What changed in this filing

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Item 1. Financial Statements

2024-04-09 compared with 2024-01-08 · 217 added, 137 removed, 527 unchanged (40% of the section changed)

4 unchanged sentences

(in thousands of dollars, except per share data)

Three Months Ended Six Months Ended

Nov 30, 2023 Nov 30, 2022 Nov 30, 2023 Nov 30, 2022

Three Months Ended Nine Months Ended

Feb 29, 2024 Feb 28, 2023 Feb 29, 2024 Feb 28, 2023

Net sales $ 75,182 $ 80,712 $ 232,934 $ 247,678

6 unchanged sentences

Amortization of intangibles 3,287 4,739 10,474 14,384

Goodwill impairment 159,476 — 159,476 —

Change in fair value of contingent consideration 112 227 203 2,084

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Gain on sale of assets 6,657 — 54,499 —

Operating income (loss) ( 13,120 ) ( 8,115 ) 21,910 ( 21,416 )

Operating loss ( 199,896 ) ( 8,928 ) ( 177,986 ) ( 30,344 )

Other expense:

2 unchanged sentences

Total other income (expense), net 156 ( 736 ) 489 ( 2,228 )

Income (loss) before income tax benefit ( 12,618 ) ( 9,051 ) 22,243 ( 22,908 )

Income tax expense (benefit) 16,430 ( 565 ) 5,407 ( 1,418 )

Net income (loss) $ ( 29,048 ) $ ( 8,486 ) $ 16,836 $ ( 21,490 )

Earnings (loss) per share

Loss before income tax benefit ( 199,740 ) ( 9,664 ) ( 177,497 ) ( 32,572 )

Income tax benefit ( 12,004 ) ( 179 ) ( 6,597 ) ( 1,597 )

Net loss $ ( 187,736 ) $ ( 9,485 ) $ ( 170,900 ) $ ( 30,975 )

Loss per share

Basic $ ( 4.67 ) $ ( 0.24 ) $ ( 4.26 ) $ ( 0.79 )

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and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands of dollars)

Three Months Ended Six Months Ended

Nov 30, 2023 Nov 30, 2022 Nov 30, 2023 Nov 30, 2022

Net income (loss) $ ( 29,048 ) $ ( 8,486 ) $ 16,836 $ ( 21,490 )

Three Months Ended Nine Months Ended

Feb 29, 2024 Feb 28, 2023 Feb 29, 2024 Feb 28, 2023

Net loss $ ( 187,736 ) $ ( 9,485 ) $ ( 170,900 ) $ ( 30,975 )

Other comprehensive income (loss), before tax:

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Other comprehensive income (loss), net of tax 1,902 ( 3,562 ) 1,917 ( 5,207 )

Total comprehensive income (loss), net of tax $ ( 28,103 ) $ ( 9,581 ) $ 16,851 $ ( 23,135 )

Total comprehensive loss, net of tax $ ( 185,834 ) $ ( 13,047 ) $ ( 168,983 ) $ ( 36,182 )

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

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(in thousands of dollars, except share data)

Nov 30, 2023 May 31, 2023

Feb 29, 2024 May 31, 2023

Current assets

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

40,594,406 and 39,981,422 shares issued and 40,224,406 and 39,611,422 shares outstanding at November 30, 2023 and May 31, 2023, respectively

40,794,533 and 39,981,422 shares issued and 40,424,533 and 39,611,422 shares outstanding at February 29, 2024 and May 31, 2023, respectively

Additional paid-in capital 608,588 599,206

Accumulated deficit ( 381,755 ) ( 210,855 )

Treasury stock, 370,000 shares at November 30, 2023 and May 31, 2023, respectively

Treasury stock, 370,000 shares at February 29, 2024 and May 31, 2023, respectively

( 5,714 ) ( 5,714 )

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(in thousands of dollars)

Six Months Ended

Nov 30, 2023 Nov 30, 2022

Nine Months Ended

Feb 29, 2024 Feb 28, 2023

Cash flows from operating activities:

Net income (loss) $ 16,836 $ ( 21,490 )

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

Net loss $ ( 170,900 ) $ ( 30,975 )

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

Depreciation and amortization 20,895 23,316

4 unchanged sentences

Change in fair value of contingent consideration 203 2,084

Impairment loss on indefinite-lived intangible assets 159,476 —

Deferred income taxes ( 7,143 ) ( 1,752 )

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Additions to placement and evaluation units ( 3,245 ) ( 4,922 )

Cash paid for acquisitions — ( 540 )

Acquisition of intangibles ( 3,250 ) ( 540 )

Proceeds from sale of assets 134,500 —

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Stock-based compensation 1,877 1,877

Other comprehensive income (loss), net of tax 945 945

Other comprehensive income, net of tax 945 945

Balance at November 30, 2023 40,594,406 $ 383 $ 605,284 $ ( 194,019 ) $ ( 4,708 ) ( 370,000 ) $ ( 5,714 ) $ 401,226

Net loss ( 187,736 ) ( 187,736 )

Issuance/Cancellation of restricted stock units 49,701 ( 9 ) ( 9 )

Purchases of common stock under ESPP 150,426 2 701 703

Stock-based compensation 2,612 2,612

Other comprehensive income, net of tax 1,902 1,902

Balance at February 29, 2024 40,794,533 $ 385 $ 608,588 $ ( 381,755 ) $ ( 2,806 ) ( 370,000 ) $ ( 5,714 ) $ 218,698

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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

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

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CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended November 30, 2023 and 2022, the Consolidated Balance Sheet as of November 30, 2023, the Consolidated Statements of Cash Flows for the six months ended November 30, 2023 and 2022, and the Consolidated Statements of Stockholders’ Equity for the six months ended November 30, 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 and nine months ended February 29, 2024 and February 28, 2023, the Consolidated Balance Sheet as of February 29, 2024, the Consolidated Statements of Cash Flows for the nine months ended February 29, 2024 and February 28, 2023, and the Consolidated Statements of Stockholders’ Equity for the nine months ended February 29, 2024 and February 28, 2023 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 November 30, 2023 (and for all periods presented) have been made.

The unaudited interim consolidated financial statements for the three and six months ended November 30, 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 February 29, 2024 (and for all periods presented) have been made.

The unaudited interim consolidated financial statements for the three and nine months ended February 29, 2024 and February 28, 2023 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.

PICCs and Midlines

Pursuant to an asset purchase agreement dated February 15, 2024 (the "Asset Purchase Agreement"), the Company completed the sale of the PICC and Midline businesses (the "Divestiture") to Spectrum Vascular ("Spectrum").

Total consideration received by the Company for the Divestiture in the third quarter of fiscal year 2024 was $ 34.5 million in cash and resulted in a pre-tax book gain of $ 6.7 million.

Included in the agreement is a $ 5.5 million earn-out related to the sales of divested products over a two year period and a milestone payment of $ 5.0 million paid upon final transfer of the manufacturing to a third-party.

The Company and Spectrum entered into various agreements to facilitate the transition of the divested businesses to Spectrum, 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 February 15, 2024

Current assets:

Inventories $ 4,203

Total current assets $ 4,203

Non-current assets:

Property, plant and equipment, net $ 158

Intangible assets, net 20,781

Other assets 40

Total non-current assets $ 20,979

Dialysis and BioSentry

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.

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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

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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:

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

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Disaggregation of Revenue

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

Three Months Ended November 30, 2023 Three Months Ended November 30, 2022

Three Months Ended February 29, 2024 Three Months Ended February 28, 2023

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

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Total $ 62,342 $ 12,840 $ 75,182 $ 67,620 $ 13,092 $ 80,712

Six Months Ended November 30, 2023 Six Months Ended November 30, 2022

Nine Months Ended February 29, 2024 Nine Months Ended February 28, 2023

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

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Contracts and Performance Obligations

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The Company contracts with its customers based on customer purchase orders, which in many cases are governed by master purchasing agreements.

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As the Company’s standard payment terms are 30 to 90 days from invoicing, the Company does not provide any significant financing to its customers.

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The Company enters into agreements to place placement and evaluation units (“units”) at customer sites, but the Company retains title to the units.

