What changed in this filing

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Item 9A. Controls and Procedures

2023-02-21 compared with 2022-02-23 · 13 added, 34 removed, 206 unchanged (19% of the section changed)

18 unchanged sentences

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.

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.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on this assessment, management concluded that, as of December 31, 2022, our internal control over financial reporting was effective.

In making this assessment as of December 31, 2021, we excluded the AffloVest assets acquired from International Biophysics Corporation on September 8, 2021.

The assets of this business, all of which represented goodwill and intangible assets, comprised 21.7% of our total assets as of December 31, 2021.

This business contributed 2.5% to our total revenues for the year ended December 31, 2021.

We have excluded this business because we have not had sufficient time to make an assessment of its internal controls using the COSO criteria in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.

In excluding this business from our assessment, we have considered the “Frequently Asked Questions” as set forth by the office of the Chief Accountant and the Division of Corporate Finance on June 24, 2004, as revised on September 24, 2007, which acknowledges that it may not be possible to conduct an assessment of an acquired business’s internal control over financial reporting in the period between the consummation date and the date of management’s assessment and contemplates that such business would be excluded from management’s assessment in the year of acquisition.

Our independent registered public accounting firm has audited the effectiveness of our internal control over financial reporting as of December 31, 2022, as stated in its report which appears below.

4 unchanged sentences

We have audited the internal control over financial reporting of Tactile Systems Technology, Inc.

(a Delaware corporation) and its subsidiary (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

(a Delaware corporation) and subsidiary (the “Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework 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 the 2013 Internal Control—Integrated Framework issued by COSO.

9 unchanged sentences

We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of the AffloVest assets acquired on September 8, 2021 (“AffloVest business”), whose financial statements reflect total assets and revenues constituting 21.7% and 2.5%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

As indicated in Management’s Report, the AffloVest business was acquired during 2021.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of the AffloVest business.

Definition and limitations of internal control over financial reporting

2 unchanged sentences

(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.

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.

4 unchanged sentences

Other Information.

Because we are filing this Annual Report on Form 10-K within four business days after the triggering event, we are making the following disclosure under this Item 9B instead of filing a Current Report on Form 8-K under Item 1.01, Entry into a Material Definitive Agreement and Item 2.03, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant:

On February 22, 2022 (the “Amendment Date”), we entered into a Second Amendment Agreement (the “Second Amendment”), which amends the Amended and Restated Credit Agreement, dated as of April 30, 2021, as amended by that First Amendment Agreement dated as of September 8, 2021 (as further amended by the Second Amendment, the “Credit Agreement”), by and among us, the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent.

The Second Amendment, among other things, provides that, effective as of the Amendment Date and continuing through the end of the Covenant Relief Period (as defined below), the applicable margin for LIBOR rate loans under the Credit Agreement shall be 3.50%.

The Second Amendment modifies the financial covenants under the Credit Agreement to require that we not permit, as of the last day of each fiscal quarter:

● our consolidated total leverage ratio to be (i) for the fiscal quarter ending March 31, 2022, greater than 3.50 to 1.00, (ii) for each fiscal quarter ending from June 30, 2022 through December 31, 2022, greater than 4.75 to 1.00, (iii) for the fiscal quarter ending March 31, 2023, greater than 4.00 to 1.00, (iv) for the fiscal quarter ending June 30, 2023, greater than 3.25 to 1.00 and (v) for each fiscal quarter thereafter, greater than 3.00 to 1.00, in each case, for the period of four consecutive fiscal quarters ending on or immediately prior to such date;

● our consolidated EBITDA to be (i) for the fiscal quarter ending March 31, 2022, less than $14,500,000, (ii) for each fiscal quarter ending from June 30, 2022 through December 31, 2022, less than $10,000,000, (iii) for the fiscal quarter ending March 31, 2023, less than $11,500,000, (iv) for the fiscal quarter ending June 30, 2023, less than $14,500,000, and (v) for each fiscal quarter thereafter, less than $20,000,000, in each case, for the period of four consecutive fiscal quarters ending on or immediately prior to such date;

● our consolidated fixed charge coverage ratio to be (i) for the fiscal quarter ending March 31, 2022, less than 1.50 to 1.00, (ii) for the fiscal quarters ending June 30, 2022 and September 30, 2022, less than 1.25 to 1.00, and (iii) for each fiscal quarter thereafter, less than 1.50 to 1.00, in each case, for the period of four consecutive fiscal quarters ending on or immediately prior to such date.

The Second Amendment provides that during the period commencing with the fiscal quarter ending March 31, 2022 and ending on the last day of the fiscal quarter ending June 30, 2023 (the “Covenant Relief Period”), we will not permit our Liquidity (as defined in the Second Amendment) to be less than $7,500,000, determined as of the last day of any fiscal quarter within the Covenant Relief Period.

The Second Amendment also permits additional addbacks to Consolidated EBITDA (as defined in the Credit Agreement) for certain litigation costs and expenses.

The Second Amendment also provides that we will make mandatory principal prepayments of the loans under the Credit Agreement upon the occurrence of collection of certain aged accounts receivable, in addition to the mandatory prepayments that were previously included in the Credit Agreement for certain asset dispositions, insurance and condemnation events and other matters.

Pursuant to the Second Amendment, on the Amendment Date, we made a mandatory principal prepayment of the term loan under the Credit Agreement of $3.0 million.

Following such payment, as of February 22, 2022, we had outstanding borrowings of $51.3 million under the Credit Agreement, comprised of $26.3 million under the term loan and $25.0 million under the revolving credit facility.

The foregoing description of the Second Amendment is a summary of the material terms, does not purport to be complete, and is qualified in its entirety by reference to the Second Amendment, a copy of which is attached to this Annual Report on Form 10-K as Exhibit 10.37 and is incorporated herein by reference.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

66 unchanged sentences

Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Comprehensive 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

10 unchanged sentences

David Shockley, Jr.

Amendment to Asset Purchase Agreement,

dated as of November 4, 2022, by and

between Tactile Systems Technology, Inc.

(f/k/a International Biophysics

Amended and Restated Certificate of Incorporation, as amended through May 9, 2019

Amended and Restated By-laws, effective M arch 10 , 2021

Amended and Restated Bylaws, effective

D ecember 19, 2022

Description of the Registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934

40 unchanged sentences

First Amendment to Credit Agreement, dated as of February 12, 2019, by and among Tactile Systems Technology, Inc., the lenders party thereto and Wells Fargo Bank, National Association

Waiver and Second Amendment to Credit Agreement, dated as of March 25, 2019, by and among Tactile Systems Technology, Inc.,

the lenders party thereto and Wells Fargo Bank, National Association

Waiver and Second Amendment to Credit Agreement, dated as of March 25, 2019, by and among Tactile Systems Technology, Inc., the lenders party thereto and Wells Fargo Bank, National Association

Third Amendment to Credit Agreement, dated as of August 2, 2019, by and among Tactile Systems Technology, Inc., the lenders party thereto and Wells Fargo Bank, National Association

11 unchanged sentences

The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL:

(i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of

Comprehensive (Loss) Income, (iv) Statements of Stockholders’ Equity, (v) Statements of Cash Flows, and (vi) Notes to the Financial Statements

(i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Comprehensive Loss, (iv) Statements of Stockholders’ Equity, (v) Statements of Cash Flows, and (vi) Notes to the Financial Statements

Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1)

20 unchanged sentences

/s/ Deepti Jain

/s/ Richard Nigon

Richard Nigon

/s/ Carmen B.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures