Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
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Changes in Internal Control over Financial Reporting
There was no change in the company’s internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. It includes those policies and procedures that:
● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. 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
● 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.
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.
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.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Tactile Systems Technology, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Tactile Systems Technology, Inc. (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.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated February 21, 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 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.
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/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
February 21, 2023
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Item 9B. Other Information.
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART II I
Item 10. Directors, Executive Officers and Corporate Governance .
Information About our Executive Officers
Daniel Reuvers , age 59, has served as our President and Chief Executive Officer, and as a member of our Board of Directors, since June 2020. Previously, he was at Integra LifeSciences Holdings Corporation, where he has served as the Executive Vice President and President, Codman Specialty Surgical, since December 2016. His responsibilities there included global sales, marketing, product development, quality and regulatory, and service and repair. He joined Integra in 2008 as Vice President of Marketing & Product Development for the company’s surgical instrument business, and held a series of roles with progressively increased responsibility. Among his accomplishments there, he led the $1B acquisition and integration of the Codman business from Johnson & Johnson. Previously, he served as President of Advanced Respiratory and Omni-Tract Surgical, both resulting in acquisitions by Hill-Rom and Integra, respectively. Mr. Reuvers served on the board of Respirtech, Inc. for 10 years, until their acquisition by Philips.
Kristie T. Burns , age 51, has served as our Senior Vice President, Marketing & Clinical Affairs since joining the company in March 2021. Prior to joining our company, Ms. Burns was the Chief Marketing Officer of Cala Health, Inc., a privately-held bioelectronic medicine company developing wearable neuromodulation therapies for chronic disease, from January 2017 until March 2021. At Cala Health, she organized the company’s commercial functions and managed the U.S. commercial introduction of its lead product. Prior to joining Cala Health, Inc., Ms. Burns served as Vice President of Solutions Marketing, ResMed Americas of ResMed Inc. (NYSE: RMD), a global leader in digital health and cloud-connected medical devices focused on sleep apnea and other chronic diseases, from December 2003 to February 2016. Ms. Burns held various marketing and leadership roles of increasing responsibility with ResMed Inc. beginning in 2003. At ResMed Inc., her responsibilities included managing marketing and legal due diligence teams and leading the collaboration between multiple teams following a significant market reorganization. Ms. Burns previously served in consulting and business development roles of increasing responsibility at a privately-held cardiology consulting practice that was subsequently acquired by GE Medical Systems, from 1994 to 1999.
Brent A. Moen , age 55, has served as our Chief Financial Officer since joining the company in September 2018. Prior to joining our company, Mr. Moen served as Chief Financial Officer of Entellus Medical, Inc., a publicly held medical device company, from May 2016 until the company’s acquisition by Stryker Corporation in February 2018. Prior to joining Entellus Medical, Mr. Moen served as Executive Vice President and Chief Financial Officer of ABRA Auto Body & Glass LP, an automotive collision repair company, from November 2013 to May 2015. Mr. Moen previously served as Senior Vice President and Chief Financial Officer of Regis Corporation, a publicly held owner, franchisor and operator of beauty salons, from January 2011 to December 2012. Mr. Moen held various financial roles of increasing responsibility with Regis Corporation, beginning in 2000. Mr. Moen holds a B.A. in Accounting from the University of North Dakota and is a Certified Public Accountant (inactive) and started his professional career with Coopers and Lybrand.
Eric Pauls , age 48, has served as our Senior Vice President, Sales since joining the company in May 2021. Prior to joining our company, Mr. Pauls served in positions of increasing responsibility at Royal Philips (NYSE: PHG; AEX: PHIA), a leading health technology company. He most recently held the position of Business Sales Leader for Sleep and Respiratory Care, North America. In this position, Mr. Pauls was responsible for a sleep and respiratory business, where he led a team of 500 sales and support personnel across multiple sales channels. From July 2017 to September 2019, he served as Business Segment Leader for RespirTech, a U.S.-based provider of an in-home wearable treatment for patients with chronic respiratory conditions, which was acquired by Philips in 2017. Mr. Pauls was Vice President of Sales for Key Accounts from January 2015 to June 2017 and Director of Sales for National Accounts from July 2012 to January 2014, leading targeted sales teams within Philips’ Sleep and Respiratory Care business. He joined Philips Respironics as a Technical Sales Specialist in 2002, and was subsequently promoted to multiple positions within its sales organization over the following decade. Mr. Pauls holds a M.B.A. from Baker University and a B.S. in Respiratory Care from the University of Kansas.
