COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Employment Agreements

We have employment agreements with various executives. The agreements have open-ended terms providing that employment shall continue until terminated by either party in accordance with the agreement. In addition to salary, bonuses, and benefits, the agreements also provide for termination benefits if the agreements are terminated by us for reasons other than cause or by the executives for good reason.

Inventory Purchases

As of June 30, 2022 and December 31, 2021, we have contractual commitments to purchase inventory from certain manufacturers totaling $13.8 million and $5.2 million, respectively.

Legal Proceedings

We are involved in various lawsuits, claims, inquiries, and other regulatory and compliance matters, most of which are routine to the nature of our business. When it is probable that a loss will be incurred and where a range of the loss can be reasonably estimated, the best estimate within the range is accrued. When the best estimate within the range cannot be determined, the low end of the range is accrued. The ultimate resolution of these claims could affect future results of operations should our exposure be materially different from our estimates or should liabilities be incurred that were not previously accrued. Potential insurance reimbursements are not offset against potential liabilities.

Because of the uncertainties associated with claims resolution and litigation, future losses to resolve these matters could be higher than the liabilities we have accrued; however, we are unable to reasonably estimate a range of potential losses. If new information were to become available that allowed us to reasonably estimate a range of potential losses in an amount higher or lower than what we have accrued, we would adjust our accrued liabilities accordingly. Based upon current information, we concluded that the impact of the resolution of these matters would not be, individually or in the aggregate, material to our financial position, results of operations or cash flows. Additional lawsuits, claims, inquiries, and other regulatory and compliance matters could arise in the future. The range of losses for resolving any future matters would be assessed as they arise.

On August 2, 2022, the Company received a demand from a purported stockholder of the Company pursuant to 8 Del. C. § 220 (the “Demand Letter”) to inspect books and records of the Company relating to, among other things, the Company’s entry into the proposed Merger with Commodore and the TPG Stockholder. On August 9, 2022, the Company replied, offering to meet and confer with the stockholder's counsel to negotiate an appropriate production in response to the Demand Letter, while reserving all rights. On August 10, 2022, the purported stockholder filed a complaint in the Delaware Chancery Court seeking to compel inspection of books and records pursuant to Section 220 of the Delaware General Corporation Law. The case is at a very early stage and the outcome of such demand and complaint and any litigation ensuing from such demand and complaint cannot be assured, including the amount of fees and costs associated with defending this claim or any other liabilities that may be incurred in connection therewith. For this same reason, the Company cannot currently estimate the loss or the range of possible losses it may experience in connection with this claim.

Sales Tax Accrual

ASC Topic 450, Contingencies, (“ASC 450”) requires an estimated loss to be accrued by a charge to income if it is probable that a liability has been incurred at the date of the financial statements and the amount of the liability can be reasonably estimated. We recognized liabilities for contingencies related to state sales and use tax deemed probable and estimable totaling $6.7 million and $6.9 million at June 30, 2022, and December 31, 2021, respectively. These are included in accrued liabilities in our condensed consolidated balance sheets.