Note 15. Commitments and Contingencies

Legal Proceedings

From time to time, the Company has been 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 effect on our results of operation or financial condition, other than as discussed below regarding the settlement of 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.

Following post-trial motions relating to the jury verdict, on September 20, 2024, the Company entered into the Settlement Agreement with Continuous Composites. The Settlement Agreement resolved all claims and counterclaims in the patent infringement litigation brought by Continuous Composites against the Company in the lawsuit. Under the terms of the Settlement Agreement, the Company made an initial upfront payment of $18 million to Continuous Composites, which payment was made on October 10, 2024, and is required to make three additional installment payments thereafter of $1 million, $2 million and $4 million in the fourth quarters of fiscal years 2025, 2026 and 2027, respectively. In consideration of such payments, the Settlement Agreement provides for a dismissal of all claims with prejudice, cross-licenses of the parties’ respective patent portfolios, a mutual release of claims for liabilities arising prior to the effective date of the Settlement Agreement and mutual covenants not to sue. On October 11, 2024, the parties filed a Stipulation of Dismissal with the United States District Court for the District of Delaware, which was granted, and the case was terminated. As of September 30, 2024, in connection with the settlement, the Company has accrued within the settlement payable caption on the condensed consolidated balance sheet the $17.3 million original jury verdict, the previously accrued interest of $0.4 million recorded in the litigation judgment caption of the condensed consolidated statement of operations during the three months ended September 30, 2024, and a $0.3 million incremental current liability. The incremental amount due under the Settlement

Agreement compared to the original verdict is determined to be representative of the amount attributable to the licensing of the patent rights contemplated under the Settlement Agreement and is recognized as an intangible asset of $5.5 million, after discount using a rate of 12%, to be amortized to cost of revenue over the life of the patents of 23 years. The future payments of $7.0 million under the Settlement Agreement are secured by the Security Agreement and as such the Company has recorded a long-term settlement payable on the condensed consolidated balance sheet of $5.2 million which will accrete $1.8 million of interest over the payment term recognized as interest expense. In addition, as of September 30, 2024, the Company has restricted cash in the amount of $19.4 million as a result of funding a surety bond in connection with the original verdict, which amount reflects the original judgment of $17.3 million in monetary damages plus $2.1 million of interest to cover the prejudgment period and duration of the appeal process. The restriction on these funds was removed on October 30, 2024 as a result of the termination of the surety bond.