ARGAN INC

In the normal course of business, the Company may have pending claims and legal proceedings. We maintain accrued expense balances for the estimated amounts of legal costs expected to be billed related to any significant matter. In the opinion of management, based on information available at this time, there are no current claims and proceedings that would have a material adverse effect on the consolidated financial statements (see Note 10 to the accompanying consolidated financial statements). However, the outcomes of such legal claims and proceedings are subject to inherent uncertainties.

In March 2025, our U.K. subsidiary sued EP NI Energy Limited and EP UK Investment Limited (together referred to as “EP”) in the High Court of Justice, Business and Property Courts of England and Wales for EP’s breach of contract and failure to remedy various events which negatively impacted the schedule and costs of an overseas project, resulting in EP receiving the benefits of the construction efforts of our U.K. subsidiary and the corresponding progress on the project without making payments to which our U.K. subsidiary was contractually entitled. Our U.K. subsidiary provided the project owner notice to terminate because of project owner breaches of the contract. Those breaches were not resolved, as a result of which the contract terminated on May 3, 2024. Subsequently, the project owner made a draw for the full amount of a $10.0 million irrevocable letter of credit, or on-demand performance bond, issued by our bank. We believe the project owner improperly initiated the draw on the bond and, therefore, the amount should be refunded. This amount is included in accounts receivable as of January 31, 2026. Our U.K. subsidiary has significant billable receivables, unresolved contract variations and claims for extensions of time, among other issues, related to an overseas project. The project owner has asserted counterclaims that our U.K. subsidiary disputes. Our U.K. subsidiary will vigorously assert its rights and claims to recover its lost value and collect any remaining monies owed.