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Item 1. Financial Statements

2023-10-05 compared with 2023-03-31 · 163 added, 223 removed, 443 unchanged (47% of the section changed)

4 unchanged sentences

(in thousands of dollars, except per share data)

Three Months Ended Nine Months Ended

Feb 28, 2023 Feb 28, 2022 Feb 28, 2023 Feb 28, 2022

Three Months Ended

Aug 31, 2023 Aug 31, 2022

Net sales $ 78,679 $ 81,537

9 unchanged sentences

Total operating expenses 52,872 55,606

Operating loss ( 8,928 ) ( 5,295 ) ( 30,344 ) ( 22,074 )

Gain on sale of assets 47,842 —

Operating income (loss) 35,030 ( 13,301 )

Other expense:

Interest expense, net ( 736 ) ( 173 ) ( 1,801 ) ( 503 )

Interest income (expense), net 119 ( 381 )

Other expense, net ( 288 ) ( 175 )

Total other expense, net ( 169 ) ( 556 )

Loss before income tax benefit ( 9,664 ) ( 5,757 ) ( 32,572 ) ( 23,228 )

Income (loss) before income tax benefit 34,861 ( 13,857 )

Income tax benefit ( 11,023 ) ( 853 )

Net loss $ ( 9,485 ) $ ( 4,958 ) $ ( 30,975 ) $ ( 20,281 )

Loss per share

Net income (loss) $ 45,884 $ ( 13,004 )

Earnings (loss) per share

Basic $ 1.15 $ ( 0.33 )

4 unchanged sentences

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

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AngioDynamics, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands of dollars)

Three Months Ended Nine Months Ended

Feb 28, 2023 Feb 28, 2022 Feb 28, 2023 Feb 28, 2022

Net loss $ ( 9,485 ) $ ( 4,958 ) $ ( 30,975 ) $ ( 20,281 )

Other comprehensive income (loss), before tax:

Foreign currency translation ( 3,562 ) ( 1,036 ) ( 5,207 ) 373

Other comprehensive income (loss), before tax ( 3,562 ) ( 1,036 ) ( 5,207 ) 373

Income tax expense related to items of other comprehensive income (loss) — — — —

Other comprehensive income (loss), net of tax ( 3,562 ) ( 1,036 ) ( 5,207 ) 373

Total comprehensive loss, net of tax $ ( 13,047 ) $ ( 5,994 ) $ ( 36,182 ) $ ( 19,908 )

Three Months Ended

Aug 31, 2023 Aug 31, 2022

Net income (loss) $ 45,884 $ ( 13,004 )

Other comprehensive loss, before tax:

Foreign currency translation loss ( 930 ) ( 550 )

Other comprehensive loss, before tax ( 930 ) ( 550 )

Income tax expense related to items of other comprehensive loss — —

Other comprehensive loss, net of tax ( 930 ) ( 550 )

Total comprehensive income (loss), net of tax $ 44,954 $ ( 13,554 )

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

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AngioDynamics, Inc.

2 unchanged sentences

(in thousands of dollars, except share data)

Feb 28, 2023 May 31, 2022

Aug 31, 2023 May 31, 2023

Current assets

4 unchanged sentences

Prepaid expenses and other 8,162 4,617

Current assets held for sale — 6,154

Total current assets 175,475 163,542

3 unchanged sentences

Other assets 9,430 10,676

Non-current assets held for sale — 43,653

Total assets $ 493,949 $ 532,637

16 unchanged sentences

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

39,976,422 and 39,541,173 shares issued and 39,606,422 and 39,171,173 shares outstanding at February 28, 2023 and May 31, 2022, respectively

40,586,641 and 39,981,422 shares issued and 40,216,641 and 39,611,422 shares outstanding at August 31, 2023 and May 31, 2023, respectively

Additional paid-in capital 603,759 599,206

Accumulated deficit ( 164,971 ) ( 210,855 )

Treasury stock, 370,000 shares at February 28, 2023 and May 31, 2022, respectively

Treasury stock, 370,000 shares at August 31, 2023 and May 31, 2023, respectively

( 5,714 ) ( 5,714 )

3 unchanged sentences

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

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AngioDynamics, Inc.

2 unchanged sentences

(in thousands of dollars)

Nine Months Ended

Feb 28, 2023 Feb 28, 2022

Three Months Ended

Aug 31, 2023 Aug 31, 2022

Cash flows from operating activities:

Net loss $ ( 30,975 ) $ ( 20,281 )

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

Net income (loss) $ 45,884 $ ( 13,004 )

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

Depreciation and amortization 6,688 7,660

1 unchanged sentence

Stock based compensation 4,144 3,024

Gain on disposal of assets ( 47,842 ) —

Transaction costs for disposition ( 2,427 ) —

Change in fair value of contingent consideration ( 130 ) 211

2 unchanged sentences

Fixed and intangible asset impairments and disposals 65 87

Write-off of other assets 869 —

Other ( 9 ) ( 96 )

8 unchanged sentences

Additions to placement and evaluation units ( 767 ) ( 2,227 )

Cash paid for acquisitions ( 540 ) ( 3,600 )

Net cash used in investing activities ( 8,218 ) ( 15,534 )

Acquisition of intangibles — ( 540 )

Proceeds from sale of assets 100,000 —

Net cash provided by (used in) investing activities 98,442 ( 3,576 )

Cash flows from financing activities:

Proceeds from borrowings on long-term debt 70,000 5,000

Repayment of long-term debt ( 50,000 ) ( 45,000 )

Proceeds from borrowings on long-term debt — 70,000

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

Payment of acquisition related contingent consideration ( 10,000 ) —

Proceeds from exercise of stock options and employee stock purchase plan 410 82

Net cash provided by financing activities 25,420 7,354

Net cash (used in) provided by financing activities ( 59,590 ) 24,376

Effect of exchange rate changes on cash and cash equivalents 13 ( 316 )

5 unchanged sentences

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

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AngioDynamics, Inc.

5 unchanged sentences

comprehensive

income (loss) Treasury Stock

loss Treasury Stock

Shares Amount Shares Amount Total

Balance at May 31, 2023 39,981,422 $ 382 $ 599,206 $ ( 210,855 ) $ ( 4,723 ) ( 370,000 ) $ ( 5,714 ) $ 378,296

Net loss ( 13,004 ) ( 13,004 )

Exercise of stock options 6,617 ( 29 ) ( 29 )

Net income 45,884 45,884

Issuance/Cancellation of restricted stock units 386,031 ( 280 ) ( 280 )

4 unchanged sentences

Balance at August 31, 2023 40,586,641 $ 383 $ 603,759 $ ( 164,971 ) $ ( 5,653 ) ( 370,000 ) $ ( 5,714 ) $ 427,804

Net loss ( 8,486 ) ( 8,486 )

Exercise of stock options 15,000 184 184

Issuance/Cancellation of restricted stock units 11,393 ( 36 ) ( 36 )

Stock-based compensation 3,350 3,350

Other comprehensive loss, net of tax ( 1,095 ) ( 1,095 )

Balance at November 30, 2022 39,874,144 $ 381 $ 593,482 $ ( 179,903 ) $ ( 288 ) ( 370,000 ) $ ( 5,714 ) $ 407,958

Net loss ( 9,485 ) ( 9,485 )

Issuance/Cancellation of restricted stock units 9,394 ( 36 ) ( 36 )

Purchases of common stock under ESPP 92,884 1 976 977

Stock-based compensation 1,803 1,803

Other comprehensive loss, net of tax ( 3,562 ) ( 3,562 )

Balance at February 28, 2023 39,976,422 $ 382 $ 596,225 $ ( 189,388 ) $ ( 3,850 ) ( 370,000 ) $ ( 5,714 ) $ 397,655

Common Stock Additional

10 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

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

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AngioDynamics, Inc.

2 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, 2023 and 2022, the Consolidated Balance Sheet as of February 28, 2023, the Consolidated Statements of Cash Flows for the nine months ended February 28, 2023 and 2022, and the Consolidated Statements of Stockholders’ Equity for the nine months ended February 28, 2023 and 2022 have been prepared by the Company and are unaudited.

The Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the three months ended August 31, 2023 and 2022, the Consolidated Balance Sheet as of August 31, 2023, the Consolidated Statements of Cash Flows for the three months ended August 31, 2023 and 2022, and the Consolidated Statements of Stockholders’ Equity for the three months ended August 31, 2023 and 2022 have been prepared by the Company and are unaudited.

The Consolidated Balance Sheet as of May 31, 2023 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, 2023 (and for all periods presented) have been made.

The unaudited interim consolidated financial statements for the three and nine months ended February 28, 2023 and 2022 include the accounts of AngioDynamics, Inc.

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, 2023 (and for all periods presented) have been made.

The unaudited interim consolidated financial statements for the three months ended August 31, 2023 and 2022 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.

Camaro Support Catheter Asset Acquisition

On July 27, 2021, the Company acquired the Camaro support catheter (rebranded as Syntrax) from QX Medical, LLC for an aggregate purchase price of $ 4.0 million, which included an upfront payment of $ 3.6 million and $ 0.4 million in purchase price holdbacks, along with $ 1.0 million of potential future contingent consideration related to revenue milestones.

This acquisition supports the Auryon product family and the Company's strategic plan.

The Company accounted for this acquisition as an asset purchase.

The Company recorded the amount paid at closing as inventory and fixed assets of $ 0.1 million and an intangible asset product technology of $ 3.9 million.

The intangible asset will be amortized over 15 years.

The contingent consideration is comprised of revenue milestones and will be accounted for when the contingency is resolved or becomes probable and reasonably estimable.

Pursuant to an asset purchase agreement dated June 8, 2023 (the "Asset Purchase Agreement"), the Company completed the sale of the dialysis and BioSentry tract sealant system biopsy businesses (the "Divestiture") to Merit Medical Systems, Inc.

Total consideration received by the Company for the Divestiture in the first quarter of fiscal year 2024 was $ 100.0 million in cash and resulted in a pre-tax book gain of $ 47.8 million.

The Company and Merit entered into various agreements to facilitate the transition of the divested businesses to Merit, including a Transition 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.

The following table summarizes the major classes of assets sold on the date of the sale:

(in thousands) As of June 8, 2023

Current assets:

Inventories $ 4,068

Prepaid expenses and other 2,000

Total current assets $ 6,068

Non-current assets:

Property, plant and equipment, net $ 54

Intangible assets, net 17,629

Goodwill 25,980

Total non-current assets $ 43,663

REVENUE FROM CONTRACTS WITH CUSTOMERS

8 unchanged sentences

The Company has one primary revenue stream which is the sales of its products.

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Disaggregation of Revenue

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 Med Tech segment.

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

Three Months Ended February 28, 2023 Three Months Ended February 28, 2022

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

Med Tech $ 20,381 $ 2,493 $ 22,874 $ 17,782 $ 1,830 $ 19,612

Med Device 47,239 10,599 57,838 44,663 9,695 54,358

Total $ 67,620 $ 13,092 $ 80,712 $ 62,445 $ 11,525 $ 73,970

Nine Months Ended February 28, 2023

Nine Months Ended February 28, 2022

Three Months Ended August 31, 2023 Three Months Ended August 31, 2022

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

26 unchanged sentences

These types of agreements include an embedded operating lease for the right to use the units.

In these arrangements, revenue recognized for the sale of the disposables is not allocated

between the disposal revenue and lease revenue due to the insignificant value of the units in relation to the total agreement value.

In these arrangements, revenue recognized for the sale of the disposables is not allocated between the disposal revenue and lease revenue due to the insignificant value of the units in relation to the total agreement value.

Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

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Variable Consideration

12 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, 2023, such product returns were not material.

During the three months ended August 31, 2023, 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, 2023 May 31, 2022

(in thousands) Aug 31, 2023 May 31, 2023

Receivables $ 49,755 $ 52,826

1 unchanged sentence

Contract liabilities $ 433 $ 499

During the nine months ended February 28, 2023, the Company had additions to contract liabilities of $ 0.6 million.

This was offset by $ 0.6 million in revenue that was recognized during the nine months ended February 28, 2023.

During the three months ended August 31, 2023, the Company had immaterial additions to contract liabilities.

This was offset by $ 0.1 million in revenue that was recognized during the three months ended August 31, 2023.

