Note Disclosure of Legal Matters

Essay

Note Disclosure of Legal Matters

Use the note disclosure of legal matters below to answer the questions that follow.

Note 13—Legal Matters

On December 14, 2017, the Company was served with a class action complaint filed in federal court in Burlington, Vermont. The complaint, captioned John Doe vs. The Company was filed by a Company’s shareholder on behalf of himself and purportedly on behalf of all other Company’s shareholders who purchased the common stock of the Company during the period from March 25, 2016, through December 19, 2016. Plaintiff alleges that the Company violated the federal securities laws by making, in 2016, untrue statements of material facts and omitting to state material facts primarily concerning the Company's construction and start-up of its new manufacturing facility. Also named as defendants in the Complaint are certain present and former officers and directors of the Company. Plaintiff is seeking an unspecified amount of monetary damages.

While this action is in its preliminary stages, management believes, based on an initial review, the allegations made in the lawsuit are without merit and the Company intends to defend the lawsuit vigorously.

-Review the note disclosure of legal matters.

Required
(1)If you were to make an entry for the lawsuit against the company,what monetary amount should be recorded? On what did you base your decision with regard to the amount?

(2)Does the disclosure imply that the company is involved in only this litigation at this time?

(3)Why did this lawsuit arise? Do you believe it to be a reasonable one,or do you think that the plaintiff,has little grounds for this lawsuit?