inventory or cost of sales. Instead, the payments have been recorded as a current liability pending resolution of the remaining uncertainties.

The Company will continue to evaluate developments in the underlying legal proceedings and will recognize any additional gain when realization becomes substantially certain.