What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-10-11 compared with 2022-04-07 · 158 added, 193 removed, 451 unchanged (44% of the section changed)

4 unchanged sentences

(in thousands of dollars, except per share data)

Three Months Ended Nine Months Ended

Feb 28, 2022 Feb 28, 2021 Feb 28, 2022 Feb 28, 2021

Three Months Ended

Aug 31, 2022 Aug 31, 2021

Net sales $ 81,537 $ 76,971

10 unchanged sentences

Operating loss ( 13,301 ) ( 8,100 )

Other income (expense):

Other expense:

Interest expense, net ( 381 ) ( 156 )

Other income (expense), net ( 289 ) ( 163 ) ( 651 ) 259

Other expense, net ( 175 ) ( 352 )

Total other expense, net ( 556 ) ( 508 )

13 unchanged sentences

(in thousands of dollars)

Three Months Ended Nine Months Ended

Feb 28, 2022 Feb 28, 2021 Feb 28, 2022 Feb 28, 2021

Three Months Ended

Aug 31, 2022 Aug 31, 2021

Net loss $ ( 13,004 ) $ ( 6,972 )

10 unchanged sentences

(in thousands of dollars, except share data)

Feb 28, 2022 May 31, 2021

Aug 31, 2022 May 31, 2022

Current assets

14 unchanged sentences

Accrued liabilities 25,558 34,842

Current portion of contingent consideration 8,892 8,783

Other current liabilities 2,682 2,652

2 unchanged sentences

Deferred income taxes 15,115 16,037

Contingent consideration 16,741 15,741

Contingent consideration, net of current portion 8,266 8,165

Other long-term liabilities 4,042 4,736

5 unchanged sentences

Common stock, par value $ 0.01 per share, 75,000,000 shares authorized;

39,520,101 and 38,920,951 shares issued and 39,150,101 and 38,550,951 shares outstanding at February 28, 2022 and May 31, 2021, respectively

39,847,751 and 39,541,173 shares issued and 39,477,751 and 39,171,173 shares outstanding at August 31, 2022 and May 31, 2022, respectively

Additional paid-in capital 589,984 586,879

Accumulated deficit ( 171,417 ) ( 158,413 )

Treasury stock, 370,000 shares at February 28, 2022 and May 31, 2021, respectively

Treasury stock, 370,000 shares at August 31, 2022 and May 31, 2022, respectively

( 5,714 ) ( 5,714 )

7 unchanged sentences

(in thousands of dollars)

Nine Months Ended

Feb 28, 2022 Feb 28, 2021

Three Months Ended

Aug 31, 2022 Aug 31, 2021

Cash flows from operating activities:

Net loss $ ( 13,004 ) $ ( 6,972 )

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

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

Depreciation and amortization 7,660 6,997

11 unchanged sentences

Accounts payable, accrued and other liabilities ( 8,990 ) ( 6,345 )

Net cash (used in) provided by operating activities ( 15,754 ) 11,894

Net cash used in operating activities ( 24,745 ) ( 8,904 )

Cash flows from investing activities:

Additions to property, plant and equipment ( 809 ) ( 1,021 )

Acquisition of intangibles ( 540 ) —

Additions to placement and evaluation units ( 2,227 ) ( 4,471 )

4 unchanged sentences

Repayment of long-term debt ( 45,000 ) —

Deferred financing costs on long-term debt ( 706 ) —

Proceeds from exercise of stock options and employee stock purchase plan 82 446

Net cash provided by (used in) financing activities 7,354 ( 7,541 )

Net cash provided by financing activities 24,376 5,446

Effect of exchange rate changes on cash and cash equivalents ( 316 ) ( 139 )

(Decrease) increase in cash and cash equivalents ( 24,271 ) 34

Decrease in cash and cash equivalents ( 4,261 ) ( 12,689 )

Cash and cash equivalents at beginning of period 28,825 48,161

19 unchanged sentences

Stock-based compensation 3,024 3,024

Other comprehensive income, net of tax 590 590

Balance at August 31, 2021 39,390,241 $ 379 $ 576,380 $ ( 138,838 ) $ 3,743 ( 370,000 ) $ ( 5,714 ) $ 435,950

Net loss ( 8,351 ) ( 8,351 )

Exercise of stock options 56,064 1,022 1,022

Issuance/Cancellation of restricted stock units 8,695 ( 83 ) ( 83 )

Purchases of common stock under ESPP 193 3 3

Stock-based compensation 3,008 3,008

Other comprehensive income, net of tax 819 819

Balance at November 30, 2021 39,455,193 $ 379 $ 580,330 $ ( 147,189 ) $ 4,562 ( 370,000 ) $ ( 5,714 ) $ 432,368

Net loss ( 4,958 ) ( 4,958 )

Exercise of stock options 5,000 77 77

Issuance/Cancellation of restricted stock units 11,304 ( 84 ) ( 84 )

Purchases of common stock under ESPP 48,604 1 972 973

Stock-based compensation 2,352 2,352

Other comprehensive loss, net of tax ( 550 ) ( 550 )

Balance at February 28, 2022 39,520,101 $ 380 $ 583,647 $ ( 152,147 ) $ 3,526 ( 370,000 ) $ ( 5,714 ) $ 429,692

