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Table of Contents

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

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

2

Table of Contents

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

3

Table of Contents

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

Table of Contents

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.

5

Table of Contents

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: