Item 3. LEGAL PROCEEDINGS

The Company has identified that certain expenses it incurred in previous years constituted undisclosed perquisites. The Company has voluntarily disclosed this information to the U.S. Securities and Exchange Commission ("SEC") and is cooperating with the SEC’s investigation of this matter.

For the named executive officers in fiscal year 2021, the Company has calculated the amount of the undisclosed perquisites to be up to approximately $225,000 in 2020 and up to approximately $350,000 in 2019. These amounts relate principally to use of corporate aircraft and will be included in the Company’s proxy statement for its 2022 annual shareholders meeting.

The Company is committed to upholding the highest standards of corporate governance and is continuously focused on ensuring the effectiveness of its policies, procedures, and controls. The Company is in the process, with the assistance of professional advisors, of reviewing and further enhancing relevant policies, procedures, and controls.

Currently the Company does not believe that this matter will have a material impact on its financial condition or results of operations, although it is possible that a loss related to this matter may be incurred. Given the ongoing nature of this matter, management cannot predict the duration, scope, or outcome of the SEC’s investigation or estimate the potential magnitude of any such loss or range of loss, or the cost of the ongoing SEC investigation. Any determination that the Company’s expense and perquisite reporting practices were not in compliance with existing laws or regulations could result in the imposition of fines, civil or criminal penalties, equitable remedies, including disgorgement, injunctive relief, or other sanctions against the Company. The Company also may become a party to litigation or other legal proceedings over these matters.

In the normal course of business, the Company is involved in various lawsuits and claims, including product liability, environmental, intellectual property, contract and commercial, advertising, employment and distributor claims, and administrative proceedings. The Company does not expect that the resolution of these matters will have a materially adverse effect on the Company’s consolidated financial position, results of operations or liquidity.