Balance at August 31, 2022 39,847,751 $ 381 $ 589,984 $ ( 171,417 ) $ 807 ( 370,000 ) $ ( 5,714 ) $ 414,041

Common Stock Additional

1 unchanged sentence

comprehensive

income (loss) Treasury Stock

income Treasury Stock

Shares Amount Shares Amount Total

1 unchanged sentence

Net loss ( 6,972 ) ( 6,972 )

Exercise of stock options 80,635 1 1,279 1,280

Issuance/Cancellation of restricted stock units 279,495 ( 1,734 ) ( 1,734 )

Issuance/Cancellation of performance share units 59,371 —

Purchases of common stock under ESPP 49,789 1 899 900

2 unchanged sentences

Balance at August 31, 2021 39,390,241 $ 379 $ 576,380 $ ( 138,838 ) $ 3,743 ( 370,000 ) $ ( 5,714 ) $ 435,950

Net loss ( 4,268 ) ( 4,268 )

Issuance/Cancellation of restricted stock units 8,952 ( 10 ) ( 10 )

Stock-based compensation 2,387 2,387

Other comprehensive income, net of tax 1,180 1,180

Balance at November 30, 2020 38,702,030 $ 375 $ 566,602 $ ( 108,854 ) $ 1,934 ( 370,000 ) $ ( 5,714 ) $ 454,343

Net loss ( 3,544 ) ( 3,544 )

Exercise of stock options 81,636 1 1,353 1,354

Issuance/Cancellation of restricted stock units 9,103 ( 49 ) ( 49 )

Purchases of common stock under ESPP 84,598 1 672 673

Stock-based compensation 2,147 2,147

Other comprehensive loss, net of tax 12 12

Balance at February 28, 2021 38,877,367 $ 377 $ 570,725 $ ( 112,398 ) $ 1,946 ( 370,000 ) $ ( 5,714 ) $ 454,936

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

3 unchanged sentences

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Loss for the three and nine months ended February 28, 2022 and 2021, the Consolidated Balance Sheet as of February 28, 2022, the Consolidated Statements of Cash Flows for the nine months ended February 28, 2022 and 2021, and the Consolidated Statements of Stockholders’ Equity for the nine months ended February 28, 2022 and 2021 have been prepared by the Company and are unaudited.

The Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Loss for the three months ended August 31, 2022 and 2021, the Consolidated Balance Sheet as of August 31, 2022, the Consolidated Statements of Cash Flows for the three months ended August 31, 2022 and 2021, and the Consolidated Statements of Stockholders’ Equity for the three months ended August 31, 2022 and 2021 have been prepared by the Company and are unaudited.

The Consolidated Balance Sheet as of May 31, 2022 was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to state fairly the financial position, changes in stockholders’ equity and comprehensive income, results of operations and cash flows as of and for the period ended February 28, 2022 (and for all periods presented) have been made.

The unaudited interim consolidated financial statements for the three and nine months ended February 28, 2022 and 2021 include the accounts of AngioDynamics, Inc.

and its wholly owned subsidiaries, collectively, "us", "we" or the “Company”.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to state fairly the financial position, changes in stockholders’ equity and comprehensive income, results of operations and cash flows as of and for the period ended August 31, 2022 (and for all periods presented) have been made.

The unaudited interim consolidated financial statements for the three months ended August 31, 2022 and 2021 include the accounts of AngioDynamics, Inc.

and its wholly owned subsidiaries (collectively, the "Company", "we", "our" or "us").

All intercompany balances and transactions have been eliminated.

17 unchanged sentences

Disaggregation of Revenue

The following table summarizes net sales by Global Business Unit ("GBU") and geography:

Three Months Ended Feb 28, 2022

Three Months Ended Feb 28, 2021

(in thousands) United States International Total United States International Total

Endovascular Therapies $ 34,400 $ 3,683 $ 38,083 $ 29,529 $ 3,722 $ 33,251

Vascular Access 19,483 3,948 23,431 21,009 3,804 24,813

Oncology 8,562 3,894 12,456 8,116 5,002 13,118

Total $ 62,445 $ 11,525 $ 73,970 $ 58,654 $ 12,528 $ 71,182

Nine Months Ended Feb 28, 2022

Nine Months Ended Feb 28, 2021

(in thousands) United States International Total United States International Total

Endovascular Therapies $ 105,405 $ 10,394 $ 115,799 $ 87,198 $ 9,810 $ 97,008

Vascular Access 60,664 12,795 73,459 60,392 16,456 76,848

Oncology 26,190 13,773 39,963 25,856 14,456 40,312

Total $ 192,259 $ 36,962 $ 229,221 $ 173,446 $ 40,722 $ 214,168

As the Company has previously announced, the Company is focused on its ongoing transformation from a company with a broad portfolio of largely undifferentiated products to a more focused medical technology company that delivers unique and innovative health care solutions.

The Company believes that this transformation will enable the Company to shift the portfolio from the mature, lower-growth markets where we have competed in the past by investing in technology and products that provide access to larger and faster growing markets.

As such, we believe the growth in the near to mid-term will be driven by our high technology products including Auryon, Thrombectomy (which includes AngioVac, AlphaVac and thrombolytics) and NanoKnife.

