0001558370-21-015023.txt : 20211108 0001558370-21-015023.hdr.sgml : 20211108 20211108160621 ACCESSION NUMBER: 0001558370-21-015023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 81 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20211108 DATE AS OF CHANGE: 20211108 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: 211387929 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-20210930x10q.htm 10-Q
00http://fasb.org/us-gaap/2021-01-31#OperatingLeaseRightOfUseAssethttp://fasb.org/us-gaap/2021-01-31#OperatingLeaseLiabilityCurrenthttp://fasb.org/us-gaap/2021-01-31#OperatingLeaseLiabilityNoncurrent0001027838--12-312021Q319797723194927181P1Yhttp://fasb.org/us-gaap/2021-01-31#OperatingLeaseRightOfUseAssethttp://fasb.org/us-gaap/2021-01-31#OperatingLeaseLiabilityCurrenthttp://fasb.org/us-gaap/2021-01-31#OperatingLeaseLiabilityNoncurrentP3YP7YP1Y0.33330.6667false0001027838us-gaap:RetainedEarningsMember2021-09-300001027838us-gaap:AdditionalPaidInCapitalMember2021-09-300001027838us-gaap:RetainedEarningsMember2021-06-300001027838us-gaap:AdditionalPaidInCapitalMember2021-06-300001027838us-gaap:RetainedEarningsMember2020-12-310001027838us-gaap:AdditionalPaidInCapitalMember2020-12-310001027838us-gaap:RetainedEarningsMember2020-09-300001027838us-gaap:AdditionalPaidInCapitalMember2020-09-300001027838us-gaap:RetainedEarningsMember2020-06-300001027838us-gaap:AdditionalPaidInCapitalMember2020-06-300001027838us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001027838us-gaap:RetainedEarningsMember2019-12-310001027838us-gaap:AdditionalPaidInCapitalMember2019-12-310001027838us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-3100010278382021-06-3000010278382020-06-300001027838us-gaap:CommonStockMember2021-09-300001027838us-gaap:CommonStockMember2021-06-300001027838us-gaap:CommonStockMember2020-12-310001027838us-gaap:CommonStockMember2020-09-300001027838us-gaap:CommonStockMember2020-06-300001027838us-gaap:CommonStockMember2019-12-310001027838us-gaap:IPOMember2016-08-020001027838srt:MinimumMembersrt:ChiefExecutiveOfficerMemberus-gaap:EmployeeStockOptionMember2021-09-300001027838us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001027838us-gaap:EmployeeStockOptionMember2020-12-310001027838us-gaap:EmployeeStockOptionMember2020-09-300001027838us-gaap:EmployeeStockMember2021-01-012021-01-010001027838tcmd:EquityIncentivePlan2016Member2021-01-012021-01-010001027838us-gaap:EmployeeStockMember2020-01-012020-01-010001027838tcmd:EquityIncentivePlan2016Member2020-01-012020-01-010001027838tcmd:NonEmployeeDirectorsMembertcmd:TimeBasedRestrictedStockUnitsRsusMember2021-01-012021-09-300001027838tcmd:TimeBasedRestrictedStockUnitsRsusMembertcmd:EquityIncentivePlan2016Member2020-12-310001027838tcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Member2020-12-310001027838tcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Memberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2021-01-012021-09-300001027838tcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Memberus-gaap:ShareBasedCompensationAwardTrancheOneMember2021-01-012021-09-300001027838srt:MinimumMembertcmd:TimeBasedRestrictedStockUnitsRsusMembertcmd:EquityIncentivePlan2016Member2021-01-012021-09-300001027838srt:MaximumMembertcmd:TimeBasedRestrictedStockUnitsRsusMembertcmd:EquityIncentivePlan2016Member2021-01-012021-09-300001027838srt:MinimumMemberus-gaap:EmployeeStockOptionMember2021-01-012021-09-300001027838srt:MaximumMemberus-gaap:EmployeeStockOptionMember2021-01-012021-09-300001027838tcmd:PerformanceBasedStockSettledRestrictedStockUnitsMember2021-01-012021-09-300001027838tcmd:VeteransAdministrationMember2021-07-012021-09-300001027838tcmd:PrivateInsurersMember2021-07-012021-09-300001027838tcmd:MedicareMember2021-07-012021-09-300001027838tcmd:DurableMedicalEquipmentDistributorsMember2021-07-012021-09-300001027838tcmd:VeteransAdministrationMember2021-01-012021-09-300001027838tcmd:PrivateInsurersMember2021-01-012021-09-300001027838tcmd:MedicareMember2021-01-012021-09-300001027838tcmd:DurableMedicalEquipmentDistributorsMember2021-01-012021-09-300001027838tcmd:VeteransAdministrationMember2020-07-012020-09-300001027838tcmd:PrivateInsurersMember2020-07-012020-09-300001027838tcmd:MedicareMember2020-07-012020-09-300001027838tcmd:VeteransAdministrationMember2020-01-012020-09-300001027838tcmd:PrivateInsurersMember2020-01-012020-09-300001027838tcmd:MedicareMember2020-01-012020-09-300001027838srt:MaximumMembertcmd:AfflovestPMember2021-09-080001027838tcmd:TermLoanMember2021-09-300001027838srt:MinimumMemberus-gaap:RevolvingCreditFacilityMember2021-01-012021-09-300001027838srt:MaximumMemberus-gaap:RevolvingCreditFacilityMember2021-01-012021-09-300001027838us-gaap:RevolvingCreditFacilityMember2021-09-080001027838srt:MinimumMemberus-gaap:EquipmentMember2021-09-300001027838srt:MinimumMemberus-gaap:BuildingMember2021-09-300001027838srt:MaximumMemberus-gaap:EquipmentMember2021-09-300001027838srt:MaximumMemberus-gaap:BuildingMember2021-09-300001027838us-gaap:VehiclesMember2021-09-300001027838srt:MinimumMember2021-09-300001027838us-gaap:EquipmentMember2021-01-012021-09-300001027838us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-12-310001027838us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-12-310001027838tcmd:AirwearProductMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2020-06-300001027838us-gaap:TradeNamesMember2021-09-080001027838us-gaap:TradeNamesMember2021-09-300001027838us-gaap:PatentsMember2021-09-300001027838us-gaap:PatentsMember2020-12-310001027838tcmd:AfflovestPMember2021-09-300001027838us-gaap:DevelopedTechnologyRightsMember2021-09-082021-09-080001027838us-gaap:CustomerRelationshipsMember2021-09-082021-09-080001027838us-gaap:PatentsMember2021-01-012021-09-300001027838us-gaap:DevelopedTechnologyRightsMember2021-01-012021-09-300001027838us-gaap:CustomerRelationshipsMember2021-01-012021-09-300001027838us-gaap:CustomerContractsMember2021-01-012021-09-300001027838tcmd:DefensiveIntangibleAssetsMember2021-01-012021-09-300001027838us-gaap:PatentsMember2020-01-012020-12-310001027838us-gaap:CustomerContractsMember2020-01-012020-12-310001027838tcmd:DefensiveIntangibleAssetsMember2020-01-012020-12-310001027838us-gaap:DevelopedTechnologyRightsMember2021-09-080001027838us-gaap:CustomerRelationshipsMember2021-09-080001027838us-gaap:PatentsMember2021-09-300001027838us-gaap:DevelopedTechnologyRightsMember2021-09-300001027838us-gaap:CustomerRelationshipsMember2021-09-300001027838us-gaap:CustomerContractsMember2021-09-300001027838tcmd:DefensiveIntangibleAssetsMember2021-09-300001027838us-gaap:PatentsMember2020-12-310001027838us-gaap:CustomerContractsMember2020-12-310001027838tcmd:DefensiveIntangibleAssetsMember2020-12-310001027838us-gaap:EmployeeStockOptionMember2021-09-300001027838tcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Member2021-09-300001027838tcmd:DefinedContribution401kRetirementPlanMember2021-07-012021-09-300001027838tcmd:DefinedContribution401kRetirementPlanMember2021-01-012021-09-300001027838tcmd:DefinedContribution401kRetirementPlanMember2020-07-012020-09-300001027838tcmd:DefinedContribution401kRetirementPlanMember2020-01-012020-09-300001027838tcmd:TermLoanMember2021-01-012021-09-300001027838tcmd:TermLoanMember2021-09-080001027838srt:MinimumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-01-012021-09-300001027838srt:MinimumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMember2021-01-012021-09-300001027838srt:MaximumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-01-012021-09-300001027838srt:MaximumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMember2021-01-012021-09-300001027838us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-01-012021-09-300001027838us-gaap:RevolvingCreditFacilityMemberus-gaap:FederalFundsEffectiveSwapRateMember2021-01-012021-09-300001027838us-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMember2021-01-012021-09-300001027838us-gaap:ProductMember2021-07-012021-09-300001027838tcmd:RentalProductServiceMember2021-07-012021-09-300001027838us-gaap:ProductMember2021-01-012021-09-300001027838tcmd:RentalProductServiceMember2021-01-012021-09-300001027838us-gaap:ProductMember2020-07-012020-09-300001027838tcmd:RentalProductServiceMember2020-07-012020-09-300001027838us-gaap:ProductMember2020-01-012020-09-300001027838tcmd:RentalProductServiceMember2020-01-012020-09-300001027838us-gaap:CostOfGoodsTotalMemberus-gaap:SupplierConcentrationRiskMembertcmd:VendorTwoMember2021-07-012021-09-300001027838us-gaap:CostOfGoodsTotalMemberus-gaap:SupplierConcentrationRiskMembertcmd:VendorOneMember2021-01-012021-09-300001027838us-gaap:CostOfGoodsTotalMemberus-gaap:SupplierConcentrationRiskMembertcmd:VendorTwoMember2020-07-012020-09-300001027838us-gaap:CostOfGoodsTotalMemberus-gaap:SupplierConcentrationRiskMembertcmd:VendorTwoMember2020-01-012020-09-300001027838us-gaap:RetainedEarningsMember2021-07-012021-09-300001027838us-gaap:RetainedEarningsMember2021-01-012021-09-300001027838us-gaap:RetainedEarningsMember2020-07-012020-09-300001027838us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001027838us-gaap:RetainedEarningsMember2020-01-012020-09-300001027838us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001027838us-gaap:EmployeeStockMember2021-09-300001027838us-gaap:EmployeeStockMember2017-04-2700010278382020-09-3000010278382019-12-310001027838us-gaap:GeneralAndAdministrativeExpenseMember2021-09-082021-09-080001027838tcmd:AfflovestPMember2021-07-012021-09-300001027838tcmd:AfflovestPMember2021-01-012021-09-300001027838tcmd:AfflovestPMember2020-07-012020-09-300001027838tcmd:AfflovestPMember2020-01-012020-09-300001027838us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001027838us-gaap:FairValueMeasurementsRecurringMember2020-12-310001027838srt:MaximumMembertcmd:AfflovestPMember2021-09-082021-09-080001027838tcmd:CorporateHeadQuarterSecondLeaseMember2018-12-310001027838tcmd:CorporateHeadQuarterInitialLeaseMember2018-10-310001027838us-gaap:RestrictedStockUnitsRSUMember2021-07-012021-09-300001027838us-gaap:PerformanceSharesMember2021-07-012021-09-300001027838us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001027838tcmd:EmployeeStockPurchasePlanMember2021-07-012021-09-300001027838us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001027838us-gaap:PerformanceSharesMember2021-01-012021-09-300001027838us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001027838tcmd:EmployeeStockPurchasePlanMember2021-01-012021-09-300001027838us-gaap:RestrictedStockUnitsRSUMember2020-07-012020-09-300001027838us-gaap:PerformanceSharesMember2020-07-012020-09-300001027838us-gaap:EmployeeStockOptionMember2020-07-012020-09-300001027838tcmd:EmployeeStockPurchasePlanMember2020-07-012020-09-300001027838us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001027838us-gaap:PerformanceSharesMember2020-01-012020-09-300001027838us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001027838tcmd:EmployeeStockPurchasePlanMember2020-01-012020-09-300001027838tcmd:TimeBasedRestrictedStockUnitsRsusMembertcmd:EquityIncentivePlan2016Member2021-07-012021-09-300001027838tcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Member2021-07-012021-09-300001027838us-gaap:SellingAndMarketingExpenseMember2021-07-012021-09-300001027838us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-300001027838us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-300001027838us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001027838us-gaap:EmployeeStockMember2021-07-012021-09-300001027838us-gaap:CostOfSalesMember2021-07-012021-09-300001027838us-gaap:SellingAndMarketingExpenseMember2021-01-012021-09-300001027838us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-09-300001027838us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300001027838us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001027838us-gaap:CostOfSalesMember2021-01-012021-09-300001027838tcmd:TwoThousandEighteenAndTwoThousandTwentyPerformanceBasedRestrictedStockUnitsMember2021-01-012021-09-300001027838tcmd:TimeBasedRestrictedStockUnitsRsusMember2021-01-012021-09-300001027838tcmd:TimeBasedRestrictedStockUnitsRsusMembertcmd:EquityIncentivePlan2016Member2020-07-012020-09-300001027838tcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Member2020-07-012020-09-300001027838us-gaap:SellingAndMarketingExpenseMember2020-07-012020-09-300001027838us-gaap:ResearchAndDevelopmentExpenseMember2020-07-012020-09-300001027838us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001027838us-gaap:EmployeeStockOptionMember2020-07-012020-09-300001027838us-gaap:EmployeeStockMember2020-07-012020-09-300001027838us-gaap:CostOfSalesMember2020-07-012020-09-300001027838tcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Member2020-01-012020-09-300001027838us-gaap:SellingAndMarketingExpenseMember2020-01-012020-09-300001027838us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-09-300001027838us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001027838us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001027838us-gaap:EmployeeStockMember2020-01-012020-09-300001027838us-gaap:CostOfSalesMember2020-01-012020-09-300001027838tcmd:TimeBasedRestrictedStockUnitsRsusMember2020-01-012020-09-300001027838us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001027838us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300001027838us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001027838us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300001027838tcmd:NonEmployeeDirectorsMembertcmd:TimeBasedRestrictedStockUnitsRsusMember2021-09-300001027838tcmd:TimeBasedRestrictedStockUnitsRsusMembertcmd:EquityIncentivePlan2016Member2021-01-012021-09-300001027838tcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Member2021-01-012021-09-300001027838tcmd:TimeBasedRestrictedStockUnitsRsusMembertcmd:EquityIncentivePlan2016Member2021-09-300001027838tcmd:EquityIncentivePlan2016Member2021-09-300001027838srt:MinimumMembertcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Member2021-01-012021-09-300001027838srt:MaximumMembertcmd:PerformanceBasedStockSettledRestrictedStockUnitsMembertcmd:EquityIncentivePlan2016Member2021-01-012021-09-300001027838tcmd:FlexitouchSystemMember2021-07-012021-09-300001027838tcmd:EntreSystemMember2021-07-012021-09-300001027838tcmd:AfflovestMember2021-07-012021-09-300001027838tcmd:FlexitouchSystemMember2021-01-012021-09-300001027838tcmd:EntreSystemMember2021-01-012021-09-300001027838tcmd:AfflovestMember2021-01-012021-09-300001027838tcmd:FlexitouchSystemMember2020-07-012020-09-300001027838tcmd:EntreSystemMember2020-07-012020-09-300001027838tcmd:FlexitouchSystemMember2020-01-012020-09-300001027838tcmd:EntreSystemMember2020-01-012020-09-300001027838tcmd:VendorTwoMember2021-09-300001027838tcmd:VendorOneMember2021-09-300001027838tcmd:VendorTwoMember2020-09-300001027838us-gaap:VehiclesMember2021-01-012021-09-300001027838srt:ChiefExecutiveOfficerMemberus-gaap:EmployeeStockOptionMember2021-01-012021-09-3000010278382021-09-082021-09-080001027838us-gaap:IPOMember2016-08-022016-08-020001027838us-gaap:EmployeeStockMember2021-01-012021-09-3000010278382021-09-080001027838tcmd:AfflovestPMember2021-09-080001027838tcmd:AssetAcquisitionEarnoutPaymentsRevenueTargetsFromOctoberTwoThousandTwentyTwoToSeptemberTwoThousandTwentyThreeMembertcmd:AfflovestPMember2021-09-082021-09-080001027838tcmd:AssetAcquisitionEarnoutPaymentsRevenueTargetsFromOctoberTwoThousandTwentyOneToSeptemberTwoThousandTwentyTwoMembertcmd:AfflovestPMember2021-09-082021-09-080001027838tcmd:AfflovestPMember2021-09-082021-09-0800010278382021-07-012021-09-3000010278382020-07-012020-09-3000010278382020-01-012020-09-300001027838us-gaap:CommonStockMember2021-07-012021-09-300001027838us-gaap:CommonStockMember2021-01-012021-09-300001027838us-gaap:CommonStockMember2020-07-012020-09-300001027838us-gaap:CommonStockMember2020-01-012020-09-300001027838tcmd:CorporateHeadQuarterThirdLeaseMember2019-12-310001027838tcmd:CorporateHeadQuarterSecondLeaseMember2019-12-3100010278382021-09-3000010278382020-12-3100010278382021-11-0400010278382021-01-012021-09-30xbrli:sharesiso4217:USDutr:sqftxbrli:puretcmd:paymenttcmd:itemiso4217:USDxbrli:sharestcmd:segment

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, 2021

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

19,823,022 shares of common stock, par value $0.001 per share, were outstanding as of November 4, 2021.

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;
loss or retirement of key executives, including prior to identifying a successor;
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, 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 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.

3

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)

    

2021

    

2020

Assets

Current assets

Cash and cash equivalents

$

22,401

$

47,855

Accounts receivable

 

44,257

 

43,849

Net investment in leases

 

12,385

 

10,708

Inventories

 

23,830

 

18,563

Prepaid expenses and other current assets

 

3,701

 

2,638

Total current assets

 

106,574

 

123,613

Non-current assets

Property and equipment, net

 

6,458

 

6,957

Right of use operating lease assets

 

23,919

 

20,132

Intangible assets, net

 

54,970

 

1,680

Goodwill

31,063

Accounts receivable, non-current

 

12,422

 

9,433

Deferred income taxes

 

11,907

 

10,198

Other non-current assets

 

2,082

 

2,074

Total non-current assets

 

142,821

 

50,474

Total assets

$

249,395

$

174,087

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

6,192

$

4,197

Note payable

2,210

Accrued payroll and related taxes

 

10,322

 

11,588

Accrued expenses

 

5,350

 

4,423

Income taxes payable

 

1,129

 

2,658

Operating lease liabilities

 

2,412

 

2,006

Other current liabilities

 

3,694

 

1,842

Total current liabilities

 

31,309

 

26,714

Non-current liabilities

Revolving line of credit, non-current

24,844

Note payable, non-current

27,673

Earn-out, non-current

6,400

Accrued warranty reserve, non-current

 

3,358

 

3,235

Income taxes payable, non-current

 

348

 

Operating lease liabilities, non-current

23,357

 

19,388

Total non-current liabilities

 

85,980

 

22,623

Total liabilities

 

117,289

 

49,337

Commitments and Contingencies (see Note 11)

Stockholders’ equity:

Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2021 and December 31,
2020

 

 

Common stock, $0.001 par value, 300,000,000 shares authorized; 19,797,723 shares issued and outstanding as of September 30, 2021; 19,492,718 shares issued and outstanding as of December 31, 2020

 

20

 

19

Additional paid-in capital

 

116,346

 

104,675

Retained earnings

 

15,740

 

20,056

Total stockholders’ equity

 

132,106

 

124,750

Total liabilities and stockholders’ equity

$

249,395

$

174,087

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

4

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)

    

2021

    

2020

    

2021

    

2020

Revenue

Sales revenue

$

44,460

$

42,573

$

124,215

$

109,714

Rental revenue

 

8,037

 

6,519

 

22,114

 

18,173

Total revenue

 

52,497

 

49,092

 

146,329

 

127,887

Cost of revenue

Cost of sales revenue

 

13,096

 

11,558

 

36,425

 

30,868

Cost of rental revenue

 

2,433

 

2,562

 

6,501

 

6,062

Total cost of revenue

 

15,529

 

14,120

 

42,926

 

36,930

Gross profit

Gross profit - sales revenue

 

31,364

 

31,015

 

87,790

 

78,846

Gross profit - rental revenue

 

5,604

 

3,957

 

15,613

 

12,111

Gross profit

 

36,968

 

34,972

 

103,403

 

90,957

Operating expenses

Sales and marketing

 

22,231

 

19,488

 

61,949

 

59,856

Research and development

 

1,409

 

1,102

 

3,885

 

3,891

Reimbursement, general and administrative

 

14,500

 

12,539

 

42,802

 

37,682

Intangible asset amortization

195

49

294

148

Total operating expenses

 

38,335

 

33,178

 

108,930

 

101,577

(Loss) income from operations

 

(1,367)

 

1,794

 

(5,527)

 

(10,620)

Other (expense) income

 

(120)

 

(121)

 

(154)

 

181

(Loss) income before income taxes

 

(1,487)

 

1,673

 

(5,681)

 

(10,439)

Income tax expense (benefit)

 

1,868

 

(751)

 

(1,365)

 

2,294

Net (loss) income

$

(3,355)

$

2,424

$

(4,316)

$

(12,733)

Net (loss) income per common share

Basic

$

(0.17)

$

0.12

$

(0.22)

$

(0.66)

Diluted

$

(0.17)

$

0.12

$

(0.22)

$

(0.66)

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

Basic

19,790,838

19,415,640

19,676,749

19,309,344

Diluted

19,790,838

19,747,365

19,676,749

19,309,344

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

5

Tactile Systems Technology, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30, 

(In thousands)

    

2021

    

2020

    

2021

    

2020

Net (loss) income

$

(3,355)

$

2,424

$

(4,316)

$

(12,733)

Other comprehensive loss

 

  

 

  

 

  

 

  

Unrealized loss on marketable securities

 

