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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: September 30, 2022

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

20,154,703 shares of common stock, par value $0.001 per share, were outstanding as of November 4, 2022.

Table of Contents

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

36

Item 1A.

Risk Factors

36

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

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," "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.

3

Table of Contents

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)

    

2022

    

2021

Assets

Current assets

Cash and cash equivalents

$

23,426

$

28,229

Accounts receivable

 

51,814

 

49,478

Net investment in leases

 

15,052

 

12,482

Inventories

 

23,020

 

19,217

Prepaid expenses and other current assets

 

3,484

 

4,141

Total current assets

 

116,796

 

113,547

Non-current assets

Property and equipment, net

 

6,677

 

6,750

Right of use operating lease assets

 

21,975

 

23,984

Intangible assets, net

 

51,308

 

54,081

Goodwill

31,063

31,063

Accounts receivable, non-current

 

17,703

 

12,847

Other non-current assets

 

3,004

 

1,998

Total non-current assets

 

131,730

 

130,723

Total assets

$

248,526

$

244,270

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

11,171

$

5,023

Note payable

2,968

2,960

Earn-out, current

10,000

3,250

Accrued payroll and related taxes

 

13,575

 

12,139

Accrued expenses

 

6,953

 

5,262

Income taxes payable

 

11

 

16

Operating lease liabilities

 

2,486

 

2,506

Other current liabilities

 

8,497

 

3,305

Total current liabilities

 

55,661

 

34,461

Non-current liabilities

Revolving line of credit, non-current

24,904

24,857

Note payable, non-current

21,721

26,933

Earn-out, non-current

7,098

2,950

Accrued warranty reserve, non-current

 

2,892

 

3,108

Income taxes payable, non-current

 

298

 

348

Operating lease liabilities, non-current

21,506

 

23,354

Deferred income taxes

49

32

Total non-current liabilities

 

78,468

 

81,582

Total liabilities

 

134,129

 

116,043

Stockholders’ equity:

Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2022 and December 31,
2021

 

 

Common stock, $0.001 par value, 300,000,000 shares authorized; 20,155,704 shares issued and outstanding as of September 30, 2022; 19,877,786 shares issued and outstanding as of December 31, 2021

 

20

 

20

Additional paid-in capital

 

128,619

 

119,962

(Accumulated deficit) retained earnings

 

(14,242)

 

8,245

Total stockholders’ equity

 

114,397

 

128,227

Total liabilities and stockholders’ equity

$

248,526

$

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

Nine Months Ended

September 30,

September 30,

(In thousands, except share and per share data)

    

2022

    

2021

    

2022

    

2021

Revenue

Sales revenue

$

55,545

$

44,460

$

147,980

$

124,215

Rental revenue

 

9,717

 

8,037

 

24,905

 

22,114

Total revenue

 

65,262

 

52,497

 

172,885

 

146,329

Cost of revenue

Cost of sales revenue

 

15,476

 

13,096

 

41,366

 

36,425

Cost of rental revenue

 

2,992

 

2,433

 

7,640

 

6,501

Total cost of revenue

 

18,468

 

15,529

 

49,006

 

42,926

Gross profit

Gross profit - sales revenue

 

40,069

 

31,364

 

106,614

 

87,790

Gross profit - rental revenue

 

6,725

 

5,604

 

17,265

 

15,613

Gross profit

 

46,794

 

36,968

 

123,879

 

103,403

Operating expenses

Sales and marketing

 

26,583

 

22,231

 

79,335

 

61,949

Research and development

 

1,581

 

1,409

 

4,949

 

3,885

Reimbursement, general and administrative

 

16,257

 

14,500

 

47,369

 

42,802

Intangible asset amortization and earn-out

3,993

195

12,834

294

Total operating expenses

 

48,414

 

38,335

 

144,487

 

108,930

Loss from operations

 

(1,620)

 

(1,367)

 

(20,608)

 

(5,527)

Other expense

 

(736)

 

(120)

 

(1,765)

 

(154)

Loss before income taxes

 

(2,356)

 

(1,487)

 

(22,373)

 

(5,681)

Income tax (benefit) expense

 

(77)

 

1,868

 

114

 

(1,365)

Net loss

$

(2,279)

$

(3,355)

$

(22,487)

$

(4,316)

Net loss per common share

Basic

$

(0.11)

$

(0.17)

$

(1.12)

$

(0.22)

Diluted

$

(0.11)

$

(0.17)

$

(1.12)

$

(0.22)

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

Basic

20,139,944

19,790,838

20,021,966

19,676,749

Diluted

20,139,944

19,790,838

20,021,966

19,676,749

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, June 30, 2022

20,132,145

$

20

$

126,059

$

(11,963)

$

114,116

Stock-based compensation

2,560

2,560

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

23,559

Net loss for the period

(2,279)

(2,279)

