What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-07 compared with 2022-01-07 · 100 added, 94 removed, 123 unchanged (61% of the section changed)

7 unchanged sentences

Investors are cautioned that actual events or results may differ materially from our expectations, expressed or implied.

Factors that may affect our actual results achieved include, without limitation, our ability to develop existing and new products, future actions by FDA or other regulatory agencies, results of pending or future clinical trials, the results of ongoing litigation, overall economic conditions (including inflation and labor shortages), general market conditions, market acceptance, foreign currency exchange rate fluctuations, the effects on pricing from group purchasing organizations and competition, our ability to integrate purchased businesses and other factors including natural disasters and pandemics (such as the scope, scale and duration of the impact of COVID-19).

Factors that may affect our actual results achieved include, without limitation, our ability to develop existing and new products, future actions by FDA or other regulatory agencies, results of pending or future clinical trials, the results of ongoing litigation, overall economic conditions (including inflation, labor shortages and supply chain challenges, including the cost and availability of raw materials), general market conditions, market acceptance, foreign currency exchange rate fluctuations, the effects on pricing from group purchasing organizations and competition, our ability to integrate purchased businesses and other factors including natural disasters and pandemics (such as the scope, scale and duration of the impact of COVID-19).

Other risks and uncertainties include, but are not limited to, the factors described from time to time in our reports filed with the Securities and Exchange Commission (the "SEC").

12 unchanged sentences

Our devices are generally used in minimally invasive, image-guided procedures.

Many of our products are intended to be used once and then discarded, or they may be temporarily implanted for short- or longer-term use.

Many of our products are intended to be used once and then discarded, or they may be temporarily implanted for short- or long-term use.

Our business operations cross a variety of markets.

13 unchanged sentences

Even with the public health actions that have been taken to reduce the spread of the virus, the market continues to experience disruptions with respect to consumer demand, hospital operating procedures and workflow, trends that may continue.

The Company's ability to manufacture products, the reliability of our supply chain, labor shortages, backlog and inflation (including the cost of raw materials, direct labor and shipping) have impacted our business, trends that may continue.

The Company's ability to manufacture products, the reliability of our supply chain, labor shortages, backlog and inflation (including the cost and availability of raw materials, direct labor and shipping) have impacted our business, trends that may continue.

Accordingly, management continues to evaluate the Company’s liquidity position, communicate with and monitor the actions of our customers and suppliers, and review our near-term financial performance.

In the third quarter of fiscal year 2022, a benefit of $4.2 million was recorded as a result of the employee retention credit that the Company filed for under the provisions of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020 which amended and extended the employee retention credit under section 2301 of the CARES Act.

In evaluating the operating performance of our business, management focuses on revenue, gross margin, operating income, earnings per share and cash flow from operations.

A summary of these key financial metrics for the three and six months ended November 30, 2021 compared to the three and six months ended November 30, 2020 are as follows:

Three months ended November 30, 2021:

A summary of these key financial metrics for the three and nine months ended February 28, 2022 compared to the three and nine months ended February 28, 2021 are as follows:

Three months ended February 28, 2022:

• Revenue increased by 3.9% to $74.0 million.

• Med Tech growth of 36.4% and Med Device growth of 0.8%.

• Med Tech growth of 28.6% while Med Device declined 2.8%.

• Gross profit decreased 190 bps to 52.2%.

1 unchanged sentence

• Loss per share increased by $0.04 to a loss of $0.13.

Six months ended November 30, 2021:

Nine months ended February 28, 2022:

• Revenue increased by 7.0% to $229.2 million.

• Med Tech growth of 50.0% and Med Device growth of 0.1%.

• Med Tech growth of 41.8% while Med Device declined 0.8%.

• Gross profit decreased 140 bps to 52.0%.

2 unchanged sentences

• Cash used in operations in creased by $27.6 million to $15.8 million.

In our Med Tech business, comprised of Auryon, the Thrombectomy portfolio and NanoKnife, Auryon and the Thrombectomy portfolio experienced improved performance during the second quarter of fiscal year 2022 as the number of procedures increased.

In our Med Device business, Vascular Access, also improved in the second quarter of fiscal year 2022 compared to the prior year period.

This was partially offset by our Oncology products, which continued to face pressure from reductions in procedure volumes due to challenges resulting from the COVID-19 pandemic.

In our Med Tech business, comprised of Auryon, the Thrombectomy platform and NanoKnife, Auryon and the Thrombectomy platform experienced improved performance during the third quarter of fiscal year 2022.

Our Med Device business was negatively impacted by the backlog in Vascular Access products and our Oncology products continued to face pressure from reductions in procedure volumes due to challenges resulting from the COVID-19 pandemic, a trend that may continue.

Results of Operations

For the three months ended November 30, 2021, the Company reported a net loss of $8.4 million, or a loss of $0.21 per diluted share, on net sales of $78.3 million, compared with a net loss of $4.3 million, or a loss of $0.11 per diluted share, on net sales of $72.8 million during the same quarter of the prior year.

For the six months ended November 30, 2021, the Company reported a net loss of $15.3 million, or a loss of $0.39 per diluted share, on net sales of $155.3 million, compared with a net loss of $8.5 million, or a loss of $0.22 per diluted share, on net sales of $143.0 million during the same period of the prior year.

For the three months ended February 28, 2022, the Company reported a net loss of $5.0 million, or a loss of $0.13 per diluted share, on net sales of $74.0 million, compared with a net loss of $3.5 million, or a loss of $0.09 per diluted share, on net sales of $71.2 million during the same quarter of the prior year.

For the nine months ended February 28, 2022, the Company reported a net loss of $20.3 million, or a loss of $0.52 per diluted share, on net sales of $229.2 million, compared with a net loss of $12.1 million, or a loss of $0.32 per diluted share, on net sales of $214.2 million during the same period of the prior year.

Net sales - Net sales are derived from the sale of products and related freight charges, less discounts, rebates and returns.

The table below summarizes net sales by Med Tech and Med Device:

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2021 Nov 30, 2020 % Change Nov 30, 2021 Nov 30, 2020 % Change

Three Months Ended Nine Months Ended

(in thousands) Feb 28, 2022 Feb 28, 2021 % Change Feb 28, 2022 Feb 28, 2021 % Change

Med Tech $ 19,612 $ 15,246 28.6% $ 56,117 $ 39,581 41.8%

1 unchanged sentence

Total $ 73,970 $ 71,182 3.9% $ 229,221 $ 214,168 7.0%

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2021 Nov 30, 2020 % Change Nov 30, 2021 Nov 30, 2020 % Change

Three Months Ended Nine Months Ended

(in thousands) Feb 28, 2022 Feb 28, 2021 % Change Feb 28, 2022 Feb 28, 2021 % Change

Net Sales by Global Business Unit

7 unchanged sentences

Total $ 73,970 $ 71,182 3.9% $ 229,221 $ 214,168 7.0%

For the three months ended November 30, 2021, net sales increased $5.5 million to $78.3 million compared to the same period in the prior year.

For the six months ended November 30, 2021, net sales increased $12.3 million to $155.3 million compared to the same period in the prior year.

At November 30, 2021, the Company had a backlog of $4.0 million.

The Med Tech business net sales increased $5.0 million and $12.2 million for the three and six months ended November 30, 2021 compared to the same periods in the prior year, respectively.

For the three months ended February 28, 2022, net sales increased $2.8 million to $74.0 million compared to the same period in the prior year.

For the nine months ended February 28, 2022, net sales increased $15.1 million to $229.2 million compared to the same period in the prior year.

At February 28, 2022, the Company had a backlog of $9.6 million.

The Med Tech business net sales increased $4.4 million and $16.5 million for the three and nine months ended February 28, 2022 compared to the same periods in the prior year, respectively.

The change in sales for both periods was primarily driven by:

• Increased Auryon sales of $3.9 million and $12.9 million compared to the same periods in the prior year, respectively;

• Growth in the thrombectomy platform driven by the AngioVac business of $1.2 million and $1.9 million, compared to the same periods in the prior year, respectively, as the Company saw increased case volumes in AngioVac despite continued COVID-19 challenges along with the limited market launch of the AlphaVac product during the second quarter of fiscal year 2022;

• Decreased NanoKnife sales of $0.7 million for the three months ended November 30, 2021 compared to the same period in the prior year and increased NanoKnife sales of $1.0 million for the six months ended November 30, 2021 compared to the same period in the prior year.

The decrease for the three months ended November 30, 2021 was driven by decreased capital sales offset by a $0.2 million increase in disposable sales, mainly in Europe.

For the six months ended November 30, 2021, NanoKnife disposable sales increased $1.0 million, driven by sales in the U.S.

and Europe, with consistent capital sales.

The Med Device business net sales increased $0.5 million and $0.1 million for the three and six months ended November 30, 2021 compared to the same periods in the prior year, respectively.

Excluding the large UK order in the first quarter of the prior year, net sales increased $5.3 million for the six months ended November 30, 2021.

• Growth in the thrombectomy platform of $0.6 million and $2.7 million compared to the same periods in the prior year, respectively, which was driven by growth in the mechanical thrombectomy platform partially offset by decreased sales of thrombolytics.

Increased sales in the mechanical thrombectomy platform of $0.9 million and $3.3 million, compared to the same periods in the prior year, respectively, was driven by AngioVac and the launch of the AlphaVac product in the second quarter of fiscal year 2022.

Even though sales increased, AngioVac case volume declined in the third quarter of fiscal year 2022 due to continued COVID-19 challenges;

• Decreased NanoKnife sales of $0.2 million for the three months ended February 28, 2022 compared to the same period in the prior year and increased NanoKnife sales of $0.8 million for the nine months ended February 28, 2022 compared to the same period in the prior year.

The decrease for the three months ended February 28, 2022 was driven by decreased capital sales internationally, partially offset by an increase in disposable sales in the U.S.

For the nine months ended February 28, 2022, NanoKnife disposable sales increased $1.2 million, driven by sales in the U.S., partially offset by decreased capital sales.

The Med Device business net sales decreased $1.6 million and $1.5 million for the three and nine months ended February 28, 2022 compared to the same periods in the prior year, respectively.

Excluding the large UK order in the first quarter of the prior year, net sales increased $3.7 million for the nine months ended February 28, 2022.

The change in sales for both periods was primarily driven by:

• Increased case volume for the three months ended November 30, 2021 compared to the same period in the prior year which resulted in increased sales of Core and BioSentry products of $0.7 million and $0.1 million, respectively.

PICCs and Port sales also increased $0.9 million and $0.6 million, respectively with the increase in PICCs driven by sales in the U.S.

and Latin America and the increase in Ports driven solely by sales in the U.S.

These increases for the three months ended November 30, 2021 compared to the same period in the prior year were partially offset by decreased Venous, Midline, Radio Frequency A blation, Microwave and Balloon sales of $0.7 million, $0.2 million, $0.5 million, $0.2 million and $0.1 million, respectively;

• Increased case volume for the six months ended November 30, 2021 compared to the same period in the prior year, which resulted in increased sales of Core and BioSentry products of $2.9 million and $0.4 million, respectively.

• The backlog of $9.6 million at February 28, 2022, which primarily impacted sales of Core, Venous and Vascular Access products, for the three and nine month periods;

• Decreased sales in Vascular Access (specifically Midlines, Ports and Dialysis), Radio Frequency A blation and Microwave products for the three months ended February 28, 2022 compared to the same period in the prior year of $1.4 million, $0.3 million and $0.2 million, respectively.

This was partially offset by increased sales of Core products of $0.3 million for the three months ended February 28, 2022 compared to the same period in the prior year;

• Increased case volume for the nine months ended February 28, 2022 compared to the same period in the prior year, which resulted in increased sales of Core (despite the impact of the backlog) and BioSentry products of $3.1 million and $0.4 million, respectively.

Port sales also increased $1.5 million, driven primarily by sales in the U.S.

These increases for the six months ended November 30, 2021 compared to the same period in the prior year were partially offset by decreased Venous, Midline, PICCs, Di alysis, Radio Frequency Ablation and Microwave sales of $0.1 million, $2.0 million, $1.6 million, $0.4 million, $0.4 million and $0.6 million, respectively;

• Midlines, PICCs and Ports increased $3.5 million, excluding the prior year order in the UK, for the six months ended November 30, 2021 compared to the prior year period;

• The backlog of $4.0 million at November 30, 2021, which was primarily related to Med Device products.