We will refer to these high technology products as our Med Tech business and we will refer to the remainder of the portfolio as our Med Device business.

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

Three Months Ended Nine Months Ended

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

As such, we believe the growth in the near to mid-term will be driven by our Med Tech segment.

The following table summarizes net sales by Med Tech, Med Device and by geography:

Three Months Ended August 31, 2022 Three Months Ended August 31, 2021

(in thousands) United States International Total United States International Total

Med Tech $ 20,442 $ 2,375 $ 22,817 $ 15,223 $ 2,384 $ 17,607

18 unchanged sentences

Revenue Recognition

Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which occurs at a point in time, and may be upon shipment from the Company’s manufacturing site or delivery to the customer’s named location, based on the contractual shipping terms of a contract.

In determining whether control has transferred, the Company considers if there is a present right to payment from the customer and when physical possession, legal title and risks and rewards of ownership have transferred to the customer.

20 unchanged sentences

The Company currently estimates product return liabilities using its historical product return information and considers other factors that it believes could significantly impact its expected returns, including product recalls.

During the nine months ended February 28, 2022, such product returns were not material.

During the three months ended August 31, 2022, such product returns were not material.

Contract Balances with Customers

4 unchanged sentences

The following table presents changes in the Company’s receivables, contract assets and contract liabilities with customers:

(in thousands) Feb 28, 2022 May 31, 2021

(in thousands) Aug 31, 2022 May 31, 2022

Receivables $ 53,586 $ 52,304

1 unchanged sentence

Contract liabilities $ 647 $ 526

During the nine months ended February 28, 2022, the Company had additions to contract liabilities of $ 1.6 million.

This was offset by $ 1.6 million in revenue that was recognized during the nine months ended February 28, 2022.

During the three months ended August 31, 2022, the Company had additions to contract liabilities of $ 0.3 million.

This was offset by $ 0.2 million in revenue that was recognized during the three months ended August 31, 2022.

Costs to Obtain or Fulfill a Customer Contract

7 unchanged sentences

Inventories consisted of the following:

(in thousands) Feb 28, 2022 May 31, 2021

(in thousands) Aug 31, 2022 May 31, 2022

Raw materials $ 32,474 $ 28,251

5 unchanged sentences

Based on these assumptions, the Company estimates the amount of obsolete, expiring and slow-moving inventory.

The total inventory reserve at February 28, 2022 and May 31, 2021 was $ 4.1 million and $ 3.8 million, respectively.

The total inventory reserve at August 31, 2022 and May 31, 2022 was $ 3.8 million and $ 3.7 million, respectively.

GOODWILL AND INTANGIBLE ASSETS

1 unchanged sentence

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination.

The Company's annual testing for impairment of goodwill was completed as of December 31, 2021.

The Company operates as a single operating segment with one reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole.

The Company determines the fair value of the reporting unit based on the market valuation approach and concluded that it was not more-likely-than-not that the fair value of the Company's reporting unit was less than its carrying value.

Even though the Company determined that there was no goodwill impairment as of December 31, 2021, the future occurrence of a potential indicator of impairment, such as a significant adverse change in legal, regulatory, business or economic conditions or a more-likely-than-not expectation that the reporting unit or a significant portion of the reporting unit will be sold or disposed of, would require an interim assessment for the reporting unit prior to the next required annual assessment as of December 31, 2022.

There were no adjustments to goodwill for the nine months ended February 28, 2022 other than foreign currency translation adjustments.

The Company has historically performed its annual goodwill assessment during the third quarter of each fiscal year.

During the fourth quarter of fiscal year 2022, the Company changed its annual impairment assessment date from December 31 to April 30 to more closely align the impairment assessment date with the Company's long term planning and forecasting process.

The Company's annual testing for impairment of goodwill was completed as of April 30, 2022.

Prior to the first quarter of fiscal year 2023, the Company managed its operations as one reporting unit.

At the beginning of the first quarter of fiscal year 2023, the Company began to manage its operations as two operating segments and two reporting units, namely Med Tech and Med Device (see Note 11"Segment and Geographic Information" set forth in the Notes to our consolidated financial statements included in this Quarterly Report on Form 10-Q).

As a result of this change, goodwill was required to be allocated to each reporting unit and an interim goodwill impairment assessment was performed at the Company and reporting unit levels.

To determine the fair value of the individual reporting units and the entire company as of June 1, 2022, the Company utilized the income approach.

The income approach is based on the projected cash flows discounted to their present value using discount rates, that in the Company's judgment, consider the timing and risk of the forecasted cash flows using internally developed forecasts and assumptions.

Under the income approach, the discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics.

Other significant assumptions include revenue growth rates, profitability projections, and terminal value growth rates.

The market approach was also considered;

however, the income approach was chosen as the Company determined it is a better representation of both the Med Tech and Med Device reporting units' projected long-term performance.

The fair value of each reporting unit and the Company as a whole was assessed to determine if there was any impairment.

The Company compared each reporting unit's fair value to the adjusted carrying value to conclude that there was no impairment for either reporting unit or the Company as a whole.

The adjusted carrying value of each reporting unit was used to calculate the Company's book value to compare to its market capitalization at the assessment date.