 

(14)

 

 

(21)

Income tax related to items of other comprehensive loss

 

 

(15)

 

 

(5)

Total other comprehensive loss

 

 

(29)

 

 

(26)

Comprehensive (loss) income

$

(3,355)

$

2,395

$

(4,316)

$

(12,759)

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

6

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, 2021

19,782,295

$

20

$

113,601

$

19,095

$

$

132,716

Stock-based compensation

2,588

2,588

Exercise of common stock options and vesting of performance and restricted stock units

16,366

199

199

Taxes paid for net share settlement of performance and restricted stock units

(938)

(42)

(42)

Comprehensive loss for the period

(3,355)

(3,355)

Balances, September 30, 2021

19,797,723

$

20

$

116,346

$

15,740

$

$

132,106

Balances, December 31, 2020

19,492,718

$

19

$

104,675

$

20,056

$

$

124,750

Stock-based compensation

7,703

7,703

Exercise of common stock options and vesting of performance and restricted stock units

284,829

1

3,583

3,584

Taxes paid for net share settlement of performance and restricted stock units

(21,918)

(1,157)

(1,157)

Common shares issued for employee stock purchase plan

42,094

1,542

1,542

Comprehensive loss for the period

(4,316)

(4,316)

Balances, September 30, 2021

19,797,723

$

20

$

116,346

$

15,740

$

$

132,106

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 performance and restricted stock units

14,322

214

214

Taxes paid for net share settlement of performance and restricted stock units

(1,047)

(39)

(39)

Comprehensive income 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 performance and restricted stock units

259,406

762

762

Taxes paid for net share settlement of performance and 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

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

7

Tactile Systems Technology, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30, 

(In thousands)

    

2021

    

2020

Cash flows from operating activities

Net loss

$

(4,316)

$

(12,733)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

2,150

2,102

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

(91)

Deferred income taxes

(1,709)

3,934

Stock-based compensation expense

7,703

8,288

Gain on other investments and maturities of marketable securities

10

Impairment losses

4,025

Loss on disposal of property and equipment

7

Changes in assets and liabilities, net of acquisition:

Accounts receivable

(408)

(2,589)

Net investment in leases

(1,677)

(1,304)

Inventories

(3,641)

(3,538)

Income taxes

(1,181)

773

Prepaid expenses and other assets

(1,133)

(1,553)

Right of use operating lease assets

588

509

Medicare accounts receivable, non-current

(2,989)

(2,916)

Accounts payable

1,995

938

Accrued payroll and related taxes

(1,266)

766

Accrued expenses and other liabilities

2,902

1,134

Net cash used in operating activities

(2,975)

(2,245)

Cash flows from investing activities

Proceeds from maturities of securities available-for-sale

22,500

Payments related to acquisition

(79,829)

Purchases of property and equipment

(1,221)

(1,623)

Intangible assets costs

(187)

(163)

Other investments

(30)

Net cash (used in) provided by investing activities

(81,237)

20,684

Cash flows from financing activities

Proceeds from issuance of note payable

30,000

Proceeds from revolving line of credit

25,000

Payment of deferred debt issuance costs

(211)

Taxes paid for net share settlement of performance and restricted stock units

(1,157)

(1,592)

Proceeds from exercise of common stock options

3,584

762

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

1,542

1,825

Net cash provided by financing activities

58,758

995

Net (decrease) increase in cash and cash equivalents

(25,454)

19,434

Cash and cash equivalents – beginning of period

47,855

22,770

Cash and cash equivalents – end of period

$

22,401

$

42,204

Supplemental cash flow disclosure

Cash paid for taxes

$

1,541

$

475

Capital expenditures incurred but not yet paid

$

$

41

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

8

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. We provide these products through our direct sales force for use in the home and sell or rent them through vascular, wound and lymphedema clinics throughout the United States.

On September 8, 2021, we acquired the assets of the AffloVest respiratory therapy business (“AffloVest Acquisition”) from International Biophysics Corporation (“IBC”), a privately-held company which developed and manufactures AffloVest. AffloVest is a portable, wearable vest that treats patients with chronic respiratory conditions. The device is sold through home medical equipment and durable medical equipment providers 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.

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 2021 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, 2021, are not necessarily indicative of results to be expected for the year ending December 31, 2021, 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, 2020.