These increases for the nine months ended February 28, 2022 compared to the same period in the prior year were partially offset by decreased Midline, PICCs, Di alysis, Radio Frequency Ablation and Microwave sales of $2.3 million, $1.6 million, $1.0 million, $0.6 million, $0.8 million, respectively;

• Midlines, PICCs and Ports increased $2.8 million, excluding the prior year order in the UK, for the nine months ended February 28, 2022 compared to the prior year period.

Gross Profit, Operating Expenses, and Other Income (expense)

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2021 Nov 30, 2020 % Change Nov 30, 2021 Nov 30, 2020 % Change

Three Months Ended Nine Months Ended

(in thousands) Feb 28, 2022 Feb 28, 2021 % Change Feb 28, 2022 Feb 28, 2021 % Change

Gross profit $ 38,583 $ 38,530 0.1 % $ 119,277 $ 114,468 4.2 %

7 unchanged sentences

Gross profit - Gross profit consists of net sales less the cost of goods sold, which includes the costs of materials, products purchased from third parties and sold by us, manufacturing personnel, royalties, freight, business insurance, depreciation of property and equipment and other manufacturing overhead, exclusive of intangible amortization.

Gross profit increased by $0.4 million for th e three months ended November 30, 2021 compared to the same period in the prior year.

The change is primarily attributable to the following:

• Sales volume positively impacted gross profit by $3.3 million;

• Price and mix negatively impacted gross profit by $0.4 million as a result of increased sales of Vascular Access products and decreased sales of NanoKnife capital.

This negative impact was partially offset by increased sales of Auryon and AngioVac products;

• Labor shortages, inflationary costs on raw materials and production volume negatively impacted gross profit by $1.7 million;

• Start-up costs related to Auryon and AlphaVac of $0.8 million, including depreciation on Auryon placement units of $0.4 million, negatively impacted gross profit .

Gross profit increased by $4.8 million for the six months ended November 30, 2021 compared to the same period in the prior year.

The change is primarily attributable to the following:

• Sales volume positively impacted gross profit by $6.9 million;

• Price and mix positively impacted gross profit by $1.3 million as a result of increased sales of Auryon and AngioVac products.

This positive impact was partially offset by increased sales of Vascular Access products;

• Start-up costs related to Auryon and AlphaVac of $1.7 million, including depreciation on Auryon placement units of $0.6 million, negatively impacted gross profit;

• Labor shortages, freight and inflationary costs on raw materials, negatively impacted gross profit by $1.7 million year over year.

Gross profit increased by $0.1 million for th e three months ended February 28, 2022 compared to the same period in the prior year.

The change was primarily driven by:

• Sales volume, which positively impacted gross profit by $1.5 million;

• Labor shortages, inflationary costs on raw materials and production volume which negatively impacted gross profit by $1.7 million;

• A benefit of $0.8 million that was recorded as a result of the employee retention credit that the Company filed for under the provisions of the CARES Act in the third quarter of the current year compared to a benefit of $0.7 million in the prior year period.

Gross profit increased by $4.8 million for the nine months ended February 28, 2022 compared to the same period in the prior year.

The change was primarily driven by:

• Sales volume which positively impacted gross profit by $9.2 million;

• Price and mix which positively impacted gross profit by $0.9 million as a result of increased sales of Auryon and AngioVac products.

This positive impact was partially offset by sales of lower margin Vascular Access products;

• Start-up costs related to Auryon and AlphaVac of $2.1 million, including depreciation on Auryon placement units of $0.8 million, which negatively impacted gross profit;

• Labor shortages, freight and inflationary costs on raw materials which negatively impacted gross profit by $2.7 million year over year;

Research and development expense - Research and development (“R&D”) expense includes internal and external costs to develop new products, enhance existing products, validate new and enhanced products, and manage clinical, regulatory and medical affairs.

R&D expense decreased $1.5 million and $3.1 million for the three and six months ended November 30, 2021 compared to the same period in the prior year, respectively.

The change from each period is primarily attributable to:

• The timing of certain projects, which reduced R&D project expense by $0.7 million and $2.1 million for the three and six months ended November 30, 2021 compared to the same periods in the prior year, respectively;

• Open R&D positions, which resulted in decreased compensation and benefits expense of $0.7 and $1.1 million for the three and six months ended November 30, 2021 compared to the same periods in the prior year, respectively.