Balances, September 30, 2022

20,155,704

$

20

$

128,619

$

(14,242)

$

114,397

Balances, December 31, 2021

19,877,786

$

20

$

119,962

$

8,245

$

128,227

Stock-based compensation

7,681

7,681

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

192,644

152

152

Common shares issued for employee stock purchase plan

85,274

824

824

Net loss for the period

(22,487)

(22,487)

Balances, September 30, 2022

20,155,704

$

20

$

128,619

$

(14,242)

$

114,397

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)

Net 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

Net loss for the period

(4,316)

(4,316)

Balances, September 30, 2021

19,797,723

$

20

$

116,346

$

15,740

$

132,106

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)

Nine Months Ended September 30, 

(In thousands)

    

2022

    

2021

Cash flows from operating activities

Net loss

$

(22,487)

$

(4,316)

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

Depreciation and amortization

4,670

2,150

Deferred income taxes

17

(1,709)

Stock-based compensation expense

7,681

7,703

Loss on disposal of property and equipment and intangibles

20

7

Change in fair value of earn-out liability

10,898

Changes in assets and liabilities, net of acquisition:

Accounts receivable

(2,336)

(408)

Net investment in leases

(2,570)

(1,677)

Inventories

(3,803)

(3,641)

Income taxes

(55)

(1,181)

Prepaid expenses and other assets

(349)

(1,133)

Right of use operating lease assets

141

588

Accounts receivable, non-current

(4,856)

(2,989)

Accounts payable

6,148

1,995

Accrued payroll and related taxes

1,436

(1,266)

Accrued expenses and other liabilities

6,799

2,902

Net cash provided by (used in) operating activities

1,354

(2,975)

Cash flows from investing activities

Payments related to acquisition

(79,829)

Purchases of property and equipment

(1,731)

(1,221)

Intangible assets expenditures

(113)

(187)

Net cash used in investing activities

(1,844)

(81,237)

Cash flows from financing activities

Proceeds from issuance of note payable

30,000

Proceeds from revolving line of credit

25,000

Payments on note payable

(5,250)

Payments of deferred debt issuance costs

(39)

(211)

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

(1,157)

Proceeds from exercise of common stock options

152

3,584

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

824

1,542

Net cash (used in) provided by financing activities

(4,313)

58,758

Net decrease in cash and cash equivalents

(4,803)

(25,454)

Cash and cash equivalents – beginning of period

28,229

47,855

Cash and cash equivalents – end of period

$

23,426

$

22,401

Supplemental cash flow disclosure

Cash paid for interest

$

1,433

$

Cash paid for taxes

$

29

$

1,541

Capital expenditures incurred but not yet paid

$

16

$

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 for the treatment of patients with underserved chronic diseases at home. We provide our Flexitouch® and Entre™ systems, which help control symptoms of lymphedema, a chronic progressive medical condition, 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 manufactured 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”.

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.

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 nine months ended September 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.

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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. 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 lingering consequence of the COVID-19 pandemic. While we saw some level of recovery in the second and third quarters of 2022, ongoing consequences of the pandemic remain uncertain. 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 nine months ended September 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. 

On November 4, 2022, we entered into an Amendment to the AffloVest APA (the “APA Amendment”) with IBC, which modifies the terms of the earn-out arrangement under the AffloVest APA, as follows:

Initial Earn-Out: The AffloVest APA provided for an 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.
oThe APA Amendment provides that the calculated amount of the initial earn-out payment is $10.0 million, of which the Company will pay $5.0 million on or before November 28, 2022, and of which the Company will pay $5.0 million, plus an imputed interest payment of $250,000, on or before May 26, 2023.

Second Earn-Out: The AffloVest APA provided for a 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.
oThe APA Amendment changes the 1.5 times multiplier to 3.0 times, but still provides that in no event will the second earn-out 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 is 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.

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The following table reflects the allocation of the 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 definite-lived 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.

Note 5. Inventories

Inventories consisted of the following:

(In thousands)

    

At September 30, 2022

    

At December 31, 2021

Finished goods

$

7,060

$

8,242

Component parts and work-in-process

 

15,960

 

10,975

Total inventories

$

23,020

$

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. 

Intangible Assets

Our patents and other intangible assets are summarized as follows:

Weighted-

At September 30, 2022

Average

Gross

Amortization

Carrying

Accumulated

Net

(In thousands)

    

Period

Amount

Amortization

Amount

Definite-lived intangible assets:

Patents

12 years

$

829

$

157

$

672

Defensive intangible assets

3 years

1,125

721

404

Customer accounts

1 year

125

108

17

Customer relationships

12 years

31,000

2,530

28,470

Developed technology

10 years

13,000

1,254

11,746

Subtotal

46,079

4,770

41,309

Unamortized intangible assets:

Tradenames

9,500

9,500

Patents pending

499

499

Total intangible assets

$

56,078

$

4,770

$

51,308

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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