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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 six months ended November 30, 2023, such product returns were not material.

During the nine months ended February 29, 2024, such product returns were not material.

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Contract Balances with Customers

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

(in thousands) Nov 30, 2023 May 31, 2023

(in thousands) Feb 29, 2024 May 31, 2023

Receivables $ 49,475 $ 52,826

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Contract liabilities $ 715 $ 499

During the six months ended November 30, 2023, the Company had additions to contract liabilities of $ 0.2 million.

This was offset by $ 0.2 million in revenue that was recognized during the six months ended November 30, 2023.

During the nine months ended February 29, 2024, the Company had additions to contract liabilities of $ 0.6 million.

This was offset by $ 0.3 million in revenue that was recognized during the nine months ended February 29, 2024.

Costs to Obtain or Fulfill a Customer Contract

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The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products.

Shipping and handling costs, associated with the distribution of finished products to

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customers, are recorded in costs of goods sold and are recognized when the related finished product is shipped to the customer.

Shipping and handling costs, associated with the distribution of finished products to customers, are recorded in costs of goods sold and are recognized when the related finished product is shipped to the customer.

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

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Inventories consisted of the following:

(in thousands) Nov 30, 2023 May 31, 2023

(in thousands) Feb 29, 2024 May 31, 2023

Raw materials $ 31,161 $ 28,679

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

The total inventory reserve at November 30, 2023 and May 31, 2023 was $ 3.2 million and $ 3.1 million, respectively.

The total inventory reserve at February 29, 2024 and May 31, 2023 was $ 3.6 million and $ 3.1 million, respectively.

GOODWILL AND INTANGIBLE ASSETS

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The Company's annual testing for impairment of goodwill was completed as of April 30, 2023.

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.

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

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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.

was a triggering event for the Med Device reporting 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.

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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 the third quarter of fiscal year 2024, the Company concluded that the sustained decline in our stock price was a triggering event for the Med Tech reporting unit.

To determine the fair value of the remaining Med Tech reporting unit as of February 29, 2024, the Company utilized the income approach, as it was determined to be a better representation of the remaining Med Tech reporting unit's projected long-term performance.

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.

Based on the results of this evaluation, the Company recorded a goodwill impairment charge of $ 159.5 million for the quarter ended February 29, 2024 to write down the carrying value of the Med Tech reporting unit to fair value.

The impairment loss is disclosed separately on the face of the accompanying consolidated statements of operations.

Goodwill for each reporting unit is allocated as follows:

Six months ended Nov 30, 2023

Nine months ended Feb 29, 2024

(in thousands) Med Tech Med Device Total

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Balance, November 30, 2023 $ 159,226 $ — $ 159,226

$ 159,226 $ — $ 159,226

There were no adjustments to goodwill for the six months ended November 30, 2023 other than foreign currency translation adjustments.

Even though the Company determined that there was no goodwill impairment at November 30, 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.

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Goodwill impairment ( 159,476 ) — ( 159,476 )

Foreign currency translation adjustments $ 250 $ — $ 250

Balance, February 29, 2024

Definite Lived Intangible Assets

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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.

During the third quarter of fiscal year 2024, the Company made the decision to abandon the Syntrax product line.

This resulted in an impairment charge of $ 3.3 million for the Syntrax product technology intangible.

The impairment charge is recorded in "Acquisition, Restructuring and Other" in the consolidated financial statements included in this Form 10-Q (see Note 15 "Acquisition, Restructuring, and Other Items, Net" set forth in the Notes to our consolidated financial statements in this Quarterly Report on Form 10 -Q).

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Intangible assets consisted of the following:

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

Amortization expense for the three months ended November 30, 2023 and 2022 was $ 3.6 million and $ 4.8 million, respectively.

Amortization expense for the six months ended November 30, 2023 and 2022 was $ 7.2 million and $ 9.6 million, respectively.

Amortization expense for the three months ended February 29, 2024 and February 28, 2023 was $ 3.3 million and $ 4.7 million, respectively.

Amortization expense for the nine months ended February 29, 2024 and February 28, 2023 was $ 10.5 million and $ 14.4 million, respectively.

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

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2029 and thereafter 38,051

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ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

(in thousands) Nov 30, 2023 May 31, 2023

(in thousands) Feb 29, 2024 May 31, 2023

Payroll and related expenses $ 13,465 $ 9,232

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LONG-TERM DEBT

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.

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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.

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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 23.7 % as of the second quarter of fiscal year 2024, as compared to 5.8 % for the same period in fiscal year 2023.

The estimated annual effective tax rate prior to discrete items was 5.6 % as of the third quarter of fiscal year 2024, as compared to 5.2 % for the same period in fiscal year 2023.

In fiscal year 2024, the Company’s effective tax rate differs from the U.S.

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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 November 30, 2023.

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

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On November 14, 2023 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 1.5 million shares.

As of November 30, 2023, there was a maximum of 2.6 million shares of common stock available for future grant under the 2020 Plan.

As of February 29, 2024, there was a maximum of 2.7 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”).

The adoption of the 2020 Plan did not impact the administration of equity awards issued under the 2004 Plan but following the adoption of the 2020 Plan, equity award grants are no longer made under the 2004 Plan.

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The Company also has an employee stock purchase plan.

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 1.0 million shares.

As of November 30, 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 November 30, 2023 and 2022, share-based compensation expense was $ 1.9 million and $ 3.4 million, respectively.

For the six months ended November 30, 2023 and 2022, share-based compensation expense was $ 6.0 million and $ 6.4 million, respectively.

During the six months ended November 30, 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 February 29, 2024, there was a maximum of 2.9 million shares of common stock available for future grant under the employee stock purchase plan.

For the three months ended February 29, 2024 and February 28, 2023, share-based compensation expense was $ 2.6 million and $ 1.8 million, respectively.

For the nine months ended February 29, 2024 and February 28, 2023, share-based compensation expense was $ 8.6 million and $ 8.2 million, respectively.

During the nine months ended February 29, 2024 and February 28, 2023, 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.

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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.

During the six months ended November 30, 2023 and 2022, the Company granted performance share units under the 2020 Plan to certain employees.

During the nine months ended February 29, 2024 and February 28, 2023, 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 November 30, 2023, there was $ 20.3 million of unrecognized compensation expense related to share-based payment arrangements.

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As of February 29, 2024, there was $ 16.5 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 Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 Nov 30, 2023 Nov 30, 2022

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 Feb 29, 2024 Feb 28, 2023

Basic 40,234 39,509 40,098 39,436

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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 $ 499.6 million as of November 30, 2023.

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Total assets were $ 324.8 million as of February 29, 2024.

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

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 Nov 30, 2023 Nov 30, 2022

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 Feb 29, 2024 Feb 28, 2023

Med Tech Net Sales $ 25,844 $ 22,874 $ 77,068 $ 70,193

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Gross margin 47.7 % 50.2 % 49.9 % 51.6 %

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Geographic information

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

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 Nov 30, 2023 Nov 30, 2022

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 Feb 29, 2024 Feb 28, 2023

United States $ 62,342 $ 67,620 $ 190,743 $ 208,274

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Total $ 75,182 $ 80,712 $ 232,934 $ 247,678

For the three months ended November 30, 2023 and 2022, international sales as a percentage of total net sales were 19.1 % and 16.2 %, respectively.

For the six months ended November 30, 2023 and 2022, international sales as a percentage of total net sales were 18.6 % and 15.8 %, respectively.

For the three months ended February 29, 2024 and February 28, 2023, international sales as a percentage of total net sales were 17.1 % and 16.2 %, respectively.

For the nine months ended February 29, 2024 and February 28, 2023, international sales as a percentage of total net sales were 18.1 % and 15.9 %, 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 Nov 30, 2023

Fair Value at Feb 29, 2024

(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 six months ended November 30, 2023 and 2022.

There were no transfers between Level 1, 2 and 3 for the three and nine months ended February 29, 2024 and February 28, 2023.

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

Three Months Ended Nov 30, 2023

Three Months Ended Feb 29, 2024

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

Balance, August 31, 2023 $ 9,167

Balance, November 30, 2023 $ 9,387

Change in present value of contingent consideration (1)

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Contingent consideration payment —

Balance, November 30, 2023

Six Months Ended Nov 30, 2023

Balance, February 29, 2024

Nine Months Ended Feb 29, 2024

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

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Contingent consideration payment ( 10,000 )

Balance, November 30, 2023

Balance, February 29, 2024

(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 fair value of the contingent consideration is remeasured at the estimated fair value at each reporting period with the change in fair value recognized as income or expense within change in fair value of contingent consideration in the Consolidated Statements of Operations.

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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.

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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 November 30, 2023:

The recurring Level 3 fair value measurements of the contingent consideration liabilities include the following significant unobservable inputs as of February 29, 2024:

(in thousands) Fair Value Valuation Technique Unobservable Input Range

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Projected fiscal year of payment 2024 - 2025

At November 30, 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.

At February 29, 2024, 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 Company determines if an arrangement is a lease at inception of the contract.

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

(in thousands) Balance Sheet Location Nov 30, 2023 May 31, 2023

(in thousands) Balance Sheet Location Feb 29, 2024 May 31, 2023

Operating lease ROU asset Other assets $ 3,854 $ 5,113

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Weighted average discount rate 4.7 %

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

(in thousands) Nov 30, 2023

(in thousands) Feb 29, 2024

Remainder of 2024 $ 501

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Long-term lease obligations $ 2,322

During the three months ended November 30, 2023 and 2022, the Company recognized $ 0.6 million and $ 0.7 million of operating lease expense, respectively, which includes immaterial short-term leases.

During the six months ended November 30, 2023 and 2022, the Company recognized $ 1.3 million and $ 1.4 million of operating lease expense, respectively, which includes immaterial short-term leases.

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During the three months ended February 29, 2024 and February 28, 2023, 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 29, 2024 and February 28, 2023, the Company recognized $ 1.9 million and $ 2.0 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 Six Months Ended

(in thousands) Nov 30, 2023

Nov 30, 2022 Nov 30, 2023

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024

Feb 28, 2023 Feb 29, 2024

Cost of sales $ 218 $ 221 $ 634 $ 661

4 unchanged sentences

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

Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022

Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023

Cash paid for amounts included in the measurement of lease liabilities

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

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

Following the reexamination proceedings, and the parties’ related appeals to the Federal Circuit which resulted in further proceedings at the USPTO, certain claims of the 615 patent were held invalid, while the remaining claims of the 615 patent and the other two patents were upheld over the prior art references considered in the reexamination proceedings.

Thereafter, the case was transferred from the District of Utah to the United States District Court for the District of Delaware (“District of Delaware”).

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

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

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Utah Decision.

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.

The parties each filed motions for summary judgement, 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.

On March 10, 2015, Bard and Bard Peripheral Vascular filed suit in the District of Delaware claiming certain of the Company's implantable port products infringe on three U.S.

1 unchanged sentence

8,475,417, 8,545,460, 8,805,478).

The case proceeded through trial which began on March 4, 2019.

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.

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.

Following remand from the Federal Circuit, a jury trial commenced in the District of Delaware beginning November 14, 2022.

On November 22, 2022, a jury entered a verdict finding that certain of the Company’s implantable port products infringe certain claims of U.S.

patents held by Bard.

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

On June 1, 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 appealed to the Federal Circuit, where the Company has a brief in response to Bard's appeal brief due at the end of January 2024.

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.

The Court entered Judgement on June 1, 2023 in favor of the Company.

Bard has appealed to the Federal Circuit, where Bard has its reply brief in support of its appeal due May 6, 2024.

A hearing date has not yet been set.

On March 8, 2021, Bard filed suit in the District of Delaware asserting certain of the Company’s port products (including certain related infusion sets) infringe U.S.

8,025,639, 9,603,992 and 9,603,993.

On December 27, 2021, the District of Delaware stayed the case pending the Federal Circuit's resolution of Bard's appeal of the Utah decision invalidating multiple claims of the ‘302, ‘022, and ‘615 patents under 35 USC §101.

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 Markman hearing was held on December 18, 2023.

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.

