Legal Proceedings

In the ordinary course of our business, the Company may be involved in various legal actions and claims, including but not limited to product liability, consumer, commercial, tax, and governmental matters, which may arise from time to time. The Company is currently a party to a number of legal proceedings. In the opinion of management, it is not reasonably possible that the Company will incur a material loss with respect to loss contingencies for asserted legal and other claims. While the Company does not anticipate any adverse outcomes from these proceedings, legal actions inherently carry uncertainties, and an unfavorable ruling could result in monetary damages that may impact the Company’s business, financial position, results of operations, or cash flows. Although the Company maintains specific insurance coverage for certain risks, it may still face judgments or need to settle claims in the future that could have potential material adverse effects on its business, financial condition, or results of operations.

Regulatory Matters

In September 2026, the Company determined that certain of its Fox Labs branded oleoresin capsicum defense sprays are formulated by the Company's third-party contract filler with trichloroethylene, a solvent whose processing and distribution  for consumer use is prohibited under a rule issued by the U.S. Environmental Protection Agency ("EPA") under the Toxic Substances Control Act. The Company has suspended shipments of the affected products, has instructed its dealers and distributors to suspend sales of them, and expects to reformulate the affected products. Additionally, on October 6, 2026, the Company voluntarily disclosed the matter to the EPA under the EPA's Audit Policy, and also intends to separately file a report with the Consumer Product Safety Commission (the “CPSC”).  The carrying value of finished goods inventory of the affected Fox Labs products as of August 31, 2026 was approximately $0.2 million. Because the regulatory prohibition was in effect as of August 31, 2026, the Company evaluated the net realizable value of the affected inventory as of that date and has recorded an appropriate inventory reserve for the affected inventory. The Company may be subject to civil penalties from this event, and may incur costs to reformulate, relabel or replace products. The Company is not able to estimate the amount or range of any loss that may result from these matters at this time, and no accrual has been recorded. See Note 25, Subsequent Events.