What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-19 compared with 2020-03-12 · 38 added, 43 removed, 217 unchanged (27% of the section changed)

2 unchanged sentences

As of December 31, 2020, the Company’s management, with participation of the Company’s President and Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e).

Based on that evaluation, the CEO and CFO concluded that the Companys disclosure controls and procedures were not effective as of December 31, 2019 solely due to the material weakness in our internal control over financial reporting related to the third-party valuation of our convertible debt as described below.

Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2020, at the reasonable assurance level.

Internal Control

13 unchanged sentences

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Based on our evaluation under the framework in COSO ICF, our management concluded that our internal control over financial reporting was not effective as of December 31, 2019 solely due to a material weakness in our internal control over financial reporting related to the valuation of our convertible debt as described below.

In conducting management's evaluation as described above, Solace was excluded.

The operations of Solace excluded from management's assessment of internal control over financial reporting, represent approximately 0.8% of the Company's consolidated revenues and approximately 2.5% of total assets as of December 31, 2019.

During the preparation of our annual financial statements and the conduct of the annual financial statements audit, management identified a material weakness in our internal control over financial reporting relating to oversight

and review of the work of the third-party valuation specialists retained to conduct the valuation of our convertible debt issued in the third quarter of 2019 which contains an equity classified embedded derivative.

This material weakness resulted in errors in our financial statements and related disclosures related to the valuation of our convertible debt as of and for the quarter ended September 30, 2019.

As a result, the debt discount on our convertible debt was increased by $32 million as of and for the quarter ended December 31, 2019 with an offset to additional paid-in-capital and deferred income taxes, which debt discount will be amortized to interest expense over the life of the loan.

To remediate the material weakness, we have subsequently enhanced the design and expanded our management review controls around the use of third-party valuation specialists.

Specifically, management has implemented procedures to review the qualifications of third-party valuation specialists and to perform additional steps to evaluate and accept the work product of such specialists.

The remediation was complete and deemed effective as of March 6, 2020.

Based on our evaluation under the framework in COSO ICIF, our management concluded that our internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2020.

In conducting management’s evaluation as described above, ReCreation was excluded.

The operations of ReCreation excluded from management’s assessment of internal control over financial reporting, represent approximately 0% of the Company’s consolidated revenues and approximately 2% of total assets as of December 31, 2020.

Our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal controls over financial reporting and will not be required to do so for as long as we are an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act of 2012.

Changes in Internal Controls over Financial Reporting

Other than the steps taken to remediate the material described above under —Managements Report on Internal Control over Financial Reporting , management has determined that there were no changes in the Companys internal controls over financial reporting during the fiscal quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

Management has determined that there were no changes in the Company’s internal controls over financial reporting during the fiscal quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

/s/ Lawrence S.

5 unchanged sentences

Chief Accounting Officer

March 12, 2020

February 19, 2021

Other Information

10 unchanged sentences

Exhibits and Financial Statement Schedules

a) Financial Information

Financial Information

Financial Statements:

3 unchanged sentences

Exhibits – See (b) below

b) Exhibits Index to Exhibits

Index to Exhibits

International Vapor Group Stock Purchase Agreement dated as of September 5, 2018, between Turning Point Brands, Inc.

and International Vapor Group, LLC (incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 7, 2018).

Agreement and Plan of Merger and Reorganization, dated as of April 7, 2020, by and among TPB, SDI and Merger Sub.

(incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on April 8, 2020).

Second Amended and Restated Certificate of Incorporation of Turning Point Brands, Inc.

(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 16, 2016).

Amended and Restated By-laws (incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form S-1/A (File No.

333-207816) filed on November 24, 2015).

Second Amended and Restated By-laws (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on October 27, 2020).

Registration Rights Agreement of Turning Point Brands, Inc.

2 unchanged sentences

Description of Securities.

(incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K filed on March 12, 2020).

Indenture dated as of July 30, 2019, between Turning Point Brands, Inc.

1 unchanged sentence

Turning Point Brands, Inc.

2015 Equity Incentive Plan (the 2015 Plan) (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1/A

2015 Equity Incentive Plan (the “2015 Plan”) (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1/A (File No.

333-207816) filed on November 5, 2015).

30 unchanged sentences

Employment Agreement between Turning Point Brands, Inc.

and James Dobbins dated November 23, 2015 (incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed on May 16, 2016).

Employment Agreement between Turning Point Brands, Inc.

Lavan dated March 13, 2018 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 19, 2018).

1 unchanged sentence

and Swedish Match North America, Inc.

(incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1/A

(incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1/A (File No.

333-207816) filed on November 24, 2015).

65 unchanged sentences

and North Atlantic Operating Company, Inc.

(incorporated by reference to Exhibit 10.32 to the Registrant’s Registration Statement on Form S-1

(incorporated by reference to Exhibit 10.32 to the Registrant’s Registration Statement on Form S-1 (File No.

333-207816) filed on November 5, 2015).

12 unchanged sentences

First Lien Credit Agreement dated as of February 17, 2017, by and among Turning Point Brands, Inc., Fifth Third Bank, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 17, 2017).

Second Lien Credit Agreement dated as of February 17, 2017, by and among Turning Point Brands, Inc., as the Borrower, Prospect Capital Corporation, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 17, 2017).

First Lien Guaranty and Security Agreement dated as of February 17, 2017, by and among Turning Point Brands, Inc., Fifth Third Bank, and the lenders party thereto (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 17, 2017).

Second Lien Guaranty and Security Agreement dated as of February 17, 2017, by and among Turning Point Brands, Inc., Prospect Capital Corporation, and the lenders party thereto (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 17, 2017).

Intercreditor Agreement dated as of February 17, 2017, by and among Turning Point Brands, Inc., the other grantors party thereto, Fifth Third Bank, as first lien collateral agent, and Prospect Capital Corporation, as second lien collateral agent (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on February 17, 2017).

1 unchanged sentence

and its subsidiaries, as the obligors, Fifth Third Bank, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 8, 2018).

Amended and Restated Second Lien Credit Agreement, dated as of March 7, 2018, by and among Turning Point Brands, Inc.

and its subsidiaries, as obligors, Prospect Capital Corporation, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 8, 2018).

Omnibus Amendment, Reaffirmation Agreement and Joinder, dated as of March 7, 2018, by and among Turning Point Brands, Inc.

and its subsidiaries, as the Grantors, Fifth Third Bank, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on March 8, 2018).

Second Lien Omnibus Amendment, Reaffirmation Agreement and Joinder, dated as of March 7, 2018, by and among Turning Point Brands, Inc.

and its subsidiaries, as the Grantors, Fifth Third Bank, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on March 8, 2018).

First Amendment to Second Lien Intercreditor Agreement, dated as of March 7, 2018, by and among Turning Point Brands, Inc., and the other grantors party thereto, Fifth Third Bank, as first lien collateral agent, and Prospect Capital Corporation, as second lien collateral agent (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on March 8, 2018).

First Amendment to the First Lien Credit Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 10-Q for the period ended June 30, 2019).

Form of Capped Call Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 30, 2019).

Second Amendment to the First Lien Credit Agreement.

Second Amendment to the First Lien Credit Agreement (incorporated by reference to Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K filed on March 12, 2020)

Third Amendment to the First Lien Credit Agreement.

(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on April 28, 2020).

Release and Severance Agreement, dated August 19, 2020, by and among TPB and James W.

Dobbins, Senior Vice President and General Counsel.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on October 27, 2020).

Consulting Agreement dated August 19, 2020, but effective November 1, 2020, between Turning Point Brands, Inc.

and James Dobbins.

(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on October 27, 2020) †

Subsidiaries of Turning Point Brands, Inc.*

6 unchanged sentences

XBRL (eXtensible Business Reporting Language).

The following materials from Turning Point Brands, Inc.’s Annual Report on Form 10-K for the years ended December 31, 2019, 2018, and 2017, formatted in XBRL:

The following materials from Turning Point Brands, Inc.’s Annual Report on Form 10-K for the years ended December 31, 2020, 2019, and 2018, formatted in Inline XBRL:

(i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of changes in stockholder’s equity (deficit), (v) consolidated statements of cash flows, and (vi) notes to the consolidated financial statements.*

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).*

Filed herewith

2 unchanged sentences

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on March 12, 2020.

TURNING POINT BRANDS, INC.

9 unchanged sentences

Director, Chief Executive Officer

March 12, 2020

February 19, 2021

/s/ Robert Lavan

Chief Financial Officer

March 12, 2020

February 19, 2021

/s/ Brian Wigginton

Chief Accounting Officer

March 12, 2020

February 19, 2021

Brian Wigginton

1 unchanged sentence

Chairman of the Board of Directors

March 12, 2020

February 19, 2021

/s/ Gregory H.

March 12, 2020

February 19, 2021

/s/ Peggy Hebard

March 12, 2020

February 19, 2021

/s/ Arnold Zimmerman

March 12, 2020

February 19, 2021

Arnold Zimmerman

/s/ Ashley Davis Frushone

March 12, 2020

February 19, 2021

Ashley Davis Frushone

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