The Company counterclaimed, alleging that certain of Bard’s catheter products infringe U.S.

8,377,011, 10,729,881, 8,454,574.

On March 31, 2024, the Company and Bard’s parent company Becton, Dickinson and Company (collectively, “BD”) entered into a settlement agreement (the “Settlement Agreement”) to resolve the ongoing litigations.

Under the terms of the Settlement Agreement, BD will grant a license to the Company under certain of BD’s port patents and AngioDynamics will grant BD a license under certain of the Company’s catheter patents.

The Company will make a one-time lump sum payment to BD in the amount of $ 7.0 million which will be payable in installments over the next 12 months.

The Company will also make six minimum annual payments to BD of $ 2.5 million through February, 2029, and potential additional payments if six percent ( 6 %) of annual net sales of the Company’s port products exceed the minimum payment.

The parties will participate in the pending appeal before the Federal Circuit of the case that was filed March 10, 2015 and a contingent payment of $ 3.0 million will be due from the Company to BD if the Federal Circuit reverses or vacates the District Court’s findings of invalidity with respect to the patent claims at issue in the case.

Neither party admitted any liability and the agreement contains mutual covenants not to sue and releases.

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ACQUISITION, RESTRUCTURING, AND OTHER ITEMS, NET

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

Three Months Ended Six Months Ended

(in thousands) Nov 30, 2023 Nov 30, 2022 Nov 30, 2023 Nov 30, 2022

Three Months Ended Nine Months Ended

(in thousands) Feb 29, 2024 Feb 28, 2023 Feb 29, 2024 Feb 28, 2023

$ 23,314 $ 2,614 $ 30,453 $ 6,899

Mergers and acquisitions (2)

Manufacturing relocation (3)

Plant closure (3)

5,426 — 6,115 —

Intangible and other asset impairment (4)

6,260 — 6,260 —

Transition service agreement (5)

( 333 ) — ( 655 ) —

Manufacturing relocation (6)

— 324 587 1,062

Israeli Innovation Authority prepayment (7)

2 unchanged sentences

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

For the three and nine months ended February 29, 2024, a $ 19.3 million settlement expense was recorded as a result of the Settlement Agreement that was entered into between the Company and BD.

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

(3) Included in the $ 6.1 million in plant closure for the nine months ended February 29, 2024 is $ 0.7 million that was previously included in manufacturing relocation.

(4) An impairment of $ 3.4 million on intangible and fixed assets and an inventory write-off of $ 2.9 million was taken in the third quarter of fiscal year 2024 relating to the abandonment of the Syntrax and RF product lines.

(5) Transition services agreements that were entered into with Merit and Spectrum.

(6) Expenses to relocate certain manufacturing lines out of Queensbury, NY.

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

(7) 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.

(6) Included in the $ 1.1 million in other for the six months ended November 30, 2023 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.

(8) Included in the $ 1.6 million in other for the nine months ended February 29, 2024 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.

Restructuring

The Company evaluates its performance and looks for opportunities to improve the overall operations of the Company on an ongoing basis.

As a result of this evaluation, certain restructuring initiatives are taken to enhance the Company’s overall operations.

On January 5, 2024, the Company announced a restructuring of its manufacturing footprint and a shift to an outsourced model (the "Plan").

This Plan will transfer all product manufacturing processes to third-party manufacturers.

The restructuring activities associated with the Plan are expected to be completed in the third quarter of fiscal year 2026.

The following table provides a summary of our estimated costs associated with the plan:

Type of cost Total estimated amount expected to be incurred (in thousands)

Facilities closeout fees (1)

$ 14,500 to $ 15,250

Termination benefits 9,000 to 10,000

Outside consultants 9,000 to 10,000

Validation expenses 4,500 to 5,500

Regulatory filings 750 to 1,250

Other 750 to 1,250

$ 38,500 to $ 43,250

(1) Included in this estimate is approximately $ 13.6 million of non-cash charges for accelerated depreciation and building impairment.

The Company recorded restructuring charges related to the plan during the three and nine months ended February 29, 2024 of $ 5.4 million and $ 6.1 million, respectively.

Total restructuring charges recorded to date are $ 6.1 million.

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benefits are only earned if an employee stays until their termination date;

therefore, the expenses related to termination benefits are being recorded ratably over the service period.

The table below presents the restructuring reserve for the three and nine months ended February 29, 2024 :

Three Months Ended Feb 29, 2024

Termination Benefits Outside Consultants Validation Expenses Facilities Closeout Fees Regulatory Filings Other Total

(in thousands)

Balance at November 30, 2023 $ — $ 653 $ — $ — $ — $ 36 $ 689

Charges 227 647 37 4,500 10 5 5,426

Non-cash adjustments — — — ( 4,500 ) — — ( 4,500 )

Cash payments — ( 635 ) — — — ( 41 ) ( 676 )

Balance at February 29, 2024 $ 227 $ 665 $ 37 $ — $ 10 $ — $ 939

Nine Months Ended Feb 29, 2024

Termination Benefits Outside Consultants Validation Expenses Facilities Closeout Fees Regulatory Filings Other Total

(in thousands)

Balance at May 31, 2023 $ — $ — $ — $ — $ — $ — $ —

Charges 227 1,300 37 4,500 10 41 6,115

Non-cash adjustments — — — ( 4,500 ) — — ( 4,500 )

Cash payments — ( 635 ) — — — ( 41 ) ( 676 )

Balance at February 29, 2024 $ 227 $ 665 $ 37 $ — $ 10 $ — $ 939

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

Three Months Ended Nov 30, 2023

Three Months Ended Feb 29, 2024

(in thousands) Foreign currency translation income

Balance at August 31, 2023 $ ( 5,653 )

Other comprehensive income, net of tax 945

Net other comprehensive loss $ 945

Balance at November 30, 2023 $ ( 4,708 )

Six Months Ended Nov 30, 2023

Other comprehensive income, net of tax 1,902

Net other comprehensive income $ 1,902

Balance at February 29, 2024

Nine Months Ended Feb 29, 2024

(in thousands) Foreign currency translation income

1 unchanged sentence

Other comprehensive income, net of tax 1,917

Net other comprehensive loss $ 15

Balance at November 30, 2023

Net other comprehensive income $ 1,917

Balance at February 29, 2024

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements - Adopted

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Standard Description Effective Date Effect on the Consolidated Financial Statements

14 unchanged sentences

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.

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SUBSEQUENT EVENTS

On January 5, 2024, the Company announced a plan to shift its manufacturing operations from company-owned facilities in upstate New York to a fully outsourced model.

This plan will reduce structural and overhead costs.

The restructuring activities associated with the plan are expected to be completed in the third quarter of fiscal year 2026.

On March 31, 2024, the Company and BD entered into a Settlement Agreement as described in Note 14 "Commitments and Contingencies" set forth in the Notes to our consolidated financial statements in this Quarterly Report on Form 10 -Q.

The Company will make a one-time lump sum payment to BD in the amount of $ 7.0 million, $ 3.0 million of which will be payable within 5 business days, and the remainder of which will be payable in installments over the next 12 months.

The Company will also make six minimum annual payments to BD of $ 2.5 million through February, 2029, and potential additional payments if six percent ( 6 %) of annual net sales of AngioDynamics’ port products exceed the minimum payment.

The parties will participate in the pending appeal before the Federal Circuit of the case titled C.R.

and Bard Peripheral Vascular, Inc.

AngioDynamics, Inc.

15-00218–JFB;

and CAFC appeal No.

23-2056) and a contingent payment of $ 3.0 million will be due from AngioDynamics to BD if the Federal Circuit reverses or vacates the District Court’s findings of invalidity with respect to the patent claims at issue in the case.

Neither party admitted any liability and the agreement contains mutual covenants not to sue and releases.

The agreement contains mutual covenants not to sue and releases.

As of February 29, 2024, the lump sum and the present value of the minimum annual payments of $ 19.3 million was recorded in "Acquisition, restructuring and other items, net" on the accompanying consolidated statements of operations and a long-term asset of $ 1.3 million, other current liabilities of $ 8.5 million and other long-term liabilities of $ 12.0 million was recorded on the consolidated balance sheets.

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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