SEC Filing - Tactile Systems Technology, Inc.

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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: June 30, 2022

☐ 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 ☑

20,132,081 shares of common stock, par value $0.001 per share, were outstanding as of July 28, 2022.

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TABLE OF CONTENTS


	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	36

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Forward-Looking Information

All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition, are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "ongoing," "plan," "potential," "predict," "project," "should," "target," "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;

●

wage and component price inflation;

●

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, 2021, 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.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements


Tactile Systems Technology, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
	June 30,		December 31,
(In thousands, except share and per share data)	2022		2021
Assets
Current assets
Cash and cash equivalents	$	23,350	$	28,229
Accounts receivable		49,157		49,478
Net investment in leases		13,346		12,482
Inventories		19,970		19,217
Prepaid expenses and other current assets		1,446		4,141
Total current assets		107,269		113,547
Non-current assets
Property and equipment, net		5,978		6,750
Right of use operating lease assets		22,628		23,984
Intangible assets, net		52,254		54,081
Goodwill		31,063		31,063
Accounts receivable, non-current		15,343		12,847
Other non-current assets		2,768		1,998
Total non-current assets		130,034		130,723
Total assets	$	237,303	$	244,270
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	9,110	$	5,023
Note payable		2,968		2,960
Earn-out, current		9,800		3,250
Accrued payroll and related taxes		12,144		12,139
Accrued expenses		5,258		5,262
Income taxes payable		11		16
Operating lease liabilities		2,488		2,506
Other current liabilities		4,767		3,305
Total current liabilities		46,546		34,461
Non-current liabilities
Revolving line of credit, non-current		24,891		24,857
Note payable, non-current		22,463		26,933
Earn-out, non-current		3,950		2,950
Accrued warranty reserve, non-current		2,791		3,108
Income taxes payable, non-current		298		348
Operating lease liabilities, non-current		22,122		23,354
Deferred income taxes		126		32
Total non-current liabilities		76,641		81,582
Total liabilities		123,187		116,043

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, 2022 and December 31, 2021		—		—
Common stock, $0.001 par value, 300,000,000 shares authorized; 20,132,145 shares issued and outstanding as of June 30, 2022; 19,877,786 shares issued and outstanding as of December 31, 2021		20		20
Additional paid-in capital		126,059		119,962
(Accumulated deficit) retained earnings		(11,963)		8,245
Total stockholders’ equity		114,116		128,227
Total liabilities and stockholders’ equity	$	237,303	$	244,270

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

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Tactile Systems Technology, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except share and per share data)	2022		2021		2022		2021
Revenue
Sales revenue	$	51,265	$	43,630	$	92,435	$	79,755
Rental revenue		8,380		7,430		15,188		14,077
Total revenue		59,645		51,060		107,623		93,832
Cost of revenue
Cost of sales revenue		13,810		12,638		25,890		23,329
Cost of rental revenue		2,612		2,217		4,648		4,068
Total cost of revenue		16,422		14,855		30,538		27,397
Gross profit
Gross profit - sales revenue		37,455		30,992		66,545		56,426
Gross profit - rental revenue		5,768		5,213		10,540		10,009
Gross profit		43,223		36,205		77,085		66,435
Operating expenses
Sales and marketing		28,822		20,933		52,752		39,718
Research and development		1,849		1,206		3,369		2,476
Reimbursement, general and administrative		14,894		14,094		31,111		28,303
Intangible asset amortization and earn-out		1,745		48		8,841		98
Total operating expenses		47,310		36,281		96,073		70,595
Loss from operations		(4,087)		(76)		(18,988)		(4,160)
Other expense		(573)		(24)		(1,029)		(34)
Loss before income taxes		(4,660)		(100)		(20,017)		(4,194)
Income tax (benefit) expense		(20)		(1,405)		191		(3,233)
Net (loss) income	$	(4,640)	$	1,305	$	(20,208)	$	(961)
Net (loss) income per common share
Basic	$	(0.23)	$	0.07	$	(1.01)	$	(0.05)
Diluted	$	(0.23)	$	0.07	$	(1.01)	$	(0.05)
Weighted-average common shares used to compute net (loss) income per common share
Basic		20,024,798		19,691,156		19,961,999		19,618,759
Diluted		20,024,798		20,047,277		19,961,999		19,618,759

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		Deficit)
	Common Stock			Paid-In		Retained
(In thousands, except share data)	Shares	Par Value		Capital		Earnings		Total
Balances, March 31, 2022	19,939,843	$	20	$	122,281	$	(7,323)	$	114,978
Stock-based compensation	—		—		2,892		—		2,892
Exercise of common stock options and vesting of performance and restricted stock units	107,028		—		62		—		62
Common shares issued for employee stock purchase plan	85,274		—		824		—		824
Net loss for the period	—		—		—		(4,640)		(4,640)
Balances, June 30, 2022	20,132,145	$	20	$	126,059	$	(11,963)	$	114,116

Balances, December 31, 2021	19,877,786	$	20	$	119,962	$	8,245	$	128,227
Stock-based compensation	—		—		5,121		—		5,121
Exercise of common stock options and vesting of performance and restricted stock units	169,085		—		152		—		152
Common shares issued for employee stock purchase plan	85,274		—		824		—		824
Net loss for the period	—		—		—		(20,208)		(20,208)
Balances, June 30, 2022	20,132,145	$	20	$	126,059	$	(11,963)	$	114,116

Balances, March 31, 2021	19,639,113	$	20	$	107,312	$	17,790	$	125,122
Stock-based compensation	—		—		2,658		—		2,658
Exercise of common stock options and vesting of performance and restricted stock units	101,088		—		2,089		—		2,089
Common shares issued for employee stock purchase plan	42,094		—		1,542		—		1,542
Net income for the period	—		—		—		1,305		1,305
Balances, June 30, 2021	19,782,295	$	20	$	113,601	$	19,095	$	132,716

Balances, December 31, 2020	19,492,718	$	19	$	104,675	$	20,056	$	124,750
Stock-based compensation	—		—		5,115		—		5,115
Exercise of common stock options and vesting of performance and restricted stock units	268,463		1		3,384		—		3,385
Taxes paid for net share settlement of performance and restricted stock units	(20,980)		—		(1,115)		—		(1,115)
Common shares issued for employee stock purchase plan	42,094		—		1,542		—		1,542
Net loss for the period	—		—		—		(961)		(961)
Balances, June 30, 2021	19,782,295	$	20	$	113,601	$	19,095	$	132,716

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)	2022		2021
Cash flows from operating activities
Net loss	$	(20,208)	$	(961)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,015		1,287
Deferred income taxes		94		(3,581)
Stock-based compensation expense		5,121		5,115
Change in fair value of earn-out liability		7,550		—
Changes in assets and liabilities, net of acquisition:
Accounts receivable		321		1,220
Net investment in leases		(864)		(1,033)
Inventories		(753)		(2,590)
Income taxes		(55)		(780)
Prepaid expenses and other assets		1,925		502
Right of use operating lease assets		106		99
Accounts receivable, non-current		(2,496)		(2,441)
Accounts payable		4,087		855
Accrued payroll and related taxes		5		(1,285)
Accrued expenses and other liabilities		1,252		1,676
Net cash used in operating activities		(900)		(1,917)
Cash flows from investing activities
Purchases of property and equipment		(331)		(603)
Intangible assets expenditures		(85)		(140)
Net cash used in investing activities		(416)		(743)
Cash flows from financing activities
Payment on note payable		(4,500)		—
Payment of deferred debt issuance costs		(39)		—
Taxes paid for net share settlement of performance and restricted stock units		—		(1,115)
Proceeds from exercise of common stock options		152		3,385
Proceeds from the issuance of common stock from the employee stock purchase plan		824		1,542
Net cash (used in) provided by financing activities		(3,563)		3,812
Net (decrease) increase in cash and cash equivalents		(4,879)		1,152
Cash and cash equivalents – beginning of period		28,229		47,855
Cash and cash equivalents – end of period	$	23,350	$	49,007

Supplemental cash flow disclosure
Cash paid for interest	$	448	$	—
Cash paid for taxes	$	28	$	1,141
Capital expenditures incurred but not yet paid	$	—	$	8

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”) manufactures and distributes medical devices that help control symptoms of lymphedema, a chronic and progressive medical condition. We provide our Flexitouch® and Entre™ systems 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 airway clearance 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. We sell this device through home medical equipment and durable medical equipment (“DME”) 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”.

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 have been, and may continue to be, significantly different than historical trends 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, 2022, are not necessarily indicative of results to be expected for the year ending December 31, 2022, 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, 2021.

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.

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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 most of 2021 and during the first quarter of 2022. We have also seen staffing challenges, both in our organization and at the clinics we serve, as another consequence of the COVID-19 pandemic. While we saw some level of recovery in the second quarter of 2022, 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 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.

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.

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, 2022. 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, 2021, for information regarding our significant accounting policies.

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.

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Note 4. Acquisitions

On September 8, 2021, we entered into an Asset Purchase Agreement (“AffloVest APA”) to acquire the AffloVest airway clearance business from IBC. 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 million 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 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 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.

The fair value of the earn-out as of the acquisition date was $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 and the current versus non-current allocation will be remeasured at the end of each reporting period until the payment requirement ends, with any adjustments reported in income from operations (see Note 15 – “Fair Value Measurements”).

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.

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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.

Note 5. Inventories

Inventories consisted of the following:


(In thousands)	At June 30, 2022		At December 31, 2021
Finished goods	$	7,718	$	8,242
Component parts and work-in-process		12,252		10,975
Total inventories	$	19,970	$	19,217

Note 6. Goodwill and Intangible Assets

Goodwill

In the third quarter of fiscal 2021, we completed the AffloVest Acquisition. The purchase price of the AffloVest product line 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.

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Intangible Assets

Our patents and other intangible assets are summarized as follows:


	Weighted-	At June 30, 2022
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	723	$	140	$	583
Defensive intangible assets	3 years		1,125		678		447
Customer accounts	1 year		125		101		24
Customer relationships	12 years		31,000		1,934		29,066
Developed technology	10 years		13,000		959		12,041
Subtotal			45,973		3,812		42,161
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			593		—		593
Total intangible assets		$	56,066	$	3,812	$	52,254


	Weighted-	At December 31, 2021
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	666	$	109	$	557
Defensive intangible assets	3 years		1,125		592		533
Customer accounts	1 year		125		89		36
Customer relationships	13 years		31,000		742		30,258
Developed technology	11 years		13,000		368		12,632
Subtotal			45,916		1,900		44,016
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			565		—		565
Total intangible assets		$	55,981	$	1,900	$	54,081

Amortization expense was $1.0 million and $0.1 million for the three months ended June 30, 2022 and 2021, and $1.9 million and $0.1 million for the six months ended June 30, 2022 and 2021, respectively. Future amortization expenses are expected as follows:


(In thousands)
2022 (July 1 - December 31)	$	1,913
2023		3,795
2024		3,773
2025		3,683
2026		3,619
Thereafter		25,378
Total	$	42,161

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Note 7. Accrued Expenses

Accrued expenses consisted of the following: