Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

8. Commitments and Contingencies

We establish contingent liabilities when a particular contingency is both probable and estimable. The Company is not aware of any pending claims or assessments, other than as described below, which may have a material adverse impact on the Company’s financial position or results of operations.

Outsource Manufacturers. We have manufacturing agreements with electronics manufacturing service (“EMS”) providers related to the outsourced manufacturing of our products. Certain manufacturing agreements establish annual volume commitments. We are also obligated to repurchase Company-forecasted but unused materials. The Company has non-cancellable, non-returnable, and long-lead time commitments with its EMS providers and certain suppliers for inventory components that will be used in production. The Company’s purchase commitments under such agreements is approximately $2,035 as of December 31, 2022.

Uncertain Tax Positions. As further discussed in Note 13 - Income Taxes, we had $962 of uncertain tax positions as of December 31, 2022. Due to the inherent uncertainty of the underlying tax positions, it is not possible to forecast the payment of this liability to any particular year.

Legal Proceedings.

Intellectual Property Litigation

The Company has been involved in several litigation proceedings (collectively, the “Litigations”) against Shure Incorporated (“Shure”) as more fully described in the Part I, Item 3 of the Company’s annual report on Form 10-K for the year ended December 31, 2021, as supplemented in Part II, Item 1 of the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2022.

On December 9, 2022, the Company and Shure entered into a confidential settlement and license agreement (the “Agreement”). Under the terms of the Agreement:

●	All of the Litigations between the parties were dismissed with prejudice and each of the Company and Shure released all claims against the other arising from or in connection with the matters that were subject to the Litigations;
●	Shure made a one-time settlement payment to the Company in the amount of $55,000 within five days after the dismissal of the Litigations in accordance with the Agreement in January 2023; and
●	The Company and Shure agreed to certain patent licenses and covenants not to sue.

The Company capitalized $737 and $7,836 of litigation expenses related to this matter during the twelve months ended December 31, 2022 and 2021, respectively.

A gain of $33,623 was recognized and included under other income after deducting the entire capitalized legal costs amounting to $27,374 net of amortized costs of $5,997 from the one-time legal settlement amount of $55,000, which is included in the balance sheet under legal settlement receivable as of December 31, 2022.

In addition, the Company is also involved from time to time in various claims and legal proceedings which arise in the normal course of our business. Such matters are subject to many uncertainties and outcomes that are not predictable. However, based on the information available to us, we do not believe any such other proceedings will have a material adverse effect on our business, results of operations, financial position, or liquidity.

Conclusion

We believe there are no other items that will have a material adverse impact on the Company’s financial position or results of operations. Legal proceedings are subject to all of the risks and uncertainties of legal proceedings and there can be no assurance as to the probable result of any legal proceedings.

The Company believes it has adequately accrued for the aforementioned contingent liabilities. If adverse outcomes were to occur, our financial position, results of operations and cash flows could be negatively affected materially for the period in which the adverse outcomes are known.