Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 ("Exchange Act"), as of December 31, 2022. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of December 31, 2022, our disclosure controls and procedures were effective, at a reasonable assurance level, to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is (b) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S. of America.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013) . Based on the criteria discussed
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above and our management’s assessment, our management concluded that, as of December 31, 2022, our internal control over financial reporting was effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the quarter ended December 31, 2022, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).
Our independent registered public accountants have also issued an audit report on our internal control over financial reporting. Their report appears below.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Merit Medical Systems, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Merit Medical Systems, Inc. and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 24, 2023, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Salt Lake City, Utah
February 24, 2023
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Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Items 10, 11, 12, 13 and 14.
The information required by these items is incorporated by reference to our definitive proxy statement relating to our 2023 Annual Meeting of Shareholders. We currently anticipate that our definitive proxy statement will be filed with the SEC not later than 120 days after December 31, 2022, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) Documents filed as part of this Report:
(1) Financial Statements . The following consolidated financial statements and the notes thereto, and the Reports of Independent Registered Public Accounting Firm are incorporated by reference as provided in Item 8 and Item 9A of this report:
Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ) — Internal Control
Report of Independent Registered Public Accounting Firm — Financial Statements
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Income (Loss) for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
—
Schedule II - Valuation and qualifying accounts
Years Ended December 31, 2022, 2021 and 2020
(In thousands)
Balance at
Additions Charged to
Balance at
Allowance for Credit Losses:
Beginning of Year
Costs and Expenses (a)
Deduction (b)
End of Year
2020
$
( 3,108 )
$
( 3,115 )
$
910
$
( 5,313 )
2021
$
( 5,313 )
$
( 2,678 )
$
1,224
$
( 6,767 )
2022
$
( 6,767 )
$
( 1,858 )
$
202
$
( 8,423 )
(a) We record a bad debt provision based upon historical bad debt experience, current economic conditions, expectations of future economic conditions, and management’s evaluation of our ability to collect individual outstanding balances.
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(b) When an individual customer balance becomes impaired and is deemed uncollectible, a deduction is made against the allowance for uncollectible accounts.
Years Ended December 31, 2022, 2021 and 2020
(In thousands)
Balance at
Additions Charged to
Balance at
Tax Valuation Allowance:
Beginning of Year
Costs and Expenses (a)
Deduction
End of Year
2020
$
( 4,644 )
$
( 5,569 )
$
-
$
( 10,213 )
2021
$
( 10,213 )
$
( 573 )
$
-
$
( 10,786 )
2022
$
( 10,786 )
$
( 2,741 )
$
-
$
( 13,527 )
(a) We record a valuation allowance against a deferred tax asset when it is determined that it is more likely than not that the deferred tax asset will not be realized.
(b) Exhibits:
The following exhibits required by Item 601 of Regulation S-K are filed herewith or have been filed previously with the SEC as indicated below:
Exhibit
No.
Index to Exhibits
2.1
Agreement and Plan of Merger, dated October 1, 2018, by and among Merit Medical Systems, Inc., CMI Transaction Co., Cianna Medical, Inc. and Fortis Advisors LLC, as the Securityholder’s Representative *
2.2
Asset Purchase Agreement, dated December 14, 2018, by and among Merit Medical Systems, Inc., Vascular Insights, LLC and VI Management, Inc.*
3.1
Amended and Restated Articles of Incorporation dated May 31, 2018*
3.2
Third Amended and Restated Bylaws dated May 31, 2018*
4.1
Specimen Certificate of the Common Stock*
4.2
Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
10.1
Merit Medical Systems, Inc. 2006 Long Term Incentive Plan, dated*†
10.2
First Amendment to the Merit Medical Systems 2006 Long-Term Incentive Plan, dated May 31, 2007*†
10.3
Lease Agreement dated as of June 8, 1993 for office and manufacturing facility*
10.4
A mended and Restated Deferred Compensation Plan, dated January 1, 2004*†
10.5
Merit Medical Systems, Inc. Amended and Restated Deferred Compensation Plan, effective January 1, 2008*†
10.6
Second Amendment to the Merit Medical Systems, Inc. 2006 Long-Term Incentive Plan made and adopted effective May 31, 2009*†
10.7
Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan made and adopted effective May 31, 2009*†
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10.8
First Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, effective September 19, 2010*†
10.9
Second Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated November 29, 2010 *†
10.10
Third Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, effective October 1, 2010*†
10.11
Fourth Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated December 31, 2011*†
10.12
Fifth Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated December 28, 2012*†
10.13
Sixth Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated December 31, 2013.*†
10.14
Seventh Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated June 10, 2014*†
10.15
Eighth Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated December 29, 2014*†
10.16
Second Amended and Restated Credit Agreement dated as of July 6, 2016 by and among Merit Medical Systems, Inc., Wells Fargo Bank, National Association, Well Fargo Securities, LLC and the lenders named therein*
10.17
Form of Employment Agreement, dated May 26, 2016 between the Company and each of the following individuals: Joseph C. Wright, and Brian G. Lloyd*†
10.18
Employment Agreement, dated May 26, 2016 between the Company and Fred P. Lampropoulos*†
10.19
Third Amendment to the Merit Medical Systems, Inc. 2006 Long-Term Incentive Plan dated February 13, 2015*†
10.20
Merit Medical Systems, Inc., Restatement of the 1996 Employee Stock Purchase Plan dated July 1, 2000*†
10.21
First Amendment to the Merit Medical Systems, Inc., 1996 Employee Stock Purchase Plan dated April 1, 2001*†
10.22
Second Amendment to the Merit Medical Systems, Inc., 1996 Employee Stock Purchase Plan dated January 1, 2006*†
10.23
Third Amendment to the Merit Medical Systems, Inc., 1996 Employee Stock Purchase Plan dated April 7, 2006*†
10.24
Fourth Amendment to the Merit Medical Systems, Inc., 1996 Employee Stock Purchase Plan dated February 13, 2015*†
10.25
Fifth Amendment to the Merit Medical Systems, Inc., 1996 Employee Stock Purchase Plan dated April 15, 2021*†
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10.26
First Amendment to Employment Agreement made and entered into by and between Merit Medical Systems, Inc. and Fred P. Lampropoulos as of the 11th day of December, 2017*†
10.27
Form of First Amendment to Employment Agreement for each of Joseph C. Wright, and Brian G. Lloyd*†
10.28
First Amendment to Lease Agreement dated May 22, 2017 for office and manufacturing facility*
10.29
Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan effective May 24, 2018*†
10.30
First Amendment to the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan effective December 14, 2018*†
10.31
Second Amendment to the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan effective April 15, 2021*†
10.32
Employment Agreement made and entered into by and between Merit Medical Systems, Inc. and Raul Parra as of the 1st day of August, 2018.*†
10.33
Merit Medical Systems, Inc. 2019 Executive Bonus Plan, dated January 1, 2019*†
10.34
Ninth Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated August 1, 2016*†
10.35
Tenth Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated January 1, 2017*†
10.36
Eleventh Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated January 1, 2019*†
10.37
Twelfth Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, dated June 1, 2018*†
10.38
Third Amended and Restated Credit Agreement entered into by and among Merit Medical Systems, Inc., Wells Fargo Bank National Association and the lenders and subsidiary guarantors named therein, dated July 9, 2019*
10.39
Thirteenth Amendment to the Second Restatement of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, effective January 1, 2019*†
10.40
Performance Stock Unit Award Agreement (Three Year Performance Period), dated February 26, 2020, by and between Merit Medical Systems, Inc. and Fred Lampropoulos.*†
10.41
Form of Performance Stock Unit Award Agreement (Three Year Performance Period), dated February 26, 2020, by and between Merit Medical Systems, Inc. and each of the following individuals: Raul Parra, Joseph C. Wright, and Brian G. Lloyd. *†
10.42
First Amendment to the Merit Medical Systems, Inc. 2019 Executive Bonus Plan, effective June 22, 2020 *†
10.43
Settlement Agreement, dated October 13, 2020, by and among the United States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General (“OIG-HHS”) of the Department of Health and Human Services (“HHS”), and the Defense Health Agency (“DHA”), acting on behalf of the TRICARE Program (collectively, the “United States”); the Company; and Charles J. Wolf, M.D. (“Relator”), through their authorized representatives.*
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10.44
Corporate Integrity Agreement, dated October 13, 2020, by and between the OIG-HHS and the Company.*
10.45
