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Commitments and Contingencies | 3 Months Ended
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Mar. 31, 2023
Commitments and Contingencies |
Commitments and Contingencies | Note 10. Commitments and Contingencies Lease Obligations We lease property and equipment under operating leases, typically with terms greater than 12 months, and determine if an arrangement contains a lease at inception. In general, an arrangement contains a lease if there is an identified asset and we have the right to direct the use of and obtain substantially all of the economic benefit from the use of the identified asset. We record an operating lease liability at the present value of lease payments over the lease term on the commencement date. The related right of use (“ROU”) operating lease asset reflects rental escalation clauses, as well as renewal options and/or termination options. The exercise of lease renewal and/or termination options are at our discretion and are included in the determination of the lease term and lease payment obligations when it is deemed reasonably certain that the option will be exercised. When available, we use the rate implicit in the lease to discount lease payments to present value; however, certain leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. We classify our leases as buildings, vehicles or computer and office equipment and do not separate lease and nonlease components of contracts for any of the aforementioned classifications. In accordance with applicable guidance, we do not record leases with terms that are less than one year on the Condensed Consolidated Balance Sheets. None of our lease agreements contain material restrictive covenants or residual value guarantees. Buildings We lease certain office and warehouse space at various locations in the United States where we provide services. These leases are typically greater than one year with fixed, escalating rents over the noncancelable terms and, therefore, ROU operating lease assets and operating lease liabilities are recorded on the Condensed Consolidated Balance Sheets, with rent expense to be recognized on a straight-line basis over the term of the lease. The remaining lease terms vary from approximately one to eight years as of March 31, 2023. We entered into a lease (“initial lease”) in October 2018, for approximately 80,000 square feet of office space for our new corporate headquarters in Minneapolis, Minnesota. In December 2018, we amended the initial lease to add approximately 29,000 square feet of additional office space, which is accounted for as a separate lease (“second lease”) in accordance with ASU No. 2016-02, “Leases” (Topic 842) (“ASC 842”). In December 2019, we further amended the lease which extended the expiration date of the initial lease, extended the expiration date of and added approximately 4,000 square feet to the second lease, as well as added approximately 37,000 square feet of additional office space, accounted for as a separate lease (“third lease”) in accordance with ASC 842. The portion of the space covered under the initial lease was placed in service in September 2019. This portion was recognized as an operating lease and included in the ROU operating lease assets and operating lease liabilities on the Condensed Consolidated Balance Sheets. The portion of the space covered under the second lease commenced in September 2020. Finally, the portion of the space covered under the third lease commenced in September 2021. Vehicles We lease vehicles for certain members of our field sales organization under a vehicle fleet program whereby the initial, noncancelable lease is for a term of 367 days, thus more than one year. Subsequent to the initial term, the lease becomes a month-to-month, cancelable lease. In addition to monthly rental fees specific to the vehicle, there are fixed monthly nonlease components that have been included in the ROU operating lease assets and operating lease liabilities. The nonlease components are not significant. As of March 31, 2023, we no longer have any vehicles with agreements within the initial, noncancelable lease term that are recorded as ROU operating lease assets and operating lease liabilities. Computer and Office Equipment We also have operating lease agreements for certain computer and office equipment. The remaining lease terms as of March 31, 2023, ranged from less than one year to approximately three years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities. The leases provide an option to purchase the related equipment at fair market value at the end of the lease. The leases will automatically renew as a month-to-month rental at the end of the lease if the equipment is not purchased or returned. ​ Lease Position, Undiscounted Cash Flow and Supplemental Information The table below presents information related to our ROU operating lease assets and operating lease liabilities that we have recorded: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
(In thousands) |  | At March 31, 2023 |  | At December 31, 2022
Right of use operating lease assets | ​ | $ | 20,633 | ​ | $ | 21,322
​ | ​ | ​ | ​ | ​ | ​ | ​
Operating lease liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Current | ​ | $ | 2,509 | ​ | $ | 2,500
Non-current | ​ |  | 20,239 | ​ |  | 20,866
Total | ​ | $ | 22,748 | ​ | $ | 23,366
​ | ​ | ​ | ​ | ​ | ​ | ​
Operating leases: | ​ | ​ | ​ | ​ | ​ | ​
Weighted average remaining lease term | ​ |  | 7.5 years | ​ | ​ | 7.7 years
Weighted average discount rate | ​ | ​ | 4.2% | ​ | ​ | 4.2%
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended March 31,
​ | ​ | 2023 | ​ | 2022
Supplemental cash flow information for our operating leases: | ​ | ​ | ​ | ​ | ​ | ​
Cash paid for operating lease liabilities | ​ | $ | 860 | ​ | $ | 918
Non-cash right of use assets obtained in exchange for new operating lease obligations | ​ | $ | — | ​ | $ | 41
