What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-08-03 compared with 2022-07-22 · 127 added, 96 removed, 240 unchanged (48% of the section changed)

4 unchanged sentences

Company and Market

AngioDynamics is a leading and transformative medical technology company focused on restoring healthy blood flow in the body's vascular system, expanding cancer treatment options and improving quality of life for patients.

We design, manufacture and sell a wide range of medical, surgical and diagnostic devices used by professional healthcare providers for vascular access, for the treatment of peripheral vascular disease and for use in oncology and surgical settings.

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.

14 unchanged sentences

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.

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.

As of May 31, 2023, $25.0 million was drawn on the Revolving Facility and $25.0 million was drawn on the Delayed Draw Term Loan.

See Note 12 "Long-Term Debt" set forth in the Notes to the consolidated financial statements.

During the fourth quarter of fiscal year 2023, the Company was in discussions with Merit Medical Systems, Inc.

("Merit") to sell the dialysis product portfolio and BioSentry tract sealant system biopsy businesses.

This qualified for held for sale accounting as of May 31, 2023.

On June 8, 2023, the Company entered into an asset purchase agreement (the "Asset Purchase Agreement") with Merit Medical Systems, Inc.

pursuant to which Merit acquired the dialysis product portfolio and BioSentry tract sealant system biopsy businesses for $100.0 million in cash subject to the terms and conditions of the Asset Purchase Agreement.

The Company and Merit entered into various agreements to facilitate the transition to Merit, including a Transactions Services Agreement and Contract Manufacturing Agreement.

The Company determined that the sale of the

businesses did not constitute a strategic shift that had a major effect on the Company’s operations or financial results and as a result, this transaction will not be classified as discontinued operations.

As of May 31, 2023, the Company concluded that the sale of the dialysis product portfolio and BioSentry tract sealant system biopsy businesses to Merit Medical Systems, Inc.

was a triggering event for the Med Device reporting unit.

The Company utilized the income approach to determine the fair value of the remaining Med Device reporting unit.

Based on the results of this evaluation, the Company recorded a goodwill impairment charge of $14.5 million for the year ended May 31, 2023 to write down the carrying value of the Med Device reporting unit to fair value.

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

4 unchanged sentences

• Gross profit decreased by 100 bps to 51.4%

• Net loss decreased by $5.0 million to $26.5 million

• Loss per share decreased by $0.14 to a loss of $0.68

• Cash flow from operations decreased by $31.3 million resulting in cash used in operations of $7.2 million

• Net loss increased by $25.9 million to $52.4 million

• Loss per share increased by $0.65 to a loss of $1.33

• Cash flow from operations increased by $7.3 million resulting in cash provided by operations of $0.1 million

Our Med Tech business, comprised of Auryon, the Thrombectomy platform and NanoKnife grew 22.8% in fiscal year 2023.

This growth was partially offset by reductions in AngioVac procedure volumes due to challenges resulting from the

COVID-19 pandemic.

Our Med Device business grew 0.9% in fiscal year 2022.

It was also adversely impacted by the backlog in Vascular Access products and continued pressure from reductions in Oncology procedure volumes, also due to challenges resulting from the COVID-19 pandemic, a trend that may continue.

The growth in Auryon, AlphaVac and NanoKnife disposables was partially offset by continued softness in AngioVac.

Our Med Device business grew 1.9% in fiscal year 2023 driven by growth in Core, Dialysis, Ports and Microwave products.

Strategic Initiatives to Drive Growth

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 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, Mechanical Thrombectomy (which includes AngioVac and AlphaVac) and NanoKnife.

The Company regularly evaluates its reportable segments and will continue to do so along with this transformation.

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

Throughout the year, we introduced strategic moves designed to streamline our business, improve our overall business operations and position ourselves for growth.

3 unchanged sentences

This included:

◦ The full market launch of the AlphaVac Mechanical Thrombectomy device in December 2021;

◦ Pathway expansion for Auryon in arterial thrombectomy and full market release of the hyrodphilic coated catheters;

◦ FDA clearance of the AlphaVac F18 thrombectomy system;

◦ FDA approval of an IDE study for the use of AlphaVac F18 to treat pulmonary embolism;

◦ Enrollment of the first patients in the PRESERVE study for the use of NanoKnife in the prostate.

◦ Enrollment of patients in the APEX IDE study for the use of AlphaVac F18 to treat pulmonary embolism;

◦ Continued enrollment of patients in the PRESERVE study for the use of NanoKnife in the prostate.

• Value Creation.

To create value and drive future growth, the Company plans to practice dispassionate portfolio optimization and continue to focus on areas of compelling unmet needs including those that are patient-centric and evidenced-based.

In addition, the Company is pursuing targeted global expansion opportunities.

In addition, the Company continues to pursue targeted global expansion opportunities.

Critical Accounting Policies and Use of Estimates

5 unchanged sentences

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following

(i) identify the contract(s) with a customer;

36 unchanged sentences

Accordingly, the Company does not have any contract assets associated with the future right to invoice its customers.

In some cases, if control of the product has not yet transferred to the customer or the timing of the payments made by the customer precedes the Company’s fulfillment of the performance obligation, the Company recognizes a contract liability that is included in deferred revenue in the accompanying Consolidated Balance Sheets.

In some cases, if control of the product has not yet transferred to the customer or the timing of the payments made by the customer precedes the Company’s

fulfillment of the performance obligation, the Company recognizes a contract liability that is included in deferred revenue in the accompanying Consolidated Balance Sheets.

Inventories are stated at the lower of cost or net realizable value based on the first-in, first-out cost method and consist of raw materials, work in process and finished goods.

9 unchanged sentences

The significant estimates used in valuing certain of the intangible assets include, but are not limited to:

future expected cash flows of the asset, discount rates to determine the

present value of the future cash flows, attrition rates of customers, royalty rates and expected technology life cycles.

future expected cash flows of the asset, discount rates to determine the present value of the future cash flows, attrition rates of customers, royalty rates and expected technology life cycles.

The Company also estimates the useful lives of the intangible assets based on the expected period over which the Company anticipates generating economic benefit from the asset.

11 unchanged sentences

Goodwill and Intangible Assets

Intangible assets other than goodwill, indefinite lived intangible assets and in process research and development ("IP R&D") are amortized over their estimated useful lives, which range between two to eighteen years, on either a straight-line basis over the expected period of benefit or as revenue is earned from the sales of the related product.

The Company periodically reviews the estimated useful lives of intangible assets and reviews such assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.

Intangible assets other than goodwill, indefinite lived intangible assets and in process research and development ("IP R&D") are amortized over their estimated useful lives, which range between two to eighteen years, on a straight-line basis over the expected period of benefit.

The Company periodically reviews the estimated useful lives of 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 may not be recoverable.

Such conditions could include significant adverse changes in the business climate, current-period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life.

When testing for impairment of definite-lived intangible assets held for use, the Company groups assets at the lowest level for which cash flows are separately identifiable.

The Company operates as a single asset group.

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 18 "Segment and Geographic Information" set forth in the Notes to our consolidated financial statements included in this Annual Report on Form 10-K).

The Company operates as two reporting units and two asset groups.

If a triggering event is deemed to exist, the Company performs an undiscounted operating cash flow analysis to determine if an impairment exists.

1 unchanged sentence

Goodwill and other intangible assets that have indefinite useful lives are not amortized, but rather, are tested for impairment annually or more frequently if impairment indicators arise.

The Company has historically performed its annual goodwill assessment during the third quarter of each year (as of December 31).

During the fourth quarter of fiscal year 2022, the Company decided to change the date of its annual impairment assessment from December 31st to April 30th.

The change was made to more closely align the impairment assessment date with the Company's long term planning and forecasting process.

See Note 8,"Goodwill and Intangible Assets" accompanying the consolidated financial statements.

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.

1 unchanged sentence

Allocated costs were based on respective fair market values at the date of acquisition.

For goodwill, the impairment test requires a comparison of the estimated fair value of the reporting unit to which the goodwill is assigned to the carrying value of the assets and liabilities of that reporting unit.

For goodwill, the impairment test requires a comparison of the estimated fair value of each reporting unit to which the goodwill is assigned to the carrying value of the assets and liabilities of those reporting units.

The determination of reporting units also requires management judgment.

The Company considers whether a reporting unit exists within a reportable segment based on the availability of discrete financial information.

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.

If the carrying value of the reporting unit exceeds the fair value of the reporting unit, the carrying value is reduced to its fair value through an adjustment to the goodwill balance, resulting in an impairment charge.

Determining the fair value of a reporting unit is judgmental and requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others.

Changes in assumptions or estimates could materially affect the estimated fair value, and therefore could affect the likelihood and amount of a potential impairment.

There were no adjustments to goodwill for the year ended May 31, 2022 other than foreign currency translation adjustments.

The Company operates as two operating segments with two reporting units and consequently evaluates goodwill for impairment based on an evaluation of the fair value of each reporting unit.

If the carrying value of the reporting units exceed the fair value, the carrying value is reduced to its fair value through an adjustment to the goodwill balance, resulting in an impairment charge.

As detailed in Note 9, "Goodwill and Intangible Assets" set forth in the Notes to our consolidated financial statements included in this Annual Report on Form 10-K, the Company recorded a goodwill impairment loss of $14.5 million for the year ended May 31, 2023 as the fair value of the Med Device reporting unit was less than its carrying value.

There were no adjustments to goodwill for the Med Tech reporting unit for the year ended May 31, 2023 other than foreign currency translation adjustments.

Results of Operations for the years ended May 31, 2023 and 2022

1 unchanged sentence

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

Net sales for the year ended May 31, 2022 and 2021 were:

Year ended May 31,

3 unchanged sentences

Total $ 338,752 $ 316,219 $ 22,533

Net Sales by Product Category

Endovascular Therapies $ 160,925 $ 135,079 19.1 %

Vascular Access 100,193 101,310 (1.1) %

Oncology/Surgery 55,101 54,621 0.9 %

Total $ 316,219 $ 291,010 8.7 %

Net Sales by Geography

3 unchanged sentences

For the year ended May 31, 2023, net sales increased $22.5 million to $338.8 million compared to the year ended May 31, 2022.

At May 31, 2022, the Company had a backlog of $8.4 million.

At May 31, 2023, the Company had a backlog of $2.7 million compared to $8.4 million at the end of May 31, 2022.

The Med Tech business net sales increased $18.0 million for the year ended May 31, 2023 compared to the prior year.

1 unchanged sentence

• Increased Auryon sales of $12.0 million;

• Growth in the thrombectomy platform of $3.7 million, which was driven by growth in the mechanical thrombectomy platform and was partially offset by decreased sales of thrombolytics.

Increased sales in the mechanical thrombectomy platform of $4.0 million was driven by AngioVac and the launch of the AlphaVac product in the second quarter of fiscal year 2022;

• Growth in the thrombectomy platform of $3.0 million, which was driven by growth in the mechanical thrombectomy platform in AlphaVac sales of $5.0 million, partially offset by softness in AngioVac;

• Increased NanoKnife sales of $3.0 million, which was driven by NanoKnife disposable sales in the U.S.

which increased $2.3 million due to increased case volume.

and internationally which increased $3.3 million due to increased case volume.

This increase was partially offset by decreased NanoKnife capital sales in the U.S.

and NanoKnife disposable sales internationally.

The Med Device business net sales increased $4.6 million for the year ended May 31, 2023 compared to the prior year.

Excluding the large UK order of $5.2 million in the first quarter of the prior year, net sales increased $7.4 million for the year ended May 31, 2022 .

The backlog, which primarily impacted sales of Core and Vascular Access products, was $2.7 million at May 31, 2023 compared to $8.4 million at May 31, 2022.

The change in sales from the prior year was primarily driven by:

• The backlog of $8.4 million at May 31, 2022, which primarily impacted sales of Core, Venous and Vascular Access products;

• Increased case volume , which resulted in increased sales of Core and Venous (despite the impact of the backlog) and BioSentry products of $3.7 million, $0.5 million and $0.4 million, respectively.

Port sales also increased $2.7 million, driven primarily by sales in the U.S.

These increases were partially offset by decreased Midline, PICCs, Di alysis,

Radio Frequency Ablation and other Oncology product sales of $2.6 million, $0.9 million, $0.2 million, $0.9 million and $0.6 million respectively.

Excluding the prior year order in the UK, Midlines, PICCs and Ports increased $4.4 million.

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

• Increased sales of Core, Dialysis, Ports and Microwave sales of $5.4 million, $5.2 million, $1.4 million and $1.0 million, respectively.

These increases were partially offset by decreased Venous, PICCs, Midlines and other Oncology and Vascular Access sales of $3.6 million, $2.4 million, $0.8 million and $1.6 million, respectively.

Year ended May 31,

(in thousands) 2023 2022 $ Change

Gross profit (exclusive of intangible amortization) $ 165,732 $ 156,788 5.7 %

Med Tech $ 61,966 $ 52,584 $ 9,382

Gross profit % of sales 64.1 % 66.8 %

Med Device $ 112,280 $ 113,148 $ (868)

Gross profit % of sales 46.4 % 47.6 %

Total $ 174,246 $ 165,732 $ 8,514

Gross profit % of sales 51.4 % 52.4 %

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.

Total Company gross profit increased by $8.5 million compared to the prior year.

The change from the prior year was primarily driven by:

• Sales volume, which positively impacted gross profit by $13.2 million;

• Production volume and other incentives which positively impacted gross profit by $11.3 million

• Price and mix, which negatively impacted gross profit by $4.9 million;

• Inflationary costs on raw materials, labor shortages and freight costs, which negatively impacted gross profit by $8.1 million;

• Incremental depreciation on placement units of $2.2 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 provision of the CARES Act in the prior year.

The Med Tech segment gross profit increased by $9.4 million compared to the prior year.

The change from the prior year was primarily driven by:

• Sales volume, which positively impacted gross profit by $13.9 million;

• Production volume, manufacturing and other incentives which positively impacted gross profit by $2.1 million;

• Pricing pressures and mix, which negatively impacted gross profit by $4.7 million;

• Inflationary costs on raw materials, labor shortages and freight costs, which negatively impacted gross profit by $0.5 million;

• Incremental depreciation on placement units of $1.3 million.

The Med Device segment gross profit decreased by $0.9 million compared to the prior year.

The change from the prior year was primarily driven by:

• Sales volume, which positively impacted gross profit by $2.1 million;

• Production volume, manufacturing and other incentives which positively impacted gross profit by $8.6 million;

• Pricing pressures and mix, which negatively impacted gross profit by $3.7 million;

• Inflationary costs on raw materials, labor shortages and freight costs, which negatively impacted gross profit by $7.6 million;

• Incremental depreciation on placement units of $0.3 million.

Operating Expenses and Other Income (expense)

Year ended May 31,

(in thousands) 2023 2022 $ Change

Research and development $ 29,883 $ 30,739 $ (856)

4 unchanged sentences

% of sales 11.8 % 12.2 %

Gross profit increased by $8.9 million compared to the prior year.

The change from the prior year was primarily driven by:

• Sales volume, which positively impacted gross profit by $14.6 million;

• Price and mix, which positively impacted gross profit by $1.6 million as a result of increased sales of higher margin Auryon and AngioVac products.

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

• Rebate expense, which negatively impacted gross profit by $0.9 million;

• Start-up costs related to Auryon and AlphaVac of $3.1 million, including depreciation on Auryon placement units of $1.3 million, which negatively impacted gross profit;

• Labor shortages, freight and inflationary costs on raw materials, which negatively impacted gross profit by $3.4 million year over year;

• 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.

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, manage clinical, regulatory and medical affairs.

1 unchanged sentence

The change from the prior year was primarily driven by:

• The timing of certain projects, which reduced R&D project expense by $4.2 million;

• Open R&D positions, which resulted in decreased compensation and benefits expense of $1.6 million ;

• 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.

• The timing of certain projects and clinical spend associated with the ongoing clinical trials, which decreased R&D expense by $1.1 million;

• Compensation and benefits expenses, which decreased $0.3 million;

• A benefit of $0.5 million that was recorded as a result of the employee retention credit that the Company filed for under the provision of the CARES Act in the prior year.

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.

1 unchanged sentence

The change from the prior year was primarily driven by:

• Additional headcount from the build-out of the Auryon sales and marketing teams, which increased compensation and benefits expense by $11.7 million;

• Travel, meeting, tradeshow and other expenses, which increased $4.2 million 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.

• Additional headcount from the build-out of the Auryon and mechanical thrombectomy sales and marketing teams, which increased compensation and benefits expense by $3.1 million;

• Travel, meeting, tradeshow and other selling expenses, which increased $3.7 million;

• Other fixed expenses (utilities, insurance, depreciation, etc.), which decreased $0.6 million;

• A benefit of $2.8 million that was recorded as a result of the employee retention credit that the Company file for under the provision of the CARES Act in the prior year.

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.

1 unchanged sentence

The change from the prior year was primarily driven by:

• Compensation and benefits expense, which increased $1.3 million;

• Other outside consultant spend, which increased $2.0 million, partially offset by decreased legal expense of $0.9 million.

• Compensation and benefits expense, which decreased $0.5 million;

• Other outside consultant spend for legal and IT which increased $1.9 million .

Year ended May 31,

1 unchanged sentence

Amortization of intangibles $ 18,790 $ 19,458 $ (668)

Goodwill impairment $ 14,549 $ — $ 14,549

Change in fair value of contingent consideration $ 2,320 $ 1,212 $ 1,108

2 unchanged sentences

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

• Amortization expense increased $1.3 million compared to the prior year.

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 and 2022.

• Amortization expense decreased $0.7 million compared to the prior year.

The decrease is due to assets that became fully amortized in fiscal year 2023.

Goodwill impairment - Represents the impairment charge taken on goodwill.

• The Company recorded a non-cash goodwill impairment charge of $14.5 million for the year ended May 31, 2023 as the fair value of the Med Device reporting unit was less than its carrying value.

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 year ended May 31, 2022 is related to the Eximo contingent consideration.

• The change in the fair value for the year ended May 31, 2023 is related to the Eximo contingent consideration and the increased probability of achieving the revenue milestones.

The first revenue milestone was achieved in May 2023 and will be paid in the first quarter of fiscal year 2024.

Acquisition, restructuring and other items, net - 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 decreased by $11.2 million compared to the prior year.

Acquisition, restructuring and other items, net increased by $6.6 million compared to the prior year.

The change from the prior year was primarily driven by:

• Legal expense, re lated to litigation that is outside of the normal course of business, which increased $1.5 million;

• Legal expense, related to litigation that is outside of the normal course of business, which increased $2.4 million;

• Mergers and acquisition expense related to legal fees, which increased $0.3 million;

• Manufacturing relocation expense related to the move of certain manufacturing lines to Costa Rica, which increased $0.4 million;

• Manufacturing facilities relocation expense related to the sale of the Fluid Management business which decreased $0.4 million ;

• Transition Services Agreement fees from Medline Industries of $1.0 million that were received in fiscal year 2021 .

These activities were completed during fiscal year 2021;

• A $14.0 million impairment charge that was recorded in fiscal year 2021 as a result of the decision to abandon the OARtrac product technology and trademark.

• Other expenses (mainly severance associated with organizational changes), which decreased $0.1 million;

• The payment to the Israeli Innovation Authority of $3.5 million related to grant funds that were provided to Eximo to develop the Auryon laser prior to the acquisition in the second quarter of fiscal year 2020.

These grant funds were fully repaid in the first quarter of fiscal year 2023 to satisfy the obligation which was otherwise being paid as a royalty based on a percentage of sales.

Other expense - Other expense includes interest expense, foreign currency impacts, bank fees, and amortization of deferred financing costs.

• The change in other expense of $0.7 million compared to the prior year is primarily due to unrealized foreign currency losses of $0.8 partially offset by decreased interest expense of $0.2 million.

• The change in other expe nse of $1.8 million compared to the prior year, is primarily due to increased interest expense of $2.1 million and unrealized foreign currency fluctuations of $0.2 million.

Income Tax Benefit

5 unchanged sentences

The current year and prior year effective tax rates differ from the U.S.

statutory rate primarily due to the impact of the valuation allowance, foreign taxes, and other non-deductible permanent items (such as non-deductible meals and entertainment, Section 162(m) excess compensation) and the impact of stock-based compensation.

The Company regularly assesses its ability to realize its deferred tax assets.

8 unchanged sentences

We regularly review our liquidity and anticipated capital requirements in light of the significant uncertainty created by the COVID-19 global pandemic.

We believe that our current cash on hand and availability under our Revolving Facility provide sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months.

We are closely monitoring receivables and payables.

We believe that our current cash on hand provides sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months.

Our cash and cash equivalents totaled $44.6 million as of May 31, 2023, compared with $28.8 million as of May 31, 2022.

As of May 31, 2022, total debt outstanding related to the Revolving Facility was $25.0 million.

As of May 31, 2023 and 2022, total debt outstanding related to the Credit Agreement was $50.0 million ($25.0 million on the Revolving Facility and $25.0 million on the Delayed Draw Term Loan) and $25.0 million, respectively.

The fair value of the contingent consideration liability as of May 31, 2023 was $19.3 million.

2 unchanged sentences

(in thousands) 2023 2022

Cash (used in) provided by:

Cash provided by (used in):

Operating activities $ 78 $ (7,194)

4 unchanged sentences

During the years ended May 31, 2023 and 2022, cash flows consisted of the following:

Cash (used in) provided by operating activities:

Cash provided by (used in) operating activities:

Years ended May 31, 2023 and 2022:

• Net loss of $26.5 million and $31.5 million, 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 $7.2 million for the year ended May 31, 2022 and cash provided by operations of $24.1 million for the year ended May 31, 2021.

• Net loss of $52.4 million and $26.5 million, respectively, plus the non-cash items, primarily driven by depreciation and amortization, goodwill impairment and stock-based compensation, along with the changes in working capital below, contributed to cash provided by operations of $0.1 million for the year ended May 31, 2023 and cash used in operations of $7.2 million for the year ended May 31, 2022.

• For the year ended May 31, 2023, working capital was unfavorably impacted by increased accounts receivable and inventory on hand of $1.3 million and $8.2 million, respectively.

This was partially offset by increased accounts payable and accrued liabilities of $2.1 million.

• For the year ended May 31, 2021, working capital was favorably impacted by decreased inventory on hand of $11.5 million and increased accounts payable and accrued liabilities of $4.9 million.

This was partially offset by increased accounts receivable of $4.2 million.

• For the year ended May 31, 2022, working capital was unfavorably impacted by increased accounts receivable, inventory on hand and prepaids of $17.2 million, $2.8 million and $5.0 million respectively.

This was partially offset by increased accounts payable and accrued liabilities of $3.9 million.

Cash used in investing activities:

2 unchanged sentences

• $5.4 million and $11.4 million, respectively, of cash was used for Auryon placement and evaluation unit additions;

• $0.5 million of cash was used for the acquisition of an exclusive license in the first quarter of fiscal year 2023;

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

Cash provided by (used in) financing activities:

Cash provided by financing activities:

Years ended May 31, 2023 and 2022:

• $70.0 million in proceeds on long-term debt less the repayment of $45.0 million associated with the new Credit Agreement in the first quarter of fiscal year 2023.

The $25.0 million draw on the Delayed Draw Term Loan associated with the new Credit Agreement is to fund the historical and planned fiscal year 2023 purchases of Auryon placement and evaluation units.

See Note 12 "Long-Term Debt" set forth in the Notes to the consolidated financial statements;

• $0.8 million of deferred financing costs associated with the new Credit Agreement;

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

• $20.0 million payment on the Revolving Facility in the third quarter of fiscal year 2021;

• $1.2 million and $2.7 million, respectively, of proceeds from stock option and ESPP activity.

Our 2019 Credit Agreement provides for a $125.0 million secured 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.

On August 30, 2022, the Company repaid all amounts outstanding under its then existing credit agreement and entered into a new Credit Agreement that provides for a $75.0 million Revolving Facility and a $30.0 million 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.

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

1 unchanged sentence

The other financial covenant requires us to maintain a total leverage ratio of not greater than 3.00 to 1.00.

The total leverage ratio is based upon our trailing twelve months total consolidated EBITDA (as defined in the Credit Agreement).

The total leverage ratio is based upon our trailing twelve months total adjusted EBITDA (as defined in the Credit Agreement).

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 May 31, 2022 was 2.31%.

The interest rate at May 31, 2023 applicable to each was 6.73%.

The Company was in compliance with the Credit Agreement covenants as of May 31, 2023.

In the first quarter of fiscal year 2023 and in connection with the new Credit Agreement, the Company drew $25.0 million on the Revolving Facility.

The Company also drew $25.0 million on the Delayed Draw Term Loan to fund the historical and planned fiscal year 2023 purchases of Auryon placement and evaluation units for total long-term debt outstanding of $50.0 million.

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.

In December 2020 and March 2021, payments of $10.0 million each were made on the Revolving Facility.

We believe that our current cash balance, together with cash generated from operations and access to our Revolving Facility, will provide sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months.

If we seek to make acquisitions of other businesses or technologies in the future for cash, we may require external financing.

Subsequent to fiscal year 2023, on June 8, 2023, the Company entered into an asset purchase agreement (the "Asset Purchase Agreement") with Merit Medical Systems, Inc.

("Merit") pursuant to which Merit acquired the dialysis product portfolio and BioSentry tract sealant system biopsy businesses.

The Company and Merit entered into various agreements to facilitate the transition to Merit, including a Transactions Services Agreement and Contract Manufacturing Agreement.

The purchase price for the asset sale was $100.0 million in cash subject to the terms and conditions of the Asset Purchase Agreement.

In conjunction with the Asset Purchase Agreement, on June 8, 2023, AngioDynamics used a portion of the consideration received to repay all amounts owed under AngioDynamics’ existing Credit Agreement, dated as of August 30, 2022, and as a result, the Credit Agreement was extinguished.

Our contractual obligations as of May 31, 2023 are set forth in the table below (in thousands).

23 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-K

Item 7. Management’s Discussion and Analysis