R&D expense decreased $1.3 million and $4.4 million for the three and nine months ended February 28, 2022 compared to the same period in the prior year, respectively.

The change for both periods was primarily driven by:

• The timing of certain projects, which reduced R&D project expense by $0.3 million and $2.4 million compared to the same periods in the prior year, respectively;

• Open R&D positions, which resulted in decreased compensation and benefits expense of $0.9 and $2.0 million compared to the same periods in the prior year, respectively;

• A benefit of $0.5 million that was recorded as a result of the employee retention credit that the Company filed for under the provisions of the CARES Act in the third quarter of the current year compared to $0.3 million in the prior year period.

Sales and marketing expense - Sales and marketing (“S&M”) expense consists primarily of salaries, commissions, travel and related business expenses, attendance at medical society meetings, product promotions and marketing activities.

S&M expense increased $3.4 million and $10.2 million for the three and six months ended November 30, 2021 compared to the same period in the prior year, respectively.

The change from each period is primarily attributable to:

• Additional headcount from the build-out of the Auryon sales and marketing teams, which increased compensation and benefits expense by $2.5 million and $6.8 million for the three and six months ended November 30, 2021 compared to the same periods in the prior year, respectively;

• Increased travel, meeting and tradeshow expenses of $1.0 million and $3.2 million for the three and six months ended November 30, 2021 compared to the same period in the prior year, respectively, as some COVID-19 restrictions were lifte d.

S&M expense increased $0.8 million and $11.0 million for the three and nine months ended February 28, 2022 compared to the same period in the prior year, respectively.

The change for both periods was primarily driven by:

• Additional headcount from the build-out of the Auryon sales and marketing teams, which increased compensation and benefits expense by $2.2 million and $8.9 million compared to the same periods in the prior year, respectively;

• Travel, meeting and tradeshow expenses, which increased $0.8 million and $4.2 million compared to the same periods in the prior year, respectively, as some COVID-19 restrictions were lifte d;

• A benefit of $2.8 million that was recorded as a result of the employee retention credit that the Company filed for under the provisions of the CARES Act in the third quarter of the current year compared to $0.9 million in the prior year period.

General and administrative expense - General and administrative (“G&A”) expense includes executive management, finance, information technology, human resources, business development, legal, and the administrative and professional costs associated with those activities.

G&A expense increased $0.5 million and $0.8 million for the three and six months ended November 30, 2021 compared to the same period in the prior year, respectively.

The change from each period is primarily attributable to:

• Additional headcount, which increased compensation and benefits expense by $0.5 million and $1.3 million for the three and six months ended November 30, 2021 compared to the same period in the prior year, respectively;

• Legal expense decreased $1.4 million offset by other outside consultant spend of $0.8 million for the six months ended November 30, 2021 compared to the same period in the prior year.

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2021 Nov 30, 2020 $ Change Nov 30, 2021 Nov 30, 2020 $ Change

G&A expense decreased $0.3 million for the three months ended February 28, 2022 and increased $0.6 million for the nine months ended February 28, 2022 compared to the same periods in the prior year.

The change for both periods was primarily driven by:

• Compensation and benefits expense, which decreased $1.1 million for the three months ended February 28, 2022 compared to the same period in the prior year while compensation and benefits expense for the nine months ended February 28, 2022 increased $0.2 million compared to the same period in the prior year;

• Other outside consultant spend, which increased $0.7 million for the three months ended February 28, 2022 compared to the same period in the prior year;

• Legal expense, which decreased $1.2 million while other outside consultant spend increased $1.6 million for the nine months ended February 28, 2022 compared to the same period in the prior year.

Three Months Ended Nine Months Ended

(in thousands) Feb 28, 2022 Feb 28, 2021 $ Change Feb 28, 2022 Feb 28, 2021 $ Change

Amortization of intangibles $ 4,895 $ 4,292 $ 603 $ 14,605 $ 13,838 $ 767

1 unchanged sentence

Acquisition, restructuring and other items, net $ 2,359 $ 610 $ 1,749 $ 7,052 $ 3,057 $ 3,995

Other income (expense), net $ (184) $ (337) $ 153 $ (692) $ (28) $ (664)

Other expense, net $ (462) $ (389) $ (73) $ (1,154) $ (417) $ (737)

Amortization of intangibles - Represents the amount of amortization expense that was taken on intangibles assets held by the Company.

• Amortization expense increased $0.3 million and $0.2 million, respectively, for the three and six months ended November 30, 2021 compared to the prior year periods.

• Amortization expense increased $0.6 million and $0.8 million, respectively, for the three and nine months ended February 28, 2022 compared to the prior year periods.

The increase is due to amortization relating to the Camaro intangible asset addition of $3.9 million in the first quarter of fiscal year 2022, partially offset by assets that became fully amortized in fiscal year 2021.

Change in fair value of contingent consideration - Represents changes in contingent consideration driven by changes to estimated future payments on earn-out liabilities created through acquisitions and amortization of present value discounts on long-term contingent consideration.

• The change in the fair value for the three and six months ended November 30, 2021 is related to the Eximo contingent consideration.

• The change in the fair value for the three and nine months ended February 28, 2022 is related to the Eximo contingent consideration.

Acquisition, restructuring and other items, net - Represents costs associated with mergers and acquisitions, restructuring expenses, legal costs that are related to litigation that is not in the ordinary course of business, legal settlements and other one-time items.

Acquisition, restructuring and other items, net, increased by $1.1 million and $2.2 million for the three and six months ended November 30, 2021, respectively, compared to the same period in the prior year.

The change from each period is primarily attributable to:

• Legal expense, re lated to litigation that is outside of the normal course of business, which increased $0.9 million and $2.2 million, respectively, for the three and six months ended November 30, 2021 compared to the same period in the prior year, respectively.

Acquisition, restructuring and other items, net, increased by $1.7 million and $4.0 million for the three and nine months ended February 28, 2022, respectively, compared to the same periods in the prior year.

The change for both periods was primarily driven by:

• Legal expense, re lated to litigation that is outside of the normal course of business, which increased $0.7 million and $2.9 million compared to the same periods in the prior year, respectively;

• Manufacturing relocation expense related to the move of certain manufacturing lines to Costa Rica of $0.4 million and $0.5 million compared to the same periods in the prior year, respectively;

• Other expenses (mainly severance associated with organizational changes), which increased $0.3 million for the three months ended February 28, 2022 compared to the same period in the prior year;

• Manufacturing facilities relocation expense of $0.4 million for the nine months ended February 28, 2021 as a result of the sale of the Fluid Management business ;

• Transition Services Agreement fees of $0.3 million and $1.0 million from Medline Industries were received for the three and nine months ended February 28, 2021.

These activities were completed during fiscal year 2021.

Other income (expense), net - Other expenses include interest expense, foreign currency impacts, bank fees, and amortization of deferred financing costs.

• The change in other expense of $0.2 million and $0.7 million for the three and six months ended November 30, 2021 compared to the same period in the prior year, respectively, is primarily due to unrealized foreign currency fluctuations of $0.1 million and $0.8 million, respectively.

• The change in other expense of $0.1 million and $0.7 million for the three and nine months ended February 28, 2022 compared to the same period in the prior year, respectively, is primarily due to unrealized foreign currency fluctuations of $0.1 million and $0.9 million, respectively.

Income Tax Benefit

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2021 Nov 30, 2020 Nov 30, 2021 Nov 30, 2020

Three Months Ended Nine Months Ended

(in thousands) Feb 28, 2022 Feb 28, 2021 Feb 28, 2022 Feb 28, 2021

Income tax benefit $ (0.8) $ (0.6) $ (2.9) $ (2.0)

Effective tax rate including discrete items 13.9 % 14.1 % 12.7 % 14.4 %

Our effective tax rate including discrete items for the three-month periods ended November 30, 2021 and 2020 was 5.8% and 17.5%, respectively.

Our effective tax rate including discrete items for the six-month periods ended November 30, 2021 and 2020 was 12.3% and 14.5%, respectively.

Our effective tax rate including discrete items for the three-month periods ended February 28, 2022 and 2021 was 13.9% and 14.1%, respectively.

Our effective tax rate including discrete items for the nine-month periods ended February 28, 2022 and 2021 was 12.7% and 14.4%, respectively.

In fiscal year 2022, the Company’s effective tax rate differs from the U.S.

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We are closely monitoring receivables and payables.

Our cash and cash equivalents totaled $34.3 million as of November 30, 2021, compared with $48.2 million as of May 31, 2021.

As of November 30, 2021 and May 31, 2021, total debt outstanding related to the Revolving Facility was $25.0 million and $20.0 million, respectively.

The fair value of contingent consideration liability as of November 30, 2021 and May 31, 2021, was $16.5 million and $15.7 million, respectively.

Our cash and cash equivalents totaled $23.9 million as of February 28, 2022, compared with $48.2 million as of May 31, 2021.

As of February 28, 2022 and May 31, 2021, total debt outstanding related to the Revolving Facility was $25.0 million and $20.0 million, respectively.

The fair value of contingent consideration liability as of February 28, 2022 and May 31, 2021, was $16.7 million and $15.7 million, respectively.

The table below summarizes our cash flows:

Six Months Ended

(in thousands) Nov 30, 2021 Nov 30, 2020

Nine Months Ended

(in thousands) Feb 28, 2022 Feb 28, 2021

Cash provided by (used in):

5 unchanged sentences

Cash flows consisted of the following:

Cash provided by (used in) operating activities

Six months ended November 30, 2021 and 2020:

• Net loss of $15.3 million and $8.5 million for the period ended November 30, 2021 and 2020, respectively, plus the non-cash items, primarily driven by depreciation and amortization and stock based compensation, along with the

changes in working capital below, contributed to cash used in operations of $7.0 million and cash provided by operations of $6.0 million, respectively, for these periods.

• For the period ended November 30, 2021, working capital was negatively impacted by decreased accounts payable, accrued liabilities and other liabilities of $4.5 million, mainly driven by the payment of annual incentive compensation in the first quarter along with increased accounts rec eivable of $2.9 million.

• For the period ended November 30, 2020, working capital was negatively impacted by increased accounts receivable of $2.3 million and decreased accounts payable, accrued liabilities and other liabilities of $3.8 million.

Cash (used in) provided by operating activities

Nine months ended February 28, 2022 and 2021:

• Net loss of $20.3 million and $12.1 million for the period ended February 28, 2022 and 2021, respectively, plus the non-cash items, primarily driven by depreciation and amortization and stock based compensation, along with the changes in working capital below, contributed to cash used in operations of $15.8 million and cash provided by operations of $11.9 million, respectively, for these periods.

• For the period ended February 28, 2022, working capital was negatively impacted by decreased accounts payable, accrued liabilities and other liabilities of $11.8 million, mainly driven by the payment of annual incentive compensation in the first fiscal quarter along with increased accounts rec eivable of $6.4 million.

• For the period ended February 28, 2021, working capital was negatively impacted by increased accounts receivable of $1.8 million and decreased accounts payable, accrued liabilities and other liabilities of $1.7 million.

Inventory had a favorable impact on working capital of $11.1 million.

Cash used in investing activities

Six months ended November 30, 2021 and 2020:

Nine months ended February 28, 2022 and 2021:

• $3.3 million and $4.6 million, respectively, of cash was used for fixed asset additions;

1 unchanged sentence

• $3.6 million of cash was used for the QX Medical asset acquisition in the first quarter of fiscal year 2022.

Cash provided by financing activities

Six months ended November 30, 2021 and 2020:

• $5.0 million draw on the revolver in the first quarter of fiscal year 2022 for the QX Medical asset acquisition;

Cash provided by (used in) financing activities

Nine months ended February 28, 2022 and 2021:

• $5.0 million draw on the Revolving Facility in the first quarter of fiscal year 2022 for the QX Medical asset acquisition;

• $10.0 million payment on the Revolving Facility in the third quarter of fiscal year 2021;

• $2.4 million and $2.5 million, respectively, of proceeds from stock option and ESPP activity.

5 unchanged sentences

The amount that we can borrow under our Credit Agreement is directly based on our leverage ratio.

The interest rate on the Revolving Facility at November 30, 2021 was 1.34%.

The Company was in compliance with the Credit Agreement covenants as of November 30, 2021.

The interest rate on the Revolving Facility at February 28, 2022 was 1.36%.

The Company was in compliance with the Credit Agreement covenants as of February 28, 2022.

In the first quarter of fiscal year 2022, the Company made a $5.0 million draw on the Revolving Facility in conjunction with the QX Medical asset acquisition.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis