0001558370-20-012258.txt : 20201102 0001558370-20-012258.hdr.sgml : 20201102 20201102161330 ACCESSION NUMBER: 0001558370-20-012258 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 74 CONFORMED PERIOD OF REPORT: 20200930 FILED AS OF DATE: 20201102 DATE AS OF CHANGE: 20201102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TACTILE SYSTEMS TECHNOLOGY INC CENTRAL INDEX KEY: 0001027838 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37799 FILM NUMBER: 201280601 BUSINESS ADDRESS: STREET 1: 1331 TYLER STREET NE STE 200 CITY: MINNEAPOLIS STATE: MN ZIP: 55413 BUSINESS PHONE: 866-435-3948 MAIL ADDRESS: STREET 1: 1331 TYLER STREET NE STE 200 CITY: MINNEAPOLIS STATE: MN ZIP: 55413 10-Q 1 tcmd-20200930x10q.htm 10-Q
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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: September 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

19,424,679 shares of common stock, par value $0.001 per share, were outstanding as of October 30, 2020.

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, in our Quarterly Report on Form 10-Q for the quarter ended June 30, 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

3

various disclosures made by us in this report and in other filings with the 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.

4

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Tactile Systems Technology, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

    

September 30,

    

December 31,

(In thousands, except share and per share data)

    

2020

    

2019

Assets

Current assets

Cash and cash equivalents

$

42,204

$

22,770

Marketable securities

22,464

Accounts receivable

 

36,033

 

33,444

Net investment in leases

 

9,451

 

8,147

Inventories

 

22,419

 

19,059

Prepaid expenses and other current assets

 

4,003

 

2,451

Total current assets

 

114,110

 

108,335

Non-current assets

Property and equipment, net

 

7,177

 

7,408

Right of use operating lease assets

 

20,717

 

15,885

Intangible assets, net

 

1,671

 

5,312

Accounts receivable, non-current

 

7,100

 

4,184

Deferred income taxes

 

5,010

 

8,970

Other non-current assets

 

1,965

 

1,658

Total non-current assets

 

43,640

 

43,417

Total assets

$

157,750

$

151,752

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

5,053

$

3,843

Accrued payroll and related taxes

 

10,864

 

10,098

Accrued expenses

 

3,582

 

4,498

Income taxes payable

 

1,459

 

632

Operating lease liabilities

 

2,010

 

1,454

Other current liabilities

 

2,673

 

903

Total current liabilities

 

25,641

 

21,428

Non-current liabilities

Accrued warranty reserve, non-current

 

3,071

 

2,541

Income taxes, non-current

 

 

54

Operating lease liabilities, non-current

19,919

 

15,134

Total non-current liabilities

 

22,990

 

17,729

Total liabilities

 

48,631

 

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 September 30, 2020 and December 31, 2019

 

 

Common stock, $0.001 par value, 300,000,000 shares authorized; 19,424,679 shares issued and outstanding as of September 30, 2020; 19,152,715 shares issued and outstanding as of December 31, 2019

 

19

 

19

Additional paid-in capital

 

101,157

 

91,874

Retained earnings

 

7,943

 

20,676

Accumulated other comprehensive income

26

Total stockholders’ equity

 

109,119

 

112,595

Total liabilities and stockholders’ equity

$

157,750

$

151,752

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

5

Tactile Systems Technology, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands, except share and per share data)

    

2020

    

2019

    

2020

    

2019

Revenue

Sales revenue

$

42,573

$

42,882

$

109,714

$

112,503

Rental revenue

 

6,519

 

6,730

 

18,173

 

19,926

Total revenue

 

49,092

 

49,612

 

127,887

 

132,429

Cost of revenue

Cost of sales revenue

 

11,558

 

12,233

 

30,868

 

33,231

Cost of rental revenue

 

2,562

 

2,006

 

6,062

 

6,062

Total cost of revenue

 

14,120

 

14,239

 

36,930

 

39,293

Gross profit

Gross profit - sales revenue

 

31,015

 

30,649

 

78,846

 

79,272

Gross profit - rental revenue

 

3,957

 

4,724

 

12,111

 

13,864

Gross profit

 

34,972

 

35,373

 

90,957

 

93,136

Operating expenses

Sales and marketing

 

19,488

 

20,737

 

59,856

 

56,546

Research and development

 

1,102

 

1,467

 

3,891

 

3,982

Reimbursement, general and administrative

 

12,588

 

9,972

 

37,830

 

28,177

Total operating expenses

 

33,178

 

32,176

 

101,577

 

88,705

Income (loss) from operations

 

1,794

 

3,197

 

(10,620)

 

4,431

Other (expense) income

 

(121)

 

166

 

181

 

498

Income (loss) before income taxes

 

1,673

 

3,363

 

(10,439)

 

4,929

Income tax (benefit) expense

 

(751)

 

932

 

2,294

 

(1,759)

Net income (loss)

$

2,424

$

2,431

$

(12,733)

$

6,688

Net income (loss) per common share

Basic

$

0.12

$

0.13

$

(0.66)

$

0.35

Diluted

$

0.12

$

0.12

$

(0.66)

$

0.34

Weighted-average common shares used to compute net income (loss) per common share

Basic

19,415,640

18,981,015

19,309,344

18,870,622

Diluted

19,747,365

19,641,853

19,309,344

19,630,721

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

6

Tactile Systems Technology, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30, 

(In thousands)

    

2020

    

2019

    

2020

    

2019

Net income (loss)

$

2,424

$

2,431

$

(12,733)

$

6,688

Other comprehensive (loss) income:

 

  

 

  

 

  

 

  

Unrealized (loss) gain on marketable securities

 

(14)

 

(13)

 

(21)

 