Costs to Obtain or Fulfill a Customer Contract

5 unchanged sentences

Amounts charged to customers for shipping and handling are recorded in net sales.

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Inventories are stated at lower of cost and net realizable value (using the first-in, first-out method).

Inventories consisted of the following:

(in thousands) Feb 28, 2023 May 31, 2022

(in thousands) Aug 31, 2023 May 31, 2023

Raw materials $ 30,737 $ 28,679

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, 2023 and May 31, 2022 was $ 3.1 million and $ 3.7 million, respectively.

The total inventory reserve at August 31, 2023 and May 31, 2023 was $ 3.1 million and $ 3.1 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 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, 2023.

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.

To determine the fair value of the two reporting units as of April 30, 2023, the Company utilized the income approach for Med Tech and a combination of the income approach and market approach for Med Device.

Based on the results of this evaluation, there were no adjustments to goodwill for either reporting unit as of April 30, 2023.

In the fourth quarter of fiscal year 2023, the Company concluded that the sale of the dialysis and BioSentry businesses to Merit Medical Systems, Inc.

was a triggering event for the Med Device report unit.

As the Company concluded that this was the sale of a business, goodwill was allocated to the sale based on the relative fair value of the dialysis and BioSentry businesses and is included in assets held for sale as of May 31, 2023.

To determine the fair value of the remaining Med Device reporting unit as of May 31, 2023, the Company utilized the income approach, as it was determined to be a better representation of the remaining Med Device reporting unit's projected long-term performance.

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.

Goodwill for each reporting unit is allocated as follows:

Nine months ended Feb 28, 2023

Three months ended Aug 31, 2023

(in thousands) Med Tech Med Device Total

2 unchanged sentences

Balance, August 31, 2023

Foreign currency translation adjustments ( 283 ) — ( 283 )

Balance, November 30, 2022 $ 160,226 $ 40,529 $ 200,755

Foreign currency translation adjustments $ ( 779 ) $ — $ ( 779 )

Balance, February 28, 2023

$ 159,017 $ — $ 159,017

There were no adjustments to goodwill for the nine months ended February 28, 2023 other than foreign currency translation adjustments.

Even though the Company determined that there was no goodwill impairment at February 28, 2023, 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.

There were no adjustments to goodwill for the three months ended August 31, 2023 other than foreign currency translation adjustments.

Even though the Company determined that there was no goodwill impairment at August 31, 2023, 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, 2024.

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.

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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

$ 281,547 $ ( 170,403 ) $ 111,144

Amortization expense for the three months ended February 28, 2023 and 2022 was $ 4.7 million and $ 4.9 million, respectively.

Amortization expense for the nine months ended February 28, 2023 and 2022 was $ 14.4 million and $ 14.6 million, respectively.

Amortization expense for the three months ended August 31, 2023 and 2022 was $ 3.6 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, 2023 May 31, 2022

(in thousands) Aug 31, 2023 May 31, 2023

Payroll and related expenses $ 10,803 $ 9,232

Royalties 2,202 2,986

Outside services 5,593 7,088

Royalties 1,649 2,874

Research and development 1,847 1,525

Sales and franchise taxes 1,088 480

Accrued payroll taxes 484 441

Rebates 485 469

Accrued Freight 450 450

Deferred Warranties 492 475

Accrued severance 179 262

Other 3,009 3,321

$ 26,079 $ 26,617

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LONG-TERM DEBT

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 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:

• Maximum leverage ratio of consolidated total indebtedness* to consolidated EBITDA* of not greater than 3.00 to 1.00 (during certain periods following material acquisitions the ratio shall be increased to 3.50 to 1.00).

• 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 August 31, 2022.

As of February 28, 2023, 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 February 28, 2023 applicable to each was 6.15 %.

As of February 28, 2023 and May 31, 2022, the carrying value of long-term debt approximated its fair market value.

(in thousands) Feb 28, 2023

Revolving Facility $ 25,000

Delayed Draw Term Loan 25,000

unamortized debt issuance costs ( 193 )

Total long-term debt $ 49,807

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).

