UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37799

Tactile Systems Technology, Inc.

(Exact name of registrant as specified in its charter)

Delaware	3701 Wayzata Blvd, Suite 300	41-1801204
(State or other jurisdiction of incorporation or organization)	Minneapolis, Minnesota 55416	(I.R.S. Employer Identification No.)
	(Address and zip code of principal executive offices)
	(612) 355-5100
	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 Per Share	TCMD	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑  No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☑  No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	◻	Non-accelerated filer	◻
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☑

19,413,004 shares of common stock, par value $0.001 per share, were outstanding as of July 31, 2020.

TABLE OF CONTENTS

	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40

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Forward-Looking Information

All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition, are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "target," "ongoing," "plan," "potential," "predict," "project," "should," "will," "would," or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Quarterly Report on Form 10-Q. These risks, uncertainties and other factors include, but are not limited to:

● the impacts of the COVID-19 pandemic on our business, financial condition and results of operations, and our inability to mitigate such impacts;

● the adequacy of our liquidity to pursue our business objectives;

● our ability to obtain reimbursement from third party payers for our products;

● our Chief Executive Officer transition, including disruptions and uncertainties related thereto, the potential impact on our business and future strategic direction resulting from our transition to a new Chief Executive Officer and our ability to retain other key members of senior management;

● loss or retirement of key executives;

● adverse economic conditions or intense competition;

● loss of a key supplier;

● entry of new competitors and products;

● adverse federal, state and local government regulation;

● technological obsolescence of our products;

● technical problems with our research and products;

● our ability to expand our business through strategic acquisitions;

● our ability to integrate acquisitions and related businesses;

● price increases for supplies and components;

● the effects of current and future U.S. and foreign trade policy and tariff actions; and

● the inability to carry out research, development and commercialization plans.

You should read the matters described in "Risk Factors" and the other cautionary statements made in our Annual Report on Form 10-K for the year ended December 31, 2019, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in this Quarterly Report on Form 10-Q. We cannot assure you that the forward-looking statements in this report will prove to be accurate and therefore you are encouraged not to place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. You are urged to carefully review and consider the various disclosures made by us in this report and in other filings with the

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Securities and Exchange Commission (the “SEC”) that advise of the risks and factors that may affect our business. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Tactile Systems Technology, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
	June 30,		December 31,
(In thousands, except share and per share data)	2020		2019
Assets
Current assets
Cash and cash equivalents	$	31,341	$	22,770
Marketable securities		6,013		22,464
Accounts receivable		30,552		33,444
Net investment in leases		8,689		8,147
Inventories		24,826		19,059
Income taxes receivable		960		—
Prepaid expenses and other current assets		2,195		2,451
Total current assets		104,576		108,335
Non-current assets
Property and equipment, net		7,009		7,408
Right of use operating lease assets		15,126		15,885
Intangible assets, net		1,674		5,312
Accounts receivable, non-current		5,881		4,184
Deferred income taxes		4,745		8,970
Other non-current assets		2,519		1,658
Total non-current assets		36,954		43,417
Total assets	$	141,530	$	151,752
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	5,686	$	3,843
Accrued payroll and related taxes		6,971		10,098
Accrued expenses		3,743		4,498
Income taxes payable		—		632
Operating lease liabilities		1,508		1,454
Other current liabilities		2,578		903
Total current liabilities		20,486		21,428
Non-current liabilities
Accrued warranty reserve, non-current		2,861		2,541
Income taxes, non-current		—		54
Operating lease liabilities, non-current		14,798		15,134
Total non-current liabilities		17,659		17,729
Total liabilities		38,145		39,157
Commitments and Contingencies (see Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of June 30, 2020 and December 31, 2019		—		—
Common stock, $0.001 par value, 300,000,000 shares authorized; 19,411,404 shares issued and outstanding as of June 30, 2020; 19,152,715 shares issued and outstanding as of December 31, 2019		19		19
Additional paid-in capital		97,818		91,874
Retained earnings		5,519		20,676
Accumulated other comprehensive income		29		26
Total stockholders’ equity		103,385		112,595
Total liabilities and stockholders’ equity	$	141,530	$	151,752