51

Income tax related to items of other comprehensive (loss) income

 

(15)

 

4

 

(5)

 

(12)

Total other comprehensive (loss) income

 

(29)

 

(9)

 

(26)

 

39

Comprehensive income (loss)

$

2,395

$

2,422

$

(12,759)

$

6,727

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

7

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, June 30, 2020

19,411,404

$

19

$

97,818

$

5,519

$

29

$

103,385

Stock-based compensation

3,164

3,164

Exercise of common stock options and vesting of restricted stock units

14,322

214

214

Taxes paid for net share settlement of restricted stock units

(1,047)

(39)

(39)

Comprehensive income (loss) for the period

2,424

(29)

2,395

Balances, September 30, 2020

19,424,679

$

19

$

101,157

$

7,943

$

$

109,119

Balances, December 31, 2019

19,152,715

$

19

$

91,874

$

20,676

$

26

$

112,595

Stock-based compensation

8,288

8,288

Exercise of common stock options and vesting of restricted stock units

259,406

762

762

Taxes paid for net share settlement of restricted stock units

(31,095)

(1,592)

(1,592)

Common shares issued for employee stock purchase plan

43,653

1,825

1,825

Comprehensive loss for the period

(12,733)

(26)

(12,759)

Balances, September 30, 2020

19,424,679

$

19

$

101,157

$

7,943

$

$

109,119

Balances, June 30, 2019

18,956,912

$

19

$

84,987

$

13,962

$

40

$

99,008

Stock-based compensation

2,330

2,330

Exercise of common stock options and vesting of restricted stock units

60,833

296

296

Taxes paid for net share settlement of restricted stock units

(1,713)

(89)

(89)

Comprehensive income (loss) for the period

2,431

(9)

2,422

Balances, September 30, 2019

19,016,032

$

19

$

87,524

$

16,393

$

31

$

103,967

Balances, December 31, 2018

18,631,125

19

79,554

9,705

(8)

89,270

Stock-based compensation

7,387

7,387

Exercise of common stock options and vesting of restricted stock units

398,477

1,838

1,838

Taxes paid for net share settlement of restricted stock units

(56,956)

(3,107)

(3,107)

Common shares issued for employee stock purchase plan

43,386

1,852

1,852

Comprehensive income for the period

6,688

39

6,727

Balances, September 30, 2019

19,016,032

$

19

$

87,524

$

16,393

$

31

$

103,967

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

8

Tactile Systems Technology, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30, 

(In thousands)

    

2020

    

2019

Cash flows from operating activities

Net (loss) income

$

(12,733)

$

6,688

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization

2,102

2,808

Net amortization of premiums and discounts on securities available-for-sale

(91)

(225)

Deferred income taxes

3,934

(31)

Stock-based compensation expense

8,288

7,387

Gain on other investments and maturities of marketable securities

10

Impairment losses

4,025

Changes in assets and liabilities:

Accounts receivable

(2,589)

(3,349)

Net investment in leases

(1,304)

(7,628)

Inventories

(3,538)

(5,693)

Income taxes

773

(2,051)

Prepaid expenses and other assets

(1,553)

(418)

Right of use operating lease assets

509

107

Medicare accounts receivable, non-current

(2,916)

(1,141)

Accounts payable

938

979

Accrued payroll and related taxes

766

3,915

Accrued expenses and other liabilities

1,134

1,073

Net cash (used in) provided by operating activities

(2,245)

2,421

Cash flows from investing activities

Proceeds from maturities of securities available-for-sale

22,500

16,000

Purchases of securities available-for-sale

(14,859)

Purchases of property and equipment

(1,623)

(4,276)

Intangible assets costs

(163)

(154)

Other investments

(30)

Net cash provided by (used in) investing activities

20,684

(3,289)

Cash flows from financing activities

Taxes paid for net share settlement of restricted stock units

(1,592)

(3,107)

Proceeds from exercise of common stock options

762

1,838

Proceeds from the issuance of common stock from the employee stock purchase plan

1,825

1,852

Net cash provided by financing activities

995

583

Net increase (decrease) in cash and cash equivalents

19,434

(285)

Cash and cash equivalents – beginning of period

22,770

20,099

Cash and cash equivalents – end of period

$

42,204

$

19,814

Supplemental cash flow disclosure

Cash paid for taxes

$

475

$

326

Capital expenditures incurred but not yet paid

$

41

$

801

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

9

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. 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 nine months ended September 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.

10

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. We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols. 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.

11

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 Income (Loss)

Comprehensive income (loss) 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 income (loss) represents net income (loss) 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 nine months ended September 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.

12

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

There were no investments in marketable securities at September 30, 2020. At December 31, 2019 investments in marketable securities were classified as available-for-sale and consisted of the following:

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

There were no net pre-tax unrealized gains for marketable securities at September 30, 2020. There were no sales of marketable securities during the nine months ended September 30, 2020.

There were no marketable securities in an unrealized loss position at September 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

13

Note 5. Inventories

Inventories consisted of the following:

(In thousands)

    

At September 30, 2020

    

At December 31, 2019

Finished goods

$

9,287

$

6,508

Component parts and work-in-process

 

13,132

 

12,551

Total inventories

$

22,419

$

19,059

Note 6. Intangible Assets

Our patents and other intangible assets are summarized as follows:

Weighted-

At September 30, 2020

Average

Gross

Amortization

Carrying

Accumulated

Net

(In thousands)

    

Period

Amount

Amortization

Amount

Patents

12 years

$

388

$

55

$

333

Defensive intangible assets

4 years

1,125

378

747

Customer accounts

3 years

 

125

 

57

 

68

Total amortizable intangible assets

1,638

490

1,148

Patents pending

523

523

Total intangible assets

$

2,161

$

490

$

1,671