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Corporate Governance
Our board of directors has adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees. This code is available on the corporate governance section of our website (which is a subsection of the investor relations section of our website) at the following address: www.tactilemedical.com. We intend to disclose on our website any amendments or waivers to the Code that are required to be disclosed by SEC rules.
Other Information
Additional information required by this Item 10 will be contained in our definitive proxy statement for our 2023 Annual Meeting of Stockholders (the “Definitive Proxy Statement”) and is incorporated herein by reference.
Item 11. Executi ve Compensation.
The information required by this Item 11 will be contained in the Definitive Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters.
The information required by this Item 12 will be contained in the Definitive Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 will be contained in the Definitive Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accou ntant Fees and Services.
The information required by this Item 14 will be contained in the Definitive Proxy Statement and is incorporated herein by reference.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
1. Financial Statements
The following financial statements of Tactile Systems Technology, Inc. are set forth in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020
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
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Not applicable.
3. Exhibits
A list of exhibits required to be filed as part of this report is set forth in the Exhibit Index below.
EXHIBIT INDEX
Incorporated by Reference
Exhibit
Exhibit
Filed
Number
Description of Exhibit
Form
Date of Filing
Number
Herewith
2.1
Asset Purchase Agreement, dated as of September 8, 2021, among Tactile Systems Technology, Inc., International Biophysics Corporation and H. David Shockley, Jr.
8-K
09/08/2021
2.1
2.2
Amendment to Asset Purchase Agreement,
dated as of November 4, 2022, by and
between Tactile Systems Technology, Inc. and
Movair, Inc. (f/k/a International Biophysics
Corporation)
10-Q
11/07/2022
2.1
3.1
Amended and Restated Certificate of Incorporation, as amended through May 9, 2019
8-K
05/09/2019
3.2
3.2
Amended and Restated Bylaws, effective
D ecember 19, 2022
X
4.1
Description of the Registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934
10-K
02/23/2022
4.1
4.2
Specimen Certificate representing shares of common stock
S-1
05/06/2016
4.1
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4.3
Form of Senior Indenture
S-3
01/18/2023
4.3
4.4
Form of Subordinated Indenture
S-3
01/18/2023
4.4
10.1*
2007 Omnibus Stock Plan
S-1
01/25/2016
10.5
10.2*
Form of Incentive Stock Option Agreement under 2007 Omnibus Stock Plan
S-1
01/25/2016
10.6
10.3*
Form of Non-Statutory Stock Option Agreement (Employee) under 2007 Omnibus Stock Plan
S-1
01/25/2016
10.7
10.4*
Form of Non-Statutory Stock Option Agreement (Directors) under 2007 Omnibus Stock Plan
S-1
01/25/2016
10.8
10.5*
Form of Non-Statutory Stock Option Agreement (Consultants) under 2007 Omnibus Stock Plan
S-1
01/25/2016
10.9
10.6*
Form of Restricted Stock Agreement
S-1
01/25/2016
10.10
10.7*
2016 Equity Incentive Plan
S-1
06/09/2016
10.11
10.8*
Form of Non-Qualified Stock Option Agreement under 2016 Equity Incentive Plan
S-1
06/09/2016
10.12
10.9*
Form of Non-Qualified Stock Option Agreement under 2016 Equity Incentive Plan (to be used for awards beginning in 2020)
10-Q
05/04/2020
10.1
10.10*
Form of Incentive Stock Option Agreement under 2016 Equity Incentive Plan
S-1
06/09/2016
10.13
10.11*
Form of Incentive Stock Option Agreement under 2016 Equity Incentive Plan (to be used for awards beginning in 2020)
10-Q
05/04/2020
10.2
10.12*
Form of Restricted Stock Agreement under 2016 Equity Incentive Plan
S-1
06/09/2016
10.14
10.13*
Form of Restricted Stock Unit Award Agreement under 2016 Equity Incentive Plan
S-1
06/09/2016
10.15
10.14*
Form of Restricted Stock Unit Aw ard Agreement under 2016 Equity Incentive Plan (to be used for awards beginning in 2019)
10-Q
05/06/2019
10.3
10.15*
Form of Restricted Stock Unit Aw ard Agreement under 2016 Equity Incentive Plan (to be used for awards beginning in 2020)
10-Q
05/04/2020
10.3
10.16*
Form of Restricted Stock Unit Agreement under 2016 Equity Incentive Plan (Quarterly Awards)
S-1
06/09/2016
10.16
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10.17*
Form of Performance Stock Unit Agreement under the 2016 Equity Incentive Plan to be used for awards beginning in 2018
8-K
02/27/2018
10.1
10.18*
Form of Performance Stock Unit Award Agreement under 2016 Equity Incentive Plan (to be used for awards beginning in 2019)
10-Q
05/06/2019
10.4
10.19*
Form of Performance Stock Unit Award Agreement under 2016 Equity Incentive Plan (to be used for awards beginning in 2020)
10-Q
05/04/2020
10.4
10.20*
Employee Stock Purchase Plan
S-1
06/09/2016
10.17
10.21*
First Declaration of Amendment to Employee Stock Purchase Plan
10-K
02/26/2018
10.18
10.22*
Management Incentive Plan
8-K
03/10/2017
10.1
10.23*
Non-Employee Director Compensation Policy
10-K
02/23/2022
10.23
10.24*
Form of Director and Officer Indemnification Agreement
S-1
05/06/2016
10.19
10.25*
Tactile Systems Technology, Inc. Executive Employee Severance Plan
10-Q
11/05/2018
10.2
10.26*
Form of Confidentiality, Assignment of Intellectual Property and Restrictive Covenants Agreement
10-Q
11/05/2018
10.3
10.27*
Offer letter between Daniel L. Reuvers and Tactile Systems Technology, Inc. dated May 20, 2020
8-K
05/22/2020
10.1
10.28*
Transition and Consulting Agreement, dated as of January 10, 2020, by and between Gerald R. Mattys and Tactile Systems Technology, Inc.