On June 8, 2023 and in connection with the completion of the dialysis and BioSentry divestiture, the Company repaid all amounts outstanding under its then existing Credit Agreement, dated as of August 30, 2022, with the lender parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A.

and KeyBank National Association, as co-syndication agents, and JPMorgan Chase Bank, N.A.

as sole bookrunner and sole lead arranger (the "Credit Agreement"), and as a result, the Credit Agreement was extinguished.

Pursuant to the terms of the Credit Agreement, AngioDynamics had the option to repay this facility prior to the maturity date without penalty.

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 5.2 % as of the third quarter of fiscal year 2023, as compared to 12.7 % for the same period in fiscal year 2022.

The estimated annual effective tax rate prior to discrete items was 32.0 % as of the first quarter of fiscal year 2024, as compared to 5.5 % for the same period in fiscal year 2023.

In fiscal year 2024, 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, 2023.

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

4 unchanged sentences

On November 3, 2022 the Company's shareholders approved an amendment to the 2020 Plan to increase the reserve of shares of common stock available for future grants by 1,950,000 shares.

As of February 28, 2023, there was a maximum of 2.9 million shares of common stock available for future grant under the 2020 Plan.

As of August 31, 2023, there was a maximum of 1.1 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”).

2 unchanged sentences

On November 3, 2022 the Company's shareholders approved an amendment to the employee stock purchase plan to increase the reserve of shares of common stock available for future grants by 1,000,000 shares.

As of February 28, 2023, there was a maximum of 3.2 million shares of common stock available for future grant under the employee stock purchase plan.

For the three months ended February 28, 2023 and 2022, share-based compensation expense was $ 1.8 million and $ 2.4 million, respectively.

For the nine months ended February 28, 2023 and 2022, share-based compensation expense was $ 8.2 million and $ 7.8 million, respectively.

During the nine months ended February 28, 2023 and 2022, the Company granted stock options and restricted stock units under the 2020 Plan to certain employees and members of the Board of Directors.

As of August 31, 2023, there was a maximum of 3.0 million shares of common stock available for future grant under the employee stock purchase plan.

For the three months ended August 31, 2023 and 2022, share-based compensation expense was $ 4.1 million and $ 3.0 million, respectively.

During the three months ended August 31, 2023 and 2022, 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, 2023 and 2022, the Company granted performance share units under the 2020 Plan to certain employees.

Generally, 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.

In July 2023, the Board of Directors approved a change in terms of restricted stock units granted to non-employee directors to provide for immediate vesting upon grant of the award.

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During the three months ended August 31, 2023 and 2022, 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.

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

As of February 28, 2023, there was $ 17.6 million of unrecognized compensation expense related to share-based payment arrangements.

As of August 31, 2023, there was $ 25.3 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 .

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

Three Months Ended Nine Months Ended

(in thousands) Feb 28, 2023 Feb 28, 2022 Feb 28, 2023 Feb 28, 2022

Three Months Ended

(in thousands) Aug 31, 2023 Aug 31, 2022

Basic 39,842 39,302

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The Company regularly reviews its segments and the approach used by the chief operating decision maker, the President and Chief Executive Officer ("CEO"), 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 manages its operations through two segments, Med Tech and Med Device.

The CEO evaluates these two segments based on net sales and gross margin to, among other items, allocate resources and assess performance.

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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 $ 542.8 million as of February 28, 2023.

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 Nine Months Ended

(in thousands) Feb 28, 2023 Feb 28, 2022 Feb 28, 2023 Feb 28, 2022

Total assets were $ 493.9 million as of August 31, 2023.

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

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Three Months Ended

(in thousands) Aug 31, 2023 Aug 31, 2022

Med Tech Net Sales $ 25,860 $ 22,817

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

Three Months Ended Nine Months Ended

(in thousands) Feb 28, 2023 Feb 28, 2022 Feb 28, 2023 Feb 28, 2022

Three Months Ended

(in thousands) Aug 31, 2023 Aug 31, 2022

United States $ 64,399 $ 69,023

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Total $ 78,679 $ 81,537

For the three months ended February 28, 2023 and 2022, international sales as a percentage of total net sales were 16.2 % and 15.6 %, respectively.

For the nine months ended February 28, 2023 and 2022, international sales as a percentage of total net sales were 15.9 % and 16.1 %, respectively.

For the three months ended August 31, 2023 and 2022, international sales as a percentage of total net sales were 18.1 % and 15.3 %, 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.

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The recurring fair value measurements using significant unobservable inputs (Level 3) relate to contingent consideration liabilities.

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The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis:

Fair Value Measurements using inputs considered as:

Fair Value at Feb 28, 2023

Fair Value at Aug 31, 2023

(in thousands) Level 1 Level 2 Level 3

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Total Financial Liabilities $ — $ — $ 19,296 $ 19,296

There were no transfers between Level 1, 2 and 3 for the three and nine months ended February 28, 2023 and 2022.

There were no transfers between Level 1, 2 and 3 for the three months ended August 31, 2023 and 2022.

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

Three Months Ended Feb 28, 2023

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

Balance, November 30, 2022 $ 18,832

Change in present value of contingent consideration (1)

Balance, February 28, 2023

Nine Months Ended Feb 28, 2023

Three Months Ended Aug 31, 2023

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

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Currency gain from remeasurement 1

Balance, February 28, 2023

Contingent consideration payment ( 10,000 )

Balance, August 31, 2023

(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.

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The Company measures the initial liability and remeasures the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements, which is determined using a discounted cash flow model applied to projected net sales, using probabilities of achieving projected net sales and projected payment dates.

Projected net

sales are based on internal projections and extensive analysis of the target market and the sales potential.

Projected net sales are based on internal projections and extensive analysis of the target market and the sales potential.

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, 2023:

The recurring Level 3 fair value measurements of the contingent consideration liabilities include the following significant unobservable inputs as of August 31, 2023:

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(in thousands) Fair Value Valuation Technique Unobservable Input Range

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Projected fiscal year of payment 2024 - 2025

At February 28, 2023, 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, 2023, the amount of undiscounted future contingent consideration that the Company expects to pay as a result of all completed acquisitions is approximately $ 10.0 million.

The milestones, including revenue projections and technical milestones associated with the contingent consideration, must be reached in future periods ranging from fiscal years 2024 to 2029 in order for the associated consideration to be paid.

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

(in thousands) Balance Sheet Location Feb 28, 2023 May 31, 2022

(in thousands) Balance Sheet Location Aug 31, 2023 May 31, 2023

Operating lease ROU asset Other assets $ 4,584 $ 5,113

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

(in thousands) Feb 28, 2023

(in thousands) Aug 31, 2023

Remainder of 2024 $ 1,523

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Long-term lease obligations $ 2,942

During the three months ended February 28, 2023 and 2022, the Company recognized $ 0.7 million and $ 0.7 million of operating lease expense, respectively, which includes immaterial short-term leases.

During the nine months ended February 28, 2023 and 2022, the Company recognized $ 2.0 million and $ 2.1 million of operating leases expense, respectively, which includes immaterial short-term leases.

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During the three months ended August 31, 2023 and 2022, the Company recognized $ 0.6 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, 2023

Feb 28, 2022 Feb 28, 2023

Three Months Ended

(in thousands) Aug 31, 2023

Cost of sales $ 197 $ 219

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General and administrative 332 360

$ 696 $ 684 $ 2,044 $ 2,114

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

(in thousands) Feb 28, 2023 Feb 28, 2022

The following table presents supplemental cash flow and other information related to leases:

Three Months Ended

(in thousands) Aug 31, 2023 Aug 31, 2022

Cash paid for amounts included in the measurement of lease liabilities

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On December 27, 2021, the District of Delaware stayed the case pending the Federal Circuit's resolution of Bard's appeal from the Utah Decision.

On February 17, 2023, the Federal Circuit Reversed-in-Part, Vacated-in-Part, and Remanded the Utah

The other defendant subsequently filed a Petition for Rehearing with the Federal Circuit on March 20, 2023, and a mandate has not yet issued.

On February 17, 2023, the Federal Circuit Reversed-in-Part, Vacated-in-Part, and Remanded the Utah Decision.

The District of Delaware lifted the stay on February 28, 2023 and held a status conference on March 23, 2023.

A scheduling order has not yet been entered, but a jury trial is currently scheduled for April 29, 2024.

A scheduling order has been entered, and a jury trial is currently scheduled for April 29, 2024.

The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

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At the close of Bard’s case, the Court granted the Company's oral motion for judgment as a matter of law as well as its motions for summary judgment on the grounds that the asserted patents are invalid, ineligible, not infringed and not willfully infringed.

On May 10, 2019, the Company filed a motion for attorney fees and non-taxable expenses under 35 USC Sec.

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.

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patents held by Bard.

The issue of damages was bifurcated by the Court during trial, was not determined by the jury and will be subject to a separate proceeding.

The Company strongly disagrees with the claims and the verdict.

The issues presented to the jury do not comprise all of the issues to be determined in the case.

Equitable issues remain to be decided by the judge, and damages remain to be decided by a jury.

The Company believes it has meritorious defenses and positions with respect to the matters remaining to be decided and the jury decision, and intends to vigorously pursue all available remedies and defenses, including post-trial motions and appeals.

The parties have filed post-trial briefs, and the Court heard argument on March 13, 2023.

A decision is forthcoming.

The issue of damages was bifurcated by the Court during trial, and was not determined by the jury.

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2023, following post-trial briefing, the Court issued its decision on the Company's Renewed Judgement as a Matter of Law.

The Court held the asserted patent claims were invalid as anticipated, indefinite, ineligible and not willfully infringed.

The Court entered Judgement the same day in favor of the Company.

Bard has filed a Notice of Appeal to the Federal Circuit and that appeal remains pending.

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

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Following the Federal Circuit’s decision on appeal, the District of Delaware lifted the stay on February 28, 2023, and held a scheduling conference on March 23, 2023.

A scheduling order has not yet been entered, but a jury trial is currently scheduled for June 9, 2025.

A scheduling order has been entered, and a jury trial is currently scheduled for June 9, 2025.

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

The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

AngioDynamics, Inc.

On May 30, 2017, the Company commenced an action in the United States District Court for the Northern District of New York entitled AngioDynamics, Inc.

and Bard Access Systems, Inc.

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

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

Three Months Ended Nine Months Ended

(in thousands) Feb 28, 2023 Feb 28, 2022 Feb 28, 2023 Feb 28, 2022

Three Months Ended

(in thousands) Aug 31, 2023 Aug 31, 2022

$ 1,817 $ 1,863

Mergers and acquisitions (2)

Manufacturing relocation (2)

324 396 1,062 455

Transition service agreement (3)

Israeli Innovation Authority prepayment (4)

Other 431 282 504 701

Total $ 3,212 $ 5,581

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

(2) Legal and due diligence expenses related to mergers and acquisitions.

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

(3) Transition services agreement that was entered into as a result of the sale of the dialysis and BioSentry businesses.

(4) 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

(5) Included in other is $0.9 million of deferred financing fees that were written-off in conjunction with the sale of the Dialysis and BioSentry businesses and concurrent extinguishment of the debt.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

Three Months Ended Feb 28, 2023

(in thousands) Foreign currency translation income

Balance at November 30, 2022 $ ( 288 )

Other comprehensive loss, net of tax ( 3,562 )

Net other comprehensive loss $ ( 3,562 )

Balance at February 28, 2023

Nine Months Ended Feb 28, 2023

Three Months Ended Aug 31, 2023

(in thousands) Foreign currency translation income

Balance at May 31, 2023 $ ( 4,723 )

Other comprehensive loss, net of tax ( 5,207 )

Other comprehensive income, net of tax ( 930 )

Net other comprehensive loss $ ( 930 )

Balance at February 28, 2023

Balance at August 31, 2023

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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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 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):

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This ASU improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.

June 1, 2023 The Company plans to adopt the new standard in the first quarter of fiscal year 2024 and does not expect there to be a material impact to the consolidated financial statements.

June 1, 2023 The Company adopted the new standard in the first quarter of fiscal year 2024 and it did not have an impact on the Company's consolidated financial statements.

There have been no material changes to our critical accounting policies since our Annual Report on Form 10-K for fiscal year ended May 31, 2023.

Recently Issued Accounting Pronouncements - Not Yet Applicable or Adopted

There are no new accounting pronouncements issued that are expected to have a material impact on our consolidated financial statements.

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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