Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Litigation

We accrue estimates for resolution of any legal and other contingencies when losses are probable and reasonably estimable in accordance with ASC 450, Contingencies (“ASC 450”). No less than quarterly, we review the status of each significant matter underlying a legal proceeding or claim and assess our potential financial exposure. We accrue a liability for an estimated loss if the potential loss from any legal proceeding or claim is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable, and accruals are based only on the information available to our management at the time the judgment is made, which may prove to be incomplete or inaccurate or unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Furthermore, the outcome of legal proceedings is inherently uncertain, and we may incur substantial defense costs and expenses defending any of these matters.

In March 2020, we (through our subsidiary Sleep Management LLC) entered into a purchase order (the “Purchase Order”) with

Vyaire Medical, Inc. d/b/a CareFusion Respiratory Technologies (“Vyaire”) for respiratory equipment and paid $1.4 million (the “Deposit”) towards the delivery of such respiratory equipment. As of September 30, 2020, outstanding supplier deposits in the amount of $0.9 million related to such Deposit are included within other prepaid and other current assets. Vyaire has been unable to deliver the vast majority of the respiratory equipment referenced in the Purchase Order. On July 29, 2020, we (through our subsidiary Sleep Management LLC) filed a lawsuit against Vyaire in the United States District Court for the Western District of Louisiana (the “Court”) seeking a declaratory judgment that the Company is not required to pay any further funds to Vyaire and demanding Vyaire refund all amounts currently held by Vyaire as a result of the Deposit.

On September 23, 2020, Vyaire filed its Defense and Counterclaim (“Counterclaim”) with the Court alleging breach of contract and seeking damages of $4.7 million, purportedly for the improper cancellation of the Purchase Order. On October 16, 2020, we filed an answer and affirmative defenses with the Court in response to the Counterclaim and intend to pursue further legal action. We continue to believe that we have valid legal and equitable grounds to recover our outstanding Deposit as a result of Vyaire’s failure to deliver the vast majority of the respiratory equipment referenced in the Purchase Order. We have not concluded that a loss

related to the Counterclaim is probable, nor have we accrued a liability related to this claim. Although a loss may be reasonably possible (as defined in ASC 450), we do not have sufficient information to determine the amount or range of reasonably possible loss with respect to the Counterclaim given that the dispute is in the early stages of the legal process.