8-K
01/13/2020
10.1
10.29*
Offer letter between Eric Pauls and Tactile Systems Technology, Inc. dated April 19, 2021
10-K
02/23/2022
10.29
10.30*
Offer letter between Kristie Burns and Tactile Systems Technology, Inc. dated February 1, 2021
10-K
02/23/2022
10.30
10.31
Credit Agreement, dated as of August 3, 2018, by and among Tactile Systems Technology, Inc., the lenders from time to time party thereto and Wells Fargo Bank, National Association
10-Q
08/06/2018
10.1
10.32
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
10-K
02/28/2019
10.33
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10.33
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
10-Q
05/06/2019
10.2
10.34
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
10-Q
11/04/2019
10.1
10.35
Amended and Restated Credit Agreement, dated as of April 30, 2021, by and among Tactile Systems Technology, Inc., the lenders from time to time party thereto and Wells Fargo Bank, National Association, as Administrative Agent
10-Q
05/03/2021
10.1
10.36
First Amendment Agreement, dated as of September 8, 2021, among Tactile Systems Technology, Inc., the lenders signatory thereto and Wells Fargo Bank, National Association, as administrative agent
8-K
09/08/2021
10.1
10.37
Second Amendment Agreement, dated as of February 22, 2022, among Tactile Systems Technology, Inc., the lenders signatory thereto and Wells Fargo Bank, National Association, as administrative agent
10-K
02/23/2022
10.37
21.1
Subsidiaries
S-1
01/25/2016
21.1
23.1
Consent of Grant Thornton LLP
X
24.1
Power of Attorney (included in signature page)
X
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934, as amended
X
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934, as amended
X
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
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101.1
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, (iv) Statements of Stockholders’ Equity, (v) Statements of Cash Flows, and (vi) Notes to the Financial Statements
X
104.1
Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1)
X
*
Indicates management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
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SIGNATURE S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Tactile Systems Technology, Inc.
Date: February 21, 2023
By:
/s/ Daniel L. Reuvers
Daniel L. Reuvers
Chief Executive Officer
(Principal executive officer)
Each of the undersigned hereby appoints Daniel L. Reuvers and Brent A. Moen, and each of them (with full power to act alone), as attorneys and agents for the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to sign and file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, any and all amendments and exhibits to this annual report on Form 10-K and any and all applications, instruments and other documents to be filed with the Securities and Exchange Commission pertaining to this annual report on Form 10-K or any amendments thereto, with full power and authority to do and perform any and all acts and things whatsoever requisite and necessary or desirable. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 21, 2023.
Name
Title
/s/ Daniel L. Reuvers
Chief Executive Officer (principal executive officer) and Director
Daniel L. Reuvers
/s/ Brent A. Moen
Chief Financial Officer (principal financial officer and principal
Brent A. Moen
accounting officer)
/s/ William W. Burke
Chairman of the Board of Directors
William W. Burke
/s/ Valerie L. Asbury
Director
Valerie L. Asbury
/s/ Sheri L. Dodd
Director
Sheri L. Dodd
/s/ Raymond O. Huggenberger
Director
Raymond O. Huggenberger
/s/ Deepti Jain
Director
Deepti Jain
/s/ D. Brent Shafer
Director
D. Brent Shafer
/s/ Carmen B. Volkart
Director
Carmen B. Volkart
130
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.