Based on the results of this evaluation, there were no adjustments to goodwill for either reporting unit or the Company as a whole as of August 31, 2022.

Even though the Company determined that there was no goodwill impairment at August 31, 2022, the future occurrence of a potential indicator of impairment, such as a significant adverse change in legal, regulatory, business or economic conditions or a more-likely-than-not expectation that one of the reporting units or a significant portion of either of the reporting units will be sold or disposed of, would require an interim assessment for the reporting units prior to the next required annual assessment as of April 30, 2023.

Goodwill for each reporting unit is allocated as follows:

Three Months Ended Aug 31, 2022

(in thousands) Med Tech Med Device Total

Balance, June 1, 2022 $ 160,529 $ 40,529 $ 201,058

Foreign currency translation adjustments ( 20 ) — ( 20 )

Balance, August 31, 2022

$ 160,509 $ 40,529 $ 201,038

There were no adjustments to goodwill for the three months ended August 31, 2022 other than foreign currency translation adjustments.

Definite Lived Intangible Assets

1 unchanged sentence

Useful lives range from two to eighteen years .

The Company periodically reviews, and adjusts, if necessary, the estimated useful lives of its intangible assets and reviews such assets or asset groups for impairment whenever events or changes in circumstances indicate

that the carrying value of the assets or asset groups may not be recoverable.

If an intangible asset or asset group is considered to be impaired, the amount of the impairment will equal the excess of the carrying value over the fair value of the asset.

12 unchanged sentences

$ 314,369 $ ( 161,989 ) $ 152,380

Amortization expense for the three months ended February 28, 2022 and 2021 was $ 4.9 million and $ 4.3 million, respectively.

Amortization expense for the nine months ended February 28, 2022 and 2021 was $14.6 million and $13.8 million, respectively.

Amortization expense for the three months ended August 31, 2022 and 2021 was $ 4.8 million and $ 4.8 million, respectively.

Expected future amortization expense related to the intangible assets for each of the following fiscal years is as follows:

4 unchanged sentences

Accrued liabilities consisted of the following:

(in thousands) Feb 28, 2022 May 31, 2021

(in thousands) Aug 31, 2022 May 31, 2022

Payroll and related expenses $ 10,109 $ 20,232

3 unchanged sentences

Sales and franchise taxes 938 750

Litigation Matters — 975

Rebates 558 511

2 unchanged sentences

LONG-TERM DEBT

On June 3, 2019 the Company repaid all amounts outstanding under its then existing credit agreement and entered into a new Credit Agreement with the lender's party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Bank of America, N.A.

and KeyBank National Association, as co-syndication agents.

The Credit Agreement provides for a $ 125.0 million secured revolving credit facility (the “Revolving Facility”), which includes an uncommitted expansion feature that allows the Company to increase the total revolving commitments and/or add new tranches of term loans in an aggregate amount not to exceed $ 75.0 million.

The proceeds may be used to refinance certain existing indebtedness of the Company and its subsidiaries, to finance the working capital needs, and for general corporate purposes (including permitted acquisitions), of the Company and its subsidiaries.

On August 30, 2022, the Company repaid all amounts outstanding under its then existing credit agreement and entered into a new Credit Agreement (the "Credit Agreement") with its lenders, JPMorgan Chase Bank, N.A., as Administrative Agent, sole bookrunner, and sole lead arranger, and Bank of America, N.A.

and KeyBank National Association, as Syndication Agents.

The Credit Agreement provides for a $ 75.0 million secured revolving credit facility (the "Revolving Facility") and a $ 30.0 million delayed draw term loan (the "Delayed Draw Term Loan"), and also includes an uncommitted expansion feature that allows the Company to increase the total revolving commitments and/or add new tranches of term loans in an aggregate amount not to exceed $ 75.0 million.

Each exercise of such expansion feature must be drawn in $ 5.0 million increments.

The proceeds of the Revolving Facility may be used for general corporate purposes, including permitted acquisitions.

The proceeds of the Delayed Draw Term Loan may be used for general corporate purposes, including primarily to finance the manufacturing costs of the Auryon laser capital equipment.

The Credit Agreement has a five-year maturity.

Interest on the Revolving Facility is based, at the Company’s option, on either a base rate of LIBOR or alternate base rate, plus an applicable margin tied to the Company’s total leverage ratio and having ranges between 0.25 % and 0.75 % for base rate loans and between 1.25 % and 1.75 % for LIBOR loans.

After default, the interest rate may be increased by 2.0 %.

The Revolving Facility also carries a commitment fee of 0.20 % to 0.25 % per annum on the unused portion.

The Company's obligations under the Revolving Facility are unconditionally guaranteed, jointly and severally, by the Company's material direct and indirect domestic subsidiaries (the “Guarantors”).

All obligations of the Company and the Guarantors under the Revolving Facility are secured by first priority security interests in substantially all of the assets of the Company and the Guarantors.

Interest on the Revolving Facility and Delayed Draw Term Loan will be based, at the Company's option, on a rate equal to (i) the Secured Overnight Financing Rate ("SOFR") plus 0.10 % (subject to a floor of 0 %), or (ii) if the Company elects to treat a borrowing as an ABR Borrowing, an alternate base rate based on SOFR, plus, in each case, an applicable margin of 1.25 %, 1.50 % or 1.75 %, depending on the leverage ratio.

If any amounts are not paid when due, such overdue amounts will bear interest at an amount generally equal to 2.0 % plus the existing loan rate.

The Credit Agreement also carries a commitment fee in the case of the Revolving Facility, and a ticking fee, in the case of the Delayed Draw Term Loans of 0.20 % to 0.25 % per annum on the unused portion.

The Company's obligations under the Credit Agreement are unconditionally guaranteed, jointly and severally, by the Company's material direct and indirect domestic subsidiaries (the “Guarantors”).

All obligations of the Company and the Guarantors under the Credit Agreement are secured by first priority security interests in substantially all of the assets of the Company and the Guarantors.

The Credit Agreement includes customary representations, warranties and covenants, and acceleration, indemnity and events of default provisions, including, among other things, two quarterly financial covenants as follows:

1 unchanged sentence

• Fixed charge coverage ratio of consolidated EBITDA minus consolidated capital expenditures* to consolidated interest expense* paid or payable in cash plus scheduled principal payments in respect of indebtedness under the Credit Agreement of not less than 1.25 to 1.00.

* The definitions of consolidated total indebtedness, consolidated EBITDA, consolidated capital expenditures and consolidated interest expense are specifically defined in the Credit Agreement included as an exhibit to Form 8-K filed on June 6, 2019.

As of February 28, 2022, there was $ 25.0 million outstanding on the Revolving Facility.

As of February 28, 2022 and May 31, 2021, the carrying value of long-term debt approximated its fair market value.

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

As of August 31, 2022, there was $ 25.0 million outstanding on the Revolving Facility and $ 25.0 million outstanding on the Delayed Draw Term Loan and the interest rate at August 31, 2022 applicable to each was 4.06 %.

As of August 31, 2022 and May 31, 2022, the carrying value of long-term debt approximated its fair market value.

(in thousands) Aug 31, 2022

Revolving Facility $ 25,000

Delayed Draw Term Loan 25,000

unamortized debt issuance costs ( 202 )

Total long-term debt $ 49,798

Principal payments of approximately 3.57 % on the Delayed Draw Term Loan will amortize in equal quarterly installments over a five year period beginning on the earlier of a full draw or the expiry of the draw period (March 1, 2024).

The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full fiscal year adjusted for any discrete events, which are recorded in the period that they occur.

The estimated annual effective tax rate prior to discrete items was 12.7 % as of the third quarter of fiscal year 2022, as compared to 15.6 % for the same period in fiscal year 2021.

The estimated annual effective tax rate prior to discrete items was 5.5 % as of the first quarter of fiscal year 2023, as compared to 10.6 % for the same period in fiscal year 2022.

In fiscal year 2023, the Company’s effective tax rate differs from the U.S.

4 unchanged sentences

Based on the review of all available evidence, the Company determined that it has not yet attained a sustained level of profitability and the objectively verifiable negative evidence outweighed the positive evidence.

Therefore, the Company has provided a valuation allowance on its federal and state net operating loss carryforwards, federal and state R&D credit carryforwards and other net deferred tax assets that have a limited life and are not supportable by the naked credit deferred tax liability sourced income as of February 28, 2022.

The Company will continue to assess the level of the valuation allowance required.

If sufficient positive evidence exists in future periods to support a release of some or all of the valuation allowance, such a release would likely have a material impact on the Company’s results of operations.

The Company filed for an employee retention credit under the provisions of the CARES Act resulting in a benefit of $ 4.2 million that was recorded in the third quarter of the fiscal year compared to a benefit of $ 1.9 million that was recorded in the prior year period.

The benefit has been recorded as a receivable and is included in other current assets on the balance sheet.

SHARE-BASED COMPENSATION

1 unchanged sentence

The 2020 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance share units, performance shares and other incentive awards to the Company's employees, directors and other service providers.

As of February 28, 2022, there was a maximum of 1.6 million shares of common stock available for future grant under the 2020 Plan.

As of August 31, 2022, there was a maximum of 0.8 million shares of common stock available for future grant under the 2020 Plan.

Prior to the adoption of the 2020 Plan, equity awards were issued under the 2004 Stock and Incentive Award Plan (the “2004 Plan”).

1 unchanged sentence

The Company also has an employee stock purchase plan.

As of February 28, 2022, there was a maximum of 2.3 million shares of common stock available for future grant under the employee stock purchase plan.

For the three months ended February 28, 2022 and 2021, share-based compensation expense was $ 2.4 million and $ 2.1 million, respectively.

For the nine months ended February 28, 2022 and 2021, share-based compensation expense was $ 7.8 million and $ 6.4 million, respectively.

During the nine months ended February 28, 2022 and 2021, the Company granted stock options and restricted stock units under the 2020 and 2004 Plan to certain employees and members of the Board of Directors.

As of August 31, 2022, there was a maximum of 2.3 million shares of common stock available for future grant under the employee stock purchase plan.

For the three months ended August 31, 2022 and 2021, share-based compensation expense was $ 3.0 million and $ 2.4 million, respectively.

During the three months ended August 31, 2022 and 2021, the Company granted stock options and restricted stock units under the 2020 Plan to certain employees and members of the Board of Directors.

Stock option awards are valued using the Black-Scholes option-pricing model and then amortized on a straight-line basis over the requisite service period of the award.

Restricted stock unit awards are valued based on the closing trading value of the Company’s common stock on the date of grant and then amortized on a straight-line basis over the requisite service period of the award.

During the nine months ended February 28, 2022 and 2021, the Company granted performance share units under the 2020 and 2004 Plan to certain employees.

During the three months ended August 31, 2022 and 2021, the Company granted performance share units under the 2020 Plan to certain employees.

The awards may be earned by achieving performance levels over the requisite service period.

1 unchanged sentence

The fair value of these awards is based on a Monte Carlo simulation model.

As of February 28, 2022, there was $ 19.1 million of unrecognized compensation expense related to share-based payment arrangements.

These costs are expected to be recognized over a weighted-average period of approximately three years .

As of August 31, 2022, there was $ 27.1 million of unrecognized compensation expense related to share-based payment arrangements.

These costs are expected to be recognized over a weighted-average period of approximately two years .

The Company has sufficient shares to satisfy expected share-based payment arrangements.

4 unchanged sentences

The following table reconciles basic to diluted weighted-average shares outstanding:

Three Months Ended Nine Months Ended

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

Three Months Ended

(in thousands) Aug 31, 2022 Aug 31, 2021

Basic 39,302 38,734

3 unchanged sentences

SEGMENT AND GEOGRAPHIC INFORMATION

The Company considers the business to be a single operating segment engaged in the development, manufacture and sale of medical devices for vascular access, peripheral vascular disease and oncology on a global basis.

The Company's chief

operating decision maker, the President and Chief Executive Officer (CEO), evaluates the various global product portfolios on a net sales basis utilizing various breakouts of the data including Global Business Unit, Med Tech versus Med Device and geography.

Segment information

The Company regularly reviews its segments and the approach used by the chief operating decision maker and management to evaluate performance and allocate resources.

Prior to the first quarter of fiscal year 2023, the Company considered the business to be a single operating segment engaged in the development, manufacture and sale of medical devices for vascular access, peripheral vascular disease and oncology on a global basis.

Commencing with the first quarter of fiscal year 2023, the Company began to manage its operations through two segments, Med Tech and Med Device to align with the transformation from a company with a broad portfolio of largely undifferentiated products to a more focused medical technology company.

The Company's chief operating decision maker, the President and Chief Executive Officer (CEO), evaluates these two segments based on net sales and gross margin to, among other items, allocate resources and assess performance.

Executives reporting to the CEO include those responsible for commercial operations, manufacturing operations, regulatory and quality and certain corporate functions.

The CEO evaluates profitability, investment and cash flow metrics on a consolidated global basis due to shared infrastructure and resources.

The table below summarizes net sales by Global Business Unit:

Three Months Ended Nine Months Ended

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

Endovascular Therapies $ 38,083 $ 33,251 $ 115,799 $ 97,008

Vascular Access 23,431 24,813 73,459 76,848

Oncology 12,456 13,118 39,963 40,312

Total $ 73,970 $ 71,182 $ 229,221 $ 214,168

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

Three Months Ended Nine Months Ended

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

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

Med Device 54,358 55,936 173,104 174,587

Total $ 73,970 $ 71,182 $ 229,221 $ 214,168

The CEO evaluates all other elements of profitability, investment and cash flow metrics on a consolidated global basis due to shared infrastructure and resources.

The Company manages its assets on a total company basis, not by operating segment;

therefore, the CEO does not review any asset information by operating segment and, accordingly, asset information is not reported or evaluated by operating segment.

Total assets were $ 557.7 million as of August 31, 2022.

The table below summarizes net sales and gross margin by Med Tech and Med Device including prior periods during which the Company considered the business to be a single operating segment, in order to conform to the current period presentation:

Three Months Ended

(in thousands) Aug 31, 2022 Aug 31, 2021

Med Tech Net Sales $ 22,817 $ 17,607

Gross profit 14,429 11,517

Gross margin 63.2 % 65.4 %

Med Device Net Sales $ 58,720 $ 59,364

Gross profit 27,876 28,622

Gross margin 47.5 % 48.2 %

Total Net Sales $ 81,537 $ 76,971

Gross profit 42,305 40,139

Gross margin 51.9 % 52.1 %

Geographic information

The table below summarizes net sales by geographic area based on external customer location:

Three Months Ended Nine Months Ended

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

Three Months Ended

(in thousands) Aug 31, 2022 Aug 31, 2021

United States $ 69,023 $ 64,464

1 unchanged sentence

Total $ 81,537 $ 76,971

As of August 31, 2022 and 2021, international sales as a percentage of total net sales were 15.3 % and 16.2 %, respectively.

Sales to any one country outside the U.S., as determined by shipment destination, did not comprise a material portion of net sales in any of the last three fiscal years.

In addition, no one customer represents more than 10% of consolidated net sales and 96 % of long-lived assets are located within the United States.

On a recurring basis, the Company measures certain financial assets and financial liabilities at fair value based upon quoted market prices, where available.

11 unchanged sentences

Fair Value Measurements using inputs considered as:

Fair Value at Feb 28, 2022

Fair Value at Aug 31, 2022

(in thousands) Level 1 Level 2 Level 3

8 unchanged sentences

Total Financial Liabilities $ — $ — $ 16,948 $ 16,948

There were no transfers between Level 1, 2 and 3 for the three and nine months ended February 28, 2022 and 2021.

There were no transfers between Level 1, 2 and 3 for the three months ended August 31, 2022 and 2021.

The table below presents the changes in fair value components of Level 3 instruments:

Three Months Ended Feb 28, 2022

(in thousands) Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Balance, November 30, 2021 $ 16,540

Total gains or losses (realized/unrealized):

Change in present value of contingent consideration (1)

Balance, February 28, 2022

Nine Months Ended Feb 28, 2022

Three Months Ended Aug 31, 2022

(in thousands) Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Balance, May 31, 2022 $ 16,948

Total gains or losses (realized/unrealized):

Change in present value of contingent consideration (1)

Currency gain from remeasurement ( 1 )

Balance, February 28, 2022

Balance, August 31, 2022

(1) Change in the fair value of contingent consideration is included in earnings and comprised of changes in estimated earn out payments based on projections of Company performance and amortization of the present value discount.

7 unchanged sentences

Increases or decreases in any valuation inputs in isolation may result in a significantly lower or higher fair value measurement in the future.

The recurring Level 3 fair value measurements of the contingent consideration liabilities include the following significant unobservable inputs as of February 28, 2022:

The recurring Level 3 fair value measurements of the contingent consideration liabilities include the following significant unobservable inputs as of August 31, 2022:

(in thousands) Fair Value Valuation Technique Unobservable Input Range

2 unchanged sentences

Projected fiscal year of payment 2023 - 2025

At February 28, 2022, the amount of undiscounted future contingent consideration that the Company expects to pay as a result of all completed acquisitions is approximately $ 20.0 million.

At August 31, 2022, the amount of undiscounted future contingent consideration that the Company expects to pay as a result of all completed acquisitions is approximately $ 20.0 million.

The milestones, including revenue projections and technical milestones associated with the contingent consideration, must be reached in future periods ranging from fiscal years 2023 to 2029 in order for the associated consideration to be paid.

5 unchanged sentences

The following table presents supplemental balance sheet information related to leases:

(in thousands) Balance Sheet Location Feb 28, 2022 May 31, 2021

(in thousands) Balance Sheet Location Aug 31, 2022 May 31, 2022

Operating lease ROU asset Other assets $ 6,335 $ 6,974

8 unchanged sentences

The maturities of the lease liabilities for each of the following fiscal years is:

(in thousands) Feb 28, 2022

(in thousands) Aug 31, 2022

Remainder of 2023 $ 2,079

5 unchanged sentences

Long-term lease obligations $ 4,008

During the three months ended February 28, 2022 and 2021, the Company recognized $ 0.7 million and $ 0.8 million of operating lease expense, respectively, which includes immaterial short-term leases.

During the nine months ended February 28, 2022 and 2021, the Company recognized $ 2.1 million and $ 2.4 million of operating lease expense, respectively, which includes immaterial short-term leases.

During the three months ended August 31, 2022 and 2021, the Company recognized $ 0.7 million and $ 0.7 million of operating lease expense, respectively, which includes immaterial short-term leases.

The expenses on the Consolidated Statement of Operations were classified as follows:

Three Months Ended Nine Months Ended

(in thousands) Feb 28, 2022

Feb 28, 2021 Feb 28, 2022

Three Months Ended

(in thousands) Aug 31, 2022

Cost of sales $ 219 $ 219

2 unchanged sentences

General and administrative 360 330

$ 684 $ 794 $ 2,114 $ 2,416

The following table presents supplemental cash flow and other information related to leases for the nine months ended:

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

The following table presents supplemental cash flow and other information related to leases for the three months ended:

(in thousands) Aug 31, 2022 Aug 31, 2021

Cash paid for amounts included in the measurement of lease liabilities

3 unchanged sentences

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is involved in various legal proceedings, including commercial, intellectual property, product liability, and regulatory matters of a nature considered normal for its business.

6 unchanged sentences

patents held by Bard (US Patent Nos.

7,785,302 (“’302 Patent”), 7,959,615 (“’615 Patent”) and 7,947,022 (“’022 Patent”)).

7,785,302 ("302"), 7,959,615 (“615”) and 7,947,022 ("022")).

The case was stayed pending reexamination in the US Patent and Trademark Office ("USPTO").

2 unchanged sentences

A scheduling order was entered on March 23, 2021.

On July 22, 2021, in another case against a different defendant the District of Utah invalidated multiple claims of the ‘302, ‘022, and ‘615 Patents

under 35 USC §101, including claims asserted against the Company.

On July 22, 2021, in another case against a different defendant, the District of Utah invalidated multiple claims of the ‘302, ‘022, and ‘615 Patents under 35 USC §101, including claims asserted against the Company.

Following the Utah court’s decision, the Company filed a Motion for Judgment on the Pleadings based on collateral estoppel on August 9, 2021.

6 unchanged sentences

Contemporaneously, the Company withdrew its Motion for Leave to Amend its Answer and Counterclaims without prejudice to refile.

Bard filed its Opening Appellate Brief in its appeal at the Federal Circuit on December 8, 2021.

Bard filed its Opening Appellate Brief in its appeal at the Federal Circuit on December 8, 2021, and the appeal remains pending.

The Company believes these claims are without merit and intends to defend them vigorously.

7 unchanged sentences

Bard appealed the judgment to the Federal Circuit and on November 10, 2020, the Federal Circuit reversed the judgment in part with respect to Section 101 (subject matter eligibility), and vacated and remanded the trial court’s invalidity and non-infringement judgments.

The Company filed a combined Petition for rehearing and rehearing en banc on December 10, 2020, which was denied on January 15, 2021.

The Company filed a combined Petition

for rehearing and rehearing en banc on December 10, 2020, which was denied on January 15, 2021.

The Federal Circuit issued its mandate on January 22, 2021.

On March 15, 2021, the District of Delaware entered an order requiring the parties to submit status reports and denied as moot the Company’s motion for attorney’s fees and expenses.

The parties agreed to schedule trial the week of May 9, 2022, and the trial has been docketed on the Court's calendar.

The parties agreed to schedule trial the week of May 9, 2022, which was subsequently rescheduled for the week of November 14, 2022.

The Company maintains its belief that Bard’s claims are without merit.

12 unchanged sentences

and Bard Access Systems, Inc.

In this action, the Company alleges that Bard has illegally tied the sales of its tip location systems to the sales of its PICCs.

The Company alleges that this practice violates the federal antitrust laws and has had, and continues to have, an anti-competitive effect in the market for PICCs.

The Company seeks both monetary damages and injunctive relief.

Bard moved to dismiss on September 8, 2017.

On August 6, 2018 the court denied Bard’s motion in its entirety.

Bard made a motion for summary judgment which was denied in its entirety in a decision issued by the Court on May 5, 2021.

Bard also raised a series of challenges targeted at one of AngioDynamics’ expert witnesses, which the Court denied in part and granted in part in decisions on May 5, 2021 and June 11, 2021.

Discovery is largely complete, and trial is scheduled to commence on July 5, 2022.

In this action, the Company alleged that Bard had illegally tied the sales of its tip location systems to the sales of its PICCs in violation of federal antitrust laws and this practice had an anti-competitive effect in the US market for PICCs.

The Company sought both monetary damages and injunctive relief.

On October 6, 2022, a jury verdict was rendered finding Bard did not restrain competition in violation of federal antitrust laws.

ACQUISITION, RESTRUCTURING, AND OTHER ITEMS, NET

1 unchanged sentence

Acquisition, restructuring and other items, net, consisted of:

Three Months Ended Nine Months Ended

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

$ 1,681 $ 967 $ 5,837 $ 2,947

Mergers and acquisitions (2)

Transition service agreement (3)

Three Months Ended

(in thousands) Aug 31, 2022 Aug 31, 2021

$ 1,863 $ 2,084

Divestiture (4)

Manufacturing relocation (2)

Other 282 ( 42 ) 701 748

Israeli Innovation Authority prepayment (3)

Total $ 5,581 $ 2,440

(1) Legal expenses related to litigation that is outside the normal course of business.

(2) Mergers and acquisitions expense related to legal and due diligence.

(3) Transition services agreement that was entered into as a result of the sale of the Fluid Management business.

(4) Divestiture expenses incurred to transition manufacturing from Glens Falls, NY to Queensbury, NY.

(2) Expenses to relocate certain manufacturing lines from Queensbury, NY to Costa Rica.

(3) I n the first quarter of fiscal year 2023, a $ 3.5 million payment was made to the Israeli Innovation Authority to fully satisfy the obligation related to grant funds that were provided to Eximo for development of the Auryon laser prior to the acquisition in the second quarter of fiscal year 2020.

ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in each component of accumulated other comprehensive income, net of tax, are as follows:

Three Months Ended Feb 28, 2022

Three Months Ended Aug 31, 2022

(in thousands) Foreign currency translation income

Balance at November 30, 2021 $ 4,562

Balance at May 31, 2022 $ 1,357

Other comprehensive loss, net of tax ( 550 )

Net other comprehensive loss $ ( 550 )

Balance at February 28, 2022

Nine Months Ended Feb 28, 2022

(in thousands) Foreign currency translation income

Balance at May 31, 2021

Other comprehensive income, net of tax 373

Net other comprehensive income $ 373

Balance at February 28, 2022

Balance at August 31, 2022

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements - Adopted

There are no recently issued accounting pronouncements that have been adopted.

Recently Issued Accounting Pronouncements - Not Yet Applicable or Adopted

Standard Description Effective Date Effect on the Consolidated Financial Statements

ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance This ASU increases the transparency of government assistance to include the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements.

June 1, 2022 The Company plans to adopt the new standard in the first quarter of fiscal year 2023 and does not expect there to be a material impact to the consolidated financial statements.

Disclosures by Business Entities about Government Assistance

This ASU increases the transparency of government assistance to include the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements.

June 1, 2022 The Company adopted the new standard in the first quarter of fiscal year 2023 and it did not have an impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements - Not Yet Applicable or Adopted

Standard Description Effective Date Effect on the Consolidated Financial Statements

ASU 2021-08, Business Combinations (Topic 805):

3 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 1. Financial Statements