9

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, particularly during 2020 and the first quarter of 2021. While we saw some level of recovery in the second quarter of 2021, the third quarter was negatively impacted by the prolonged recovery from COVID-19 and increased Delta variant cases during the period, which resulted in restricted access to clinics and hospitals and disrupted the recovery in patient visits versus the pre-COVID environment. There are no reliable estimates of how long the pandemic will last, whether any recovery will be sustained or will reverse course, the severity of any resurgence of COVID-19 or variant strains of the virus, the effectiveness of vaccines and attitudes towards receiving them, or what ultimate effects the pandemic will have. For that reason, we are unable to reasonably estimate the long-term impact of the pandemic on our business at this time. Since the onset of COVID-19, we have remained proactive to ensure we continue to adapt to the needs of our employees, clinicians and patients.

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.

In addition, we are closely monitoring mandatory vaccination requirements and related evolving guidance that is or may be applicable to us, including in our capacity as a U.S. government contractor. See See Part II, Item 1A. Risk Factors” in this Form 10-Q for additional information about vaccine mandates and potential risks related thereto.

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 nine months ended September 30, 2021, 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, 2020, for information regarding our significant accounting policies.

Business Segments

10

We operate and report in only one operating and reportable segment. Our chief operating decision maker does not use financial information below revenue to allocate resources.

Goodwill

Goodwill represents the excess of the purchase price paid over the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of a business. Goodwill is not amortized, but is tested for impairment at least annually or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We plan to perform our annual assessment of goodwill for impairment as of July 1st of each fiscal year. See Note 7 – “Goodwill and Intangible Assets” for additional information.

Revenue Recognition for AffloVest

The AffloVest device is sold through home medical equipment and durable medical equipment providers (collectively, "distributors"). Revenue is recognized when control of the promised goods or services is transferred to the distributors, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those goods or providing services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. When determining whether the distributor has obtained control of the goods or services, we consider any future performance obligations. Generally, there is no post-shipment obligation on products sold other than warranty obligations in the normal and ordinary course of business.

In general, revenue from the sale of the AffloVest product is recognized at shipment, unless circumstances dictate that control has not yet passed to the distributor.

Certain of our contracts include volume-based incentives which involve rebates that are negotiated at or prior to the time of sale with the customer and are redeemable only if the customer achieves a specified cumulative level of sales or sales increase. Under these incentive programs, at the time of sale, we determine the most likely amount of the rebate to be paid based on forecasted sales levels. These forecasts are updated at least quarterly for each customer, and the transaction price is reduced for the anticipated cost of the rebate. If the forecasted sales for a customer change, the accrual for rebates is adjusted to reflect the new rebates expected to be earned by the customer.

Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in revenue in the accompanying Consolidated Statements of Operations. Shipping and handling costs incurred for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of revenue sold in the accompanying Consolidated Statements of Operations.

For a description of our revenue recognition policies related to our Flexitouch and Entre systems, see Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.

Accounting Pronouncement Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848) — Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), addressing the discontinuation of LIBOR, a widely used reference rate for pricing financial products. The ASU is intended to provide optional expedients and exceptions if certain criteria are met when accounting for contracts, hedging relationships and other transactions that reference LIBOR, or another reference rate expected to be discontinued because of reference rate reform. The application and adoption requirements of ASU 2020-04 are optional until December 31, 2022 and vary based on expedients elected. We have not elected any expedients to date and are currently evaluating any potential future impacts on the condensed consolidated financial statements.

11

Recently Adopted Accounting Pronouncements

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. We adopted ASU 2019-12 as of January 1, 2021, and it did not have an impact on the condensed consolidated financial statements.

In June 2016, the FASB issued 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 replaced 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 consolidated financial statements at that time. In connection with the AffloVest Acquisition, it was determined CECL did not have a material financial impact on the receivables related to the durable medical equipment channel.

Note 4. Acquisitions

On September 8, 2021, we entered into an Asset Purchase Agreement (“AffloVest APA”) to acquire the AffloVest therapy business from International Biophysics Corporation. Under the terms of the AffloVest APA, we agreed to pay IBC a total of up to $100.0 million for the purchase of substantially all of the assets related to its branded high frequency chest wall oscillation vest therapy business, other than specifically identified excluded assets. We acquired AffloVest to further expand our position as a leader in treating patients with underserved chronic conditions in the home. The acquired assets included inventory, tooling, intellectual property, permits and approvals, data and records, and customer and supplier information. At closing, $80.0 million of the purchase price was paid, of which a total of $0.5 million was deposited into an escrow account at closing for purposes of satisfying certain post-closing purchase price adjustments and indemnification claims. Subsequent to closing, $0.2 milion was returned to us as a result of working capital adjustments. The AffloVest acquisition was funded through a combination of cash on hand and proceeds from borrowings. 

 

Two earn-out payments of up to $10.0 million each are potentially due to IBC under the AffloVest APA depending on the achievement of specified revenue targets, as follows:

Initial Earn-Out: Equal to 1.5 times the amount by which the AffloVest business’ U.S. revenues in the period from October 1, 2021 to September 30, 2022 (the “Initial Earn-Out Period”) exceed a specified amount; provided that in no event will the payment exceed $10.0 million; and
Second Earn-Out: Equal to 1.5 times the amount by which the AffloVest business’ U.S. revenues in the period from October 1, 2022 to September 30, 2023 exceed the revenues recognized during the Initial Earn-Out Period; provided that in no event will the payment exceed $10.0 million.

This liability was recorded on the Condensed Consolidated Balance Sheet at September 30, 2021 in the line item Earn-out, non-current, at an acquisition-date fair value of $6.4 million. The fair value of the earn-out, reflecting management’s estimate of the likelihood of achieving these targets, was determined by employing a Monte Carlo Simulation model. This amount will be re-measured at the end of each reporting period until the payment requirement ends, with any adjustments reported in income from operations.

12

On the date of AffloVest Acquisition, we allocated the assets acquired based on an estimate of their fair values. The following table summarizes the purchase price allocation:

(In millions)

    

Allocated Fair Value

Inventories

$

1.6

Property and equipment(1)

Intangible assets

53.5

Goodwill

31.1

Purchase price

$

86.2

(1) The purchase price included less than $0.1 million of property and equipment.

The goodwill reflects expected synergies of combining the acquired products and customer information with our existing operations, and is deductible for tax purposes over 15 years.

The following table reflects the allocation of purchase price to the acquired intangible assets and related estimated useful lives: 

(In millions)

    

Allocated Fair Value

Estimated Useful Life

Customer relationships

$

31.0

13 years

Developed technology

13.0

11 years

Tradenames

 

9.5

Indefinite

Total intangible assets

$

53.5

The weighted-average amortization period of the acquired intangible assets was 12.3 years.

The fair market valuations associated with the assets acquired fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our due diligence models, most recent operational budgets, long-range strategic plans and other estimates.

Transaction costs, such as legal and other costs, related to the acquisition aggregated approximately $0.8 million. These costs have been expensed as incurred and are included in reimbursement, general and administrative expenses in our Condensed Consolidated Statements of Operations.

The Condensed Consolidated Statements of Operations reflect the AffloVest operations beginning September 9, 2021. The following unaudited pro forma information for the three and nine months ended September 30, 2021 and the three and nine months ended September 30, 2020 presents the revenues and net income assuming the acquisition of AffloVest had occurred as of January 1, 2020. This information has been prepared for comparative purposes only and is not indicative of what actual results would have been if the acquisition had taken place at the beginning of fiscal 2020, or of future results.

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

(In thousands)

    

2021

2020

2021

2020

Total revenue

$

56,249

$

53,068

$

157,686

$

139,130

Net income (loss)

$

628

$

(309)

$

1,369

$

1,770

These pro forma results include certain adjustments, primarly due to increases in amortization expense due to fair value adjustments of intangible assets, increases in interest expense due to additional borrowings incurred to finance the acquisition and amortization of debt issuance costs incurred to finance the transaction, acquisition related costs including transaction costs such as legal, accounting, valuation and other professional services, and related tax effects.

13

Note 5. Marketable Securities

There were no investments in marketable securities at September 30, 2021 and December 31, 2020.

There were no net pre-tax unrealized gains for marketable securities at September 30, 2021. There were no sales of marketable securities during the nine months ended September 30, 2021.

There were no marketable securities in an unrealized loss position at September 30, 2021 and December 31, 2020.

Note 6. Inventories

Inventories consisted of the following:

(In thousands)

    

At September 30, 2021

    

At December 31, 2020

Finished goods

$

9,607

$

7,129

Component parts and work-in-process

 

14,223

 

11,434

Total inventories

$

23,830

$

18,563

Note 7. Goodwill and Intangible Assets

Goodwill

In the third quarter of fiscal 2021, we completed the AffloVest Acqusition. The purchase price of the AffloVest business exceeded the net acquisition-date estimated fair value amounts of the identifiable assets acquired and the liabilities assumed by $31.1 million, which was assigned to goodwill. 

Intangible Assets

Our patents and other intangible assets are summarized as follows:

Weighted-

At September 30, 2021

Average

Gross

Amortization

Carrying

Accumulated