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Tactile Systems Technology, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except share and per share data)	2020		2019		2020		2019
Revenue
Sales revenue	$	29,518	$	38,790	$	67,141	$	69,621
Rental revenue		5,602		6,410		11,654		13,196
Total revenue		35,120		45,200		78,795		82,817
Cost of revenue
Cost of sales revenue		8,388		11,586		19,310		20,998
Cost of rental revenue		1,820		2,109		3,500		4,056
Total cost of revenue		10,208		13,695		22,810		25,054
Gross profit
Gross profit - sales revenue		21,130		27,204		47,831		48,623
Gross profit - rental revenue		3,782		4,301		8,154		9,140
Gross profit		24,912		31,505		55,985		57,763
Operating expenses
Sales and marketing		17,398		18,418		40,368		35,809
Research and development		1,105		1,234		2,789		2,515
Reimbursement, general and administrative		14,372		8,811		25,242		18,205
Total operating expenses		32,875		28,463		68,399		56,529
(Loss) income from operations		(7,963)		3,042		(12,414)		1,234
Other income		36		165		302		332
(Loss) income before income taxes		(7,927)		3,207		(12,112)		1,566
Income tax expense (benefit)		5,923		422		3,045		(2,691)
Net (loss) income	$	(13,850)	$	2,785	$	(15,157)	$	4,257
Net (loss) income per common share
Basic	$	(0.72)	$	0.15	$	(0.79)	$	0.23
Diluted	$	(0.72)	$	0.14	$	(0.79)	$	0.22
Weighted-average common shares used to compute net (loss) income per common share
Basic		19,337,644		18,881,526		19,255,612		18,814,511
Diluted		19,337,644		19,591,129		19,255,612		19,619,213

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Tactile Systems Technology, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2020		2019		2020		2019
Net (loss) income	$	(13,850)	$	2,785	$	(15,157)	$	4,257
Other comprehensive (loss) income:
Unrealized (loss) gain on marketable securities		(36)		34		(7)		64
Income tax related to items of other comprehensive (loss) income		27		(9)		10		(16)
Total other comprehensive (loss) income		(9)		25		3		48
Comprehensive (loss) income	$	(13,859)	$	2,810	$	(15,154)	$	4,305

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Tactile Systems Technology, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
								Accumulated
				Additional				Other
	Common Stock			Paid-In		Retained		Comprehensive
(In thousands, except share data)	Shares	Par Value		Capital		Earnings		(Loss) Income		Total
Balances, March 31, 2020	19,226,665	$	19	$	93,614	$	19,369	$	38	$	113,040
Stock-based compensation	—		—		2,396		—		—		2,396
Exercise of common stock options and vesting of restricted stock units	148,898		—		376		—		—		376
Taxes paid for net share settlement of restricted stock units	(7,812)		—		(393)		—		—		(393)
Common shares issued for employee stock purchase plan	43,653		—		1,825		—		—		1,825
Comprehensive loss for the period	—		—		—		(13,850)		(9)		(13,859)
Balances, June 30, 2020	19,411,404	$	19	$	97,818	$	5,519	$	29	$	103,385
Balances, December 31, 2019	19,152,715	$	19	$	91,874	$	20,676	$	26	$	112,595
Stock-based compensation	—		—		5,124		—		—		5,124
Exercise of common stock options and vesting of restricted stock units	245,084		—		548		—		—		548
Taxes paid for net share settlement of restricted stock units	(30,048)		—		(1,553)		—		—		(1,553)
Common shares issued for employee stock purchase plan	43,653		—		1,825		—		—		1,825
Comprehensive (loss) income for the period	—		—		—		(15,157)		3		(15,154)
Balances, June 30, 2020	19,411,404	$	19	$	97,818	$	5,519	$	29	$	103,385
Balances, March 31, 2019	18,818,692	$	19	$	80,788	$	11,177	$	15	$	91,999
Stock-based compensation	—		—		2,274		—		—		2,274
Exercise of common stock options and vesting of restricted stock units	105,830		—		681		—		—		681
Taxes paid for net share settlement of restricted stock units	(10,996)		—		(608)		—		—		(608)
Common shares issued for employee stock purchase plan	43,386		—		1,852		—		—		1,852
Comprehensive income for the period	—		—		—		2,785		25		2,810
Balances, June 30, 2019	18,956,912	$	19	$	84,987	$	13,962	$	40	$	99,008
Balances, December 31, 2018	18,631,125		19		79,554		9,705		(8)		89,270
Stock-based compensation	—		—		5,057		—		—		5,057
Exercise of common stock options and vesting of restricted stock units	337,644		—		1,542		—		—		1,542
Taxes paid for net share settlement of restricted stock units	(55,243)		—		(3,018)		—		—		(3,018)
Common shares issued for employee stock purchase plan	43,386		—		1,852		—		—		1,852
Comprehensive income for the period	—		—		—		4,257		48		4,305
Balances, June 30, 2019	18,956,912	$	19	$	84,987	$	13,962	$	40	$	99,008