Form of Indemnification Agreement, dated October 24, 2020, between the Company and each of the following individuals: A. Scott Anderson, F. Ann Millner, Ed. D., Lynne N. Ward, and Thomas J. Gunderson *†
10.46
Form of Indemnification Agreement, dated October 24, 2020, between the Company and each of the following individuals: Lonny J. Carpenter, David K. Floyd, and James T. Hogan *†
10.47
Form of Indemnification Agreement between the Company and each executive officer. *†
10.48
Indemnification Agreement, dated as of June 17, 2021, between the Company and Stephen C. Evans.*†
10.49
Form of Indemnification Agreement, dated as of May 19, 2022, between the Company and each of Laura Kaiser and Michael McDonnell.*†
10.50
Employment Agreement between the Company and Michel J. Voigt, dated December 11, 2020*†
10.51
Employment Agreement between the Company and Neil Peterson, dated May 19, 2022†
10.52
Performance Stock Unit Award Agreement (Two Year Performance Period), dated March 19, 2021, by and between Merit Medical Systems, Inc. and Fred Lampropoulos.*†
10.53
Performance Stock Unit Award Agreement (Three Year Performance Period), dated March 19, 2021, by and between Merit Medical Systems, Inc. and Fred Lampropoulos.*†
10.54
Form of Performance Stock Unit Award Agreement (Two Year Performance Period), dated March 19, 2021, by and between Merit Medical Systems, Inc. and each of the following individuals: Raul Parra, Brian G. Lloyd, Michel J. Voigt, and Joseph C. Wright.*†
10.55
Form of Performance Stock Unit Award Agreement (Three Year Performance Period), dated March 19, 2021, by and between Merit Medical Systems, Inc. and each of the following individuals: Raul Parra, Brian G. Lloyd, Michel J. Voigt, and Joseph C. Wright.*†
10.56
Performance Stock Unit Award Agreement (Three Year Performance Period), dated February 26, 2022, by and between Merit Medical Systems, Inc. and Fred Lampropoulos.*†
10.57
Performance Stock Unit Award Agreement (Three Year Performance Period), dated February 26, 2022, by and between Merit Medical Systems, Inc. and Raul Parra.*†
10.58
Form of Performance Stock Unit Award Agreement (Three Year Performance Period), dated February 26, 2022, by and between Merit Medical Systems, Inc. and each of the following individuals: Brian G. Lloyd, Michel J. Voigt, and Joseph C. Wright.*†
10.59
Performance Stock Unit Award Agreement (Three Year Performance Period), dated May 19, 2022, by and between Merit Medical Systems, Inc. and Neil Peterson.*†
10.60
Form of Restricted Stock Unit Award Agreement, dated May 24, 2022, by and between Merit Medical Systems, Inc. and each of the following individuals: A. Scott Anderson, Lonny J. Carpenter, Stephen C. Evans, David K. Floyd, James T. Hogan, Thomas J. Gunderson, Laura s. Kaiser, Michael R. McDonnell, F. Ann Millner, and Lynne N. Ward.†
10.61
Second Amendment to Lease Agreement dated March 10, 2022 for office and manufacturing facility.
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10.62
Deferred Compensation Plan for Non-Employee Directors.*†
21
Subsidiaries of Merit Medical Systems, Inc.
23.1
Consent of Independent Registered Public Accounting Firm
31.1
Certification of Chief Executive Officer
31.2
Certification of Chief Financial Officer
32.1
Certification of Chief Executive Officer
32.2
Certification of Chief Financial Officer
101
The following materials from the Merit Medical Systems, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Income (Loss), (ii) Consolidated Statements of Comprehensive Income (Loss), (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Equity, and (vi) Notes to Consolidated Financial Statements
104
Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).
*
These exhibits are incorporated herein by reference.
†
Indicates management contract or compensatory plan or arrangement.
(c) Schedules:
None
Item 16. Form 10-K Summary.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on February 24, 2023.
MERIT MEDICAL SYSTEMS, INC.
By:
/s/ FRED P. LAMPROPOULOS
Fred P. Lampropoulos, President and
Chief Executive Officer
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ADDITIONAL SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on form 10-K has been signed below by the following persons in the capacities indicated on February 24, 2023.
Signature
Capacity in Which Signed
/s/: FRED P. LAMPROPOULOS
President, Chief Executive Officer and Director
Fred P. Lampropoulos
(Principal executive officer)
/s/: RAUL PARRA
Chief Financial Officer and Treasurer
Raul Parra
(Principal financial and accounting officer)
/s/: A. SCOTT ANDERSON
Director
A. Scott Anderson
/s/: LONNY J. CARPENTER
Director
Lonny J. Carpenter
/s/: STEPHEN C. EVANS
Director
Stephen C. Evans
/s/: DAVID K. FLOYD
Director
David K. Floyd
/s/: THOMAS J. GUNDERSON
Director
Thomas J. Gunderson
/s/: JAMES T. HOGAN
Director
James T. Hogan
/s/: LAURA S. KAISER
Director
Laura S. Kaiser
/s/: MICHAEL R. MCDONNELL
Director
Michael R. McDonnell
/s/: F. ANN MILLNER
Director
F. Ann Millner
/s/: LYNNE N. WARD
Director
Lynne N. Ward
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