​ The table below reconciles the undiscounted cash flows for the periods presented to the operating lease liabilities recorded on the Condensed Consolidated Balance Sheet for the periods presented: ​
​ | ​ | ​ | ​
(In thousands) | ​ | ​ | ​
2023 (April 1 - December 31) | ​ | $ | 2,566
2024 | ​ | ​ | 3,418
2025 | ​ |  | 3,518
2026 | ​ |  | 3,615
2027 | ​ |  | 3,167
Thereafter | ​ |  | 10,082
Total minimum lease payments | ​ | ​ | 26,366
Less: Amount of lease payments representing interest | ​ | ​ | (3,618)
Present value of future minimum lease payments | ​ | ​ | 22,748
Less: Current obligations under operating lease liabilities | ​ | ​ | (2,509)
Non-current obligations under operating lease liabilities | ​ | $ | 20,239
​ Operating lease costs were $0.9 million and $1.0 million for the three months ended March 31, 2023 and 2022, respectively. Major Vendors We had purchases from one vendor that accounted for 29% of our total purchases for the three months ended March 31, 2023, and purchases from two vendors that accounted for 29% of our total purchases for the three months ended March 31, 2022. Purchase Commitments We issued purchase orders prior to March 31, 2023, totaling $37.4 million for goods that we expect to receive within the next year. Retirement Plan We maintain a 401(k) retirement plan for our employees in which eligible employees can contribute a percentage of their pre-tax compensation. We recorded an expense related to our discretionary contributions to the 401(k) plan of $0.4 million for each of the three months ended March 31, 2023 and 2022. Legal Proceedings From time to time, we are subject to various claims and legal proceedings arising in the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. We and certain of our present or former officers have been sued in a purported securities class action lawsuit that was filed in the United States District Court for the District of Minnesota on September 29, 2020, and that is pending under the caption Brian Mart v. Tactile Systems Technology, Inc., et al., File No. 0:20-cv-02074-NEB-BRT (the “Mart Lawsuit”). On April 19, 2021, the plaintiff filed an Amended Complaint against us and eight of our present and former officers and directors. Plaintiff seeks to represent a class consisting of investors who purchased our common stock in the market during the time period from May 7, 2018 through June 8, 2020 (“alleged class period”). The Amended Complaint alleges the following claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”): (1) that we and certain officer defendants made materially false or misleading public statements about our business, operational and compliance policies, and results during the alleged class period in violation of Section 10(b) of the Exchange Act; (2) that we and the individual defendants engaged in a scheme to defraud investors in order to allow the individual defendants to sell our stock in violation of Section 10(b) of the Exchange Act; (3) that the individual defendants engaged in improper insider trading of our stock in violation of Section 20A of the Exchange Act; and (4) that we and the individual defendants are liable under Section 20(a) of the Exchange Act because each defendant is a controlling person. On June 18, 2021, we and the individual defendants filed a motion to dismiss the Amended Complaint. On March 31, 2022, the court granted in part, and denied in part, the defendants’ motion to dismiss. All claims against three individual defendants were dismissed, and most claims against four other individual defendants were dismissed. On November 21, 2022, the Company announced that it entered into a Memorandum of Understanding to settle this matter. The Company does not expect to fund any portion of cash payments made in connection with the $5 million settlement amount. The settlement does not constitute an admission of liability or wrongdoing by the Company. The settlement is subject to court approval. On February 28, 2023, the parties executed a stipulation of settlement and the plaintiff filed an unopposed motion for preliminary approval of the class settlement with the court. On April 26, 2023, the court issued a minute order indicating the motion would be approved and on May 4, 2023, issued the written order granting the motion for preliminary approval of the settlement. A hearing for final approval of the settlement will be held on August 23, 2023. On May 24, 2022, a stockholder derivative lawsuit was filed in the United States District Court for the District of Minnesota, purportedly on behalf of the Company against certain of our present and former officers and directors and the Company (as a nominal defendant), captioned Jack Weaver v. Moen, et al., File No. 0:22-cv-01403-NEB-BRT. This complaint generally arises out of the same subject matter as the Mart Lawsuit and alleges the following claims under the Exchange Act and common law: (1) that the director defendants made materially false or misleading public statements in proxy statements in violation of Section 14(a) of the Exchange Act; (2) that the director defendants’ stock and option awards should be rescinded under Section 29(b) of the Exchange Act; (3) that the officer defendants’ employment contract compensation should be rescinded under Section 29(b) of the Exchange Act; (4) that certain officer defendants are liable for contribution arising out of any liability incurred in the Mart Lawsuit, under Sections 10(b) and 21D of the Exchange Act; (5) that the individual defendants breached their fiduciary duties; and (6) that the individual defendants were unjustly enriched. The lawsuit seeks unspecified damages. In August 2022, the matter was transferred to the United States District Court for the District of Delaware by order granting the Parties Stipulation to Transfer. On February 10, 2023, we filed a motion to dismiss the action. The plaintiff filed an Amended Complaint on March 3, 2023. On March 31, 2023, we filed a motion to dismiss the Amended Complaint. We are defending the action as it proceeds.

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