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Tactile Systems Technology, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
	Six Months Ended June 30,
(In thousands)	2020		2019
Cash flows from operating activities
Net (loss) income	$	(15,157)	$	4,257
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		1,450		1,978
Net amortization of premiums and discounts on securities available-for-sale		(89)		(145)
Deferred income taxes		4,282		(1,552)
Stock-based compensation expense		5,124		5,057
Gain on maturities of marketable securities		40		—
Impairment losses		4,025		—
Changes in assets and liabilities:
Accounts receivable		2,892		(426)
Net investment in leases		(542)		(5,869)
Inventories		(5,945)		(1,976)
Income taxes		(1,646)		(1,458)
Prepaid expenses and other assets		(317)		15
Right of use operating lease assets		135		(12)
Medicare accounts receivable, non-current		(1,697)		(725)
Accounts payable		1,602		1,637
Accrued payroll and related taxes		(3,127)		(415)
Accrued expenses and other liabilities		990		485
Net cash (used in) provided by operating activities		(7,980)		851
Cash flows from investing activities
Proceeds from maturities of securities available-for-sale		16,500		11,500
Purchases of securities available-for-sale		—		(5,929)
Purchases of property and equipment		(660)		(1,760)
Intangible assets costs		(109)		(97)
Net cash provided by investing activities		15,731		3,714
Cash flows from financing activities
Taxes paid for net share settlement of restricted stock units		(1,553)		(3,018)
Proceeds from exercise of common stock options		548		1,542
Proceeds from the issuance of common stock from the employee stock purchase plan		1,825		1,852
Net cash provided by financing activities		820		376
Net increase in cash and cash equivalents		8,571		4,941
Cash and cash equivalents – beginning of period		22,770		20,099
Cash and cash equivalents – end of period	$	31,341	$	25,040
Supplemental cash flow disclosure
Cash paid for taxes	$	475	$	322
Capital expenditures incurred but not yet paid	$	241	$	136

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Tactile Systems Technology, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Nature of Business and Operations

Tactile Systems Technology, Inc. (“we,” “us,” and “our”) is the sole manufacturer and distributor of the Flexitouch® and Entre™ systems, medical devices that help control symptoms of lymphedema, a chronic and progressive medical condition, and the Airwear wrap, a medical device used for the management of venous insufficiency, venous hypertension, venous ulcerations and lymphedema. Our products are purchased or rented for at-home use and are recommended by vascular, wound and lymphedema clinics throughout the United States.

We were originally incorporated in Minnesota under the name Tactile Systems Technology, Inc. on January 30, 1995. During 2006, we established a merger corporation and subsequently, on July 21, 2006, merged with and into this merger corporation, resulting in our reincorporation as a Delaware corporation. The resulting corporation assumed the name Tactile Systems Technology, Inc. In September 2013, we began doing business as “Tactile Medical”.

On August 2, 2016, we closed the initial public offering of our common stock, which resulted in the sale of 4,120,000 shares of our common stock at a public offering price of $10.00 per share. We received net proceeds from the initial public offering of approximately $35.4 million, after deducting underwriting discounts and approximately $2.9 million of transaction expenses. In connection with the closing of the initial public offering, all of our outstanding redeemable convertible preferred stock automatically converted to common stock on August 2, 2016. As a result, at August 2, 2016, we did not have any redeemable convertible preferred stock issued or outstanding.

Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher revenue in the third and fourth quarters of the year when patients have met their annual insurance deductibles, thereby reducing their out-of-pocket costs for our products, and because patients desire to exhaust their flexible spending accounts at year end. This seasonality applies only to purchases and rentals of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of our products. Further, seasonality trends in 2020 may be significantly different than in prior years as a result of the COVID-19 pandemic and related impacts.

Note 2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included.

The results for the six months ended June 30, 2020, are not necessarily indicative of results to be expected for the year ending December 31, 2020, or for any other interim period or for any future year. The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

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Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc. All intercompany balances and transactions have been eliminated in consolidation.

Risks and Uncertainties

Coronavirus (COVID-19)

The United States economy in general and our business specifically have been negatively affected by the COVID-19 pandemic. There are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it. For that reason, we are unable to reasonably estimate the long-term impact of the pandemic on our business at this time. Our first priority with regard to the COVID-19 pandemic is to ensure the safety and health of our employees, clinicians and patients. Subject to that, we are focusing our efforts on attempting to continue our business operations in this unprecedented environment. Part of our strategy includes changing many of our processes and practices in an effort to help mitigate the impact of COVID-19 on our business so that we can support our clinicians and safely make our at-home therapies available to patients. Since the onset of COVID-19, we have remained proactive to ensure we continue to adapt to our employees, clinicians and patients needs.  These changes to our business include, but are not limited to:

● Initially, we modified our operations  with the primary focus on keeping our employees safe while continuing to serve our clinicians and patients. As an essential business under federal guidelines, we continued to manufacture product and implemented multiple, smaller rotational shifts and other best practices to help protect the health and safety of our workforce. More recently, we have migrated closer to our pre-COVID work shifts, however we have implemented more stringent safety measures including mandatory use of face masks, social distancing and temperature checks for our employees.

● We have continued to incorporate remote and flexible work arrangements for employees whenever possible, including real-time, online training of our new sales representatives.

● Continuing employee travel and contact restrictions to reduce exposure.

● Collaborating with payers to modify coverage requirements by serving patients virtually.

● In concert with COVID-19 social distancing requirements and recommendations, we moved to a “no contact” virtual patient training model. This new model substantially reduced the need for in-person contact and visits to patients’ homes and clinics in order to protect the health and limit the exposure of both our trainers and patients. Accordingly in the second quarter of 2020, we inactivated our independent healthcare practitioners, who acted as at-home trainers to educate patients on the proper use of our systems, in order to allow these individuals to have access to specific COVID related financial relief.

● We continue to transition large, in-person medical education programs in favor of conducting virtual meetings whenever possible.

● When in-person visits are required, we are supporting clinicians and patients by using rigorous infection control practices.

We cannot assure you that these changes to our processes and practices will be successful in mitigating the impact of COVID-19 on our business. We continue to evaluate and, if appropriate, will adopt other measures in the future related to the ongoing safety of our employees, clinicians and patients.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive (Loss) Income

Comprehensive (loss) income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive (loss) income represents net (loss) income adjusted for unrealized gains and losses on available-for-sale marketable securities and the related taxes.

