Note 15. Commitments and Contingencies

Legal Proceedings

From time to time, the Company has been and is involved in claims that arise during the ordinary course of business. At each reporting date, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that address accounting for contingencies. The Company expenses the costs related to its legal proceedings as incurred. Although the results of litigation and claims cannot be predicted with certainty, we do not currently believe that the outcome of any of these legal matters will have a material adverse effect on our results of operation or financial condition, other than as discussed below regarding the matter involving Continuous Composites Inc. (“Continuous Composites”), which we previously disclosed. Regardless of the outcome, litigation can be costly and time consuming, as it can divert management’s attention from important business matters and initiatives, negatively impacting our overall operations.

In July 2021, Continuous Composites, a company based in Idaho, brought a claim in the United States District Court for the District of Delaware against the Company regarding patent infringement. On April 11, 2024, the jury returned a verdict against the Company in the amount of $17.3 million. The jury found one of the two patent claims Continuous Composites asserted at trial against the Company to be invalid and not infringed. However, the jury found that the Company had infringed the other patent claim and awarded monetary damages. The Company disagrees with this verdict and has sought to overturn the verdict in post-trial motions with the District Court. The Company is exploring all available options, including seeking to overturn the verdict and any resulting judgment through the appeals process.

As of June 30, 2024, monetary damages resulting from the Continuous Composites verdict are accrued within the litigation payable caption on the condensed consolidated balance sheet together with estimated and accrued interest of $0.2 million for the three and six months ended June 30, 2024. As of June 30, 2024, the Company has restricted cash in the amount of $19.1 million as a result of funding a surety bond in connection with the verdict, which amount reflects the original judgment of $17.3 million in monetary damages plus $1.8 million of interest to cover the prejudgment period and duration of the appeal process. Continuous Composites has also asserted through post-trial motions claims for additional royalty payments for sales of certain products manufactured and/or sold in the United States after December 31, 2023. In accordance with ASC Topic 450, the Company estimated the loss contingency related to the royalty payment claims to be in the range of $0 to $2.7 million for the six months ended June 30, 2024, and the Company believed that no amount within this range was a better estimate than any other amount. In accordance with ASC Topic 450, the Company recorded no accrual during the reporting period because the low end of the range is estimated to be $0. Because of the uncertainties related to the outcome of post-trial claims and proceedings, accruals are based on our best estimates based on information available at the time of the assessment. On a periodic basis, as additional information becomes available, or based on specific events such as the outcome of post-trial claims and proceedings, or the settlement of claims (and offers of settlement), we may reassess the potential liability related to this matter and may revise these estimates, which could result in a material adverse adjustment to our operating results.