Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

The Company leases its office under a non-cancelable operating lease that expires in 2023. Rent expense for office space was $39,000 and $39,000 for the three months ended March 31, 2022 and 2021, respectively.

Future minimum payments under all operating leases are as follows (in thousands):


Year ending December 31,

2022	120
2023	81


Total	$	201

Neither the Company nor its subsidiaries are parties to any potentially material pending legal proceedings during the quarter. The Company is subject to legal proceedings described in Item 3 of the Company’s 10-K filed March 22, 2022, which are incorporated herein by reference. Except as described below, there have been no material changes in the litigation since then.

On April 28, 2022, in connection with the proposed acquisition of the Company by an affiliate of D.R. Horton, Inc. (the “Transaction”), a purported individual stockholder of the Company filed a complaint in the United States District Court for the Southern District of New York, captioned Stein v. Vidler Water Resources, Inc., et al, No. 1:22-cv-3468 (“Stein”), naming as defendants the Company and each member of the Company’s board of directors as of the date of the Merger Agreement (as defined below). On May 2, 2022, one additional case was filed by a purported individual stockholder of the Company in the same court, captioned Casey v. Vidler Water Resources, et al, No. 1:22-cv-3528 (“Casey”). On May 2, 2022 and May 6, 2022, two additional cases were filed by purported individual stockholders of the Company in the United States District Court for the Eastern District of New York, captioned, respectively, Rabinovich v. Vidler Water Resources, Inc, et al, No. 1:22-cv-2509 (“Rabinovich), and Koh v. Vidler Water Resources, Inc., et al, No. 1:22-cv-2631 (“Koh”). On May 12, 2022, three additional cases were filed by purported individual stockholders of the Company in the United States District Court for the District of Delaware, the United Stated District Court for the Eastern District of Pennsylvania, and the United States District Court for the Eastern District of New York, captioned, respectively, Wilhelm v. Vidler Water Resources, Inc., et al, No. 1:22-cv-00631 (“Wilhelm”), Waterman v. Vidler Water Resources, Inc., et al, No. 2:22-cv-01854 (“Waterman”), and Whitfield v. Vidler Water Resources, Inc., et al, No. 1:22-cv-02788 (“Whitfield”). On May 13, 2022, one additional case was filed by a purported individual stockholder of the Company in the United States District Court for the Southern District of New York, captioned Taylor v. Vidler Water Resources, Inc., at al, No. 1:22-cv-03909 (“Taylor”). The Stein, Casey, Rabinovich, Koh, Wilhelm, Waterman, Whitfield, Taylor, and any similar subsequently filed cases involving the Company, the Company’s board of directors or any committee thereof, and/or any of the Company’s directors or officers relating directly or indirectly to the Merger Agreement, the Transaction, or any related transaction, are referred to as the “Transaction Litigations.”

The Transaction Litigations filed to date generally allege that the Solicitation/Recommendation Statement on Schedule 14D-9 (the “Schedule 14D-9”) filed by the Company with the SEC on April 27, 2022, in connection with the Transaction is materially incomplete and misleading by allegedly failing to disclose purportedly material information relating to the sale process leading to the Transaction, the Company’s financial projections, and the analyses performed by Duff & Phelps Opinion Practice, Kroll LLC in connection with the Transaction. The Transaction Litigations assert violations of Section 14(e), Section

14(d), and Section 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14d-9 promulgated thereunder. The Transaction Litigations seek, among other things: an injunction enjoining consummation of the Transaction, rescission of the Merger Agreement, dissemination of a revised Schedule 14D-9, damages, a declaration that the Company and the board of directors violated Sections 14(e), 14(d), and 20(a) of the Exchange Act and Rule 14d-9 promulgated thereunder, costs of the action, including plaintiff’s attorneys’ fees and experts’ fees and expenses, and any other relief the court may deem just and proper.

In addition, on May 2, 2022 and May 10, 2022, the Company received demand letters from purported stockholders of the Company alleging that the Schedule 14D-9 omits purportedly material information relating to the Transaction (the “Demand Letters”).

The Company cannot predict the outcome of the Transaction Litigations or the Demand Letters, nor can the Company predict the amount of time and expense that will be required to resolve each. The Company believes that the Transaction Litigations and Demand Letters are without merit and intends to vigorously defend against each, and any subsequently filed similar actions.

The Company is also subject to various litigation matters that arise in the ordinary course of its business. Because litigation is inherently unpredictable and unfavorable results could occur, assessing contingencies is highly subjective and requires judgments about future events. When evaluating contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against the Company may be unsupported, exaggerated, or unrelated to possible outcomes, and as such, are not meaningful indicators of the potential liability. The Company regularly reviews contingencies to determine the adequacy of accruals and related disclosures. The amount of ultimate loss may differ from these estimates, and it is possible that the financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies.

Whether any losses finally determined in any claim, action, investigation, or proceeding could reasonably have a material effect on the Company’s business, financial condition, results of operations, or cash flows will depend on a number of variables, including: the timing and amount of such losses; the structure and type of any remedies; the significance of the impact any such losses, damages or remedies may have on the Company’s condensed consolidated financial statements; and the unique facts and circumstances of the particular matter that may give rise to additional factors.