Note 3. Summary of Significant Accounting Policies

Significant Accounting Policies

There were no material changes in our significant accounting policies during the six months ended June 30, 2020, except as set forth below. See Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, for information regarding our significant accounting policies.

Impairment of Long-Lived Assets

We review long-lived assets, including property and equipment and patents, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. We assess long-lived assets used in operations for impairment indicators, including when undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.

In the second quarter of 2020, we reevaluated the Airwear wrap go-to market plan, and determined to focus our strategy on more advanced solutions within our core, long-standing Flexitouch and Entre franchises. Accordingly, we made the strategic decision to discontinue the Airwear wrap in the second quarter of 2020. Due to the planned discontinuation of the product line, we recorded a $4.0 million non-cash impairment charge to fully write-off the inventory and long-lived assets of the Airwear wrap in the quarter ended June 30, 2020. The majority of the impairment charge was comprised of the intangible assets and property and equipment, totaling $3.6 million, and was classified within the reimbursement, general and administrative line of the Condensed Consolidated Statements of Operations. The inventory-related component of the impairment charge was $0.4 million, and was classified within the cost of revenue line of the Condensed Consolidated Statements of Operations.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments — Credit Losses” (“ASU 2016-13”), which introduced a new model for recognizing credit losses on financial instruments based on an estimate of the current expected credit losses. The new current expected credit losses (“CECL”) model generally calls for the immediate recognition of all expected credit losses and applies to financial instruments and other assets, including accounts receivable and other financial assets measured at amortized cost, debt securities and other financial assets. This guidance replaces the previous incurred loss model for measuring expected credit losses and requires expected losses on available-for-sale debt securities to be recognized through an allowance for credit losses rather than as reductions in the amortized cost of the securities. We adopted ASU 2016-13 as of January 1, 2020, and it did not have an impact on the condensed consolidated financial statements.

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Accounting Pronouncements Issued Not Yet Adopted

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740) — Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects of the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the applicability and impact of the standard on our condensed consolidated financial statements and related disclosures.  

Note 4. Marketable Securities

Our investments in marketable securities, all of which have original contractual maturities of less than twelve months, are classified as available-for-sale and consist of the following:

	At June 30, 2020
	Amortized		Unrealized				Fair
(In thousands)	Cost		Gains		Losses		Value
U.S. government and agency obligations	$	5,999	$	14	$	—	$	6,013
Corporate debt securities		—		—		—		—
Marketable securities	$	5,999	$	14	$	—	$	6,013

	At December 31, 2019
	Amortized		Unrealized				Fair
(In thousands)	Cost		Gains		Losses		Value
U.S. government and agency obligations	$	19,950	$	14	$	1	$	19,963
Corporate debt securities		2,493		8		—		2,501
Marketable securities	$	22,443	$	22	$	1	$	22,464

Net pre-tax unrealized gains for marketable securities at June 30, 2020, were recorded as a component of accumulated other comprehensive income in stockholders' equity. There were no sales of marketable securities during the six months ended June 30, 2020.

There were no marketable securities in an unrealized loss position at June 30, 2020.

At December 31, 2019, unrealized losses and the fair value of marketable securities aggregated by investment category and the length of time the securities were in a continuous loss position, were as follows:

	At December 31, 2019
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. government and agency obligations	$	5,997	$	1	$	—	$	—	$	5,997	$	1
Corporate debt securities		—		—		—		—		—		—
Marketable securities	$	5,997	$	1	$	—	$	—	$	5,997	$	1

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Note 5. Inventories

Inventories consisted of the following:

(In thousands)	At June 30, 2020		At December 31, 2019
Finished goods	$	9,730	$	6,508
Component parts and work-in-process		15,096		12,551
Total inventories	$	24,826	$	19,059

Note 6. Intangible Assets

Our patents and other intangible assets are summarized as follows: