UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM10-Q

☒

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended~~September~~June 30, ~~2017~~

2022

☐

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to

________________

Commission filenumber: 1-13165

~~CRYOLIFE,~~

ARTIVION, INC.

(Exact name of registrant as specified in its charter)


~~Florida~~Delaware		59-2417093
(State or other jurisdiction of	~~(I.R.S. Employer~~
incorporation or organization)	(I.R.S. Employer Identification No.)

1655 Roberts Boulevard, NW, Kennesaw, Georgia		30144
(Address of principal executive offices)		(Zip Code)

(770)419-3355

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	AORT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).


		~~Yes ☒~~		~~No ☐~~

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

Large ~~accelerated filer ☐~~

Accelerated Filer

Accelerated ~~filer ☒~~

~~Non-accelerated~~ ~~filer ☐ (Do not check if a smaller reporting company)~~

Filer

~~Smaller reporting company ☐~~o

Non-accelerated Filer

Smaller Reporting Company

Emerging ~~growth company ☐~~Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section ~~7(a)(2)(B)~~13(a) of the ~~Securities~~Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).


		~~Yes ☐~~		~~No ☒~~

Yes o No x

Indicate the number of shares outstanding of each of the ~~issuer’s~~issuer's classes of common stock, as of the latest practicable date.


Class			Outstanding at ~~October 23, 2017~~July 29, 2022
	Common Stock, $0.01 par value	40,316,054


~~Common Stock~~

Table of Contents

TABLE OF CONTENTS

			~~33,457,552 Shares~~
Part I – FINANCIAL INFORMATION

Item 1. Financial Statements.			3
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Cash Flows			5
Condensed Consolidated Statements of Shareholders’ Equity			6
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			36
Item 4. Controls and Procedures.			36

Part II - OTHER INFORMATION			38

Item 1. Legal Proceedings.			38
Item 1A. Risk Factors.			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			52
Item 3. Defaults Upon Senior Securities.			53
Item 4. Mine Safety Disclosures.			53
Item 5. Other Information.			53
Item 6. Exhibits.			54
Signatures			55

Table of Contents

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements.

~~CRYOLIFE, INC. AND SUBSIDIARIES~~

~~SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME~~

~~(IN THOUSANDS, EXCEPT PER SHARE DATA)~~

   Three Months Ended
September 30,    Nine Months Ended
September 30,




           2017                 2016                    2017                 2016




   (Unaudited)    (Unaudited)
Revenues:

Products
   $ 27,029 $ 28,004    $ 84,519 $ 85,067
Preservation services
   16,970 17,248    52,357 50,284




Total revenues
   43,999 45,252    136,876 135,351





Cost of products and preservation services:

Products
   6,220 6,598    21,196 21,299
Preservation services
   7,917 8,872    23,401 26,348




Total cost of products and preservation services
   14,137 15,470    44,597 47,647





Gross margin
   29,862 29,782    92,279 87,704





Operating expenses:

General, administrative, and marketing
   24,756 20,592    71,016 69,302
Research and development
   4,277 3,714    13,098 9,602




Total operating expenses
   29,033 24,306    84,114 78,904




Gain from sale of business components
   -- --    -- (7,915)




Operating income
   829 5,476    8,165 16,715





Interest expense
   851 742    2,486 2,256
Interest income
   (64 ) (18)    (159 ) (48)
Other expense (income), net
   21 21    (70 ) (146)





Income before income taxes
   21 4,731    5,908 14,653
Income tax (benefit) expense
   (1,304 ) 1,738    (803 ) 6,772





Net income
   $ 1,325 $ 2,993    $ 6,711 $ 7,881





Income per common share:

Basic
   $ 0.04 $ 0.09    $ 0.20 $ 0.24




Diluted
   $ 0.04 $ 0.09    $ 0.19 $ 0.24





Weighted-average common shares outstanding:

Basic
   32,887 32,151    32,665 31,731
Diluted
   34,057 33,165    33,851 32,568

Net income
   $ 1,325 $ 2,993    $ 6,711 $ 7,881
Other comprehensive income (loss)
   217 (31)    582 (459)




Comprehensive income
   $ 1,542 $ 2,962    $ 7,293 $ 7,422

Artivion, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

In Thousands, Except Per Share Data

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues:
Products	$	58,936	$	56,076	$	116,478	$	109,421
Preservation services	21,404		20,072		41,075		37,814
Total revenues	80,340		76,148		157,553		147,235

Cost of products and preservation services:
Products	18,230		16,178		35,638		31,089
Preservation services	9,938		9,457		19,024		17,795
Total cost of products and preservation services	28,168		25,635		54,662		48,884

Gross margin	52,172		50,513		102,891		98,351

Operating expenses:
General, administrative, and marketing	38,983		40,830		77,938		79,468
Research and development	8,648		8,360		18,776		16,114
Total operating expenses	47,631		49,190		96,714		95,582

Operating income	4,541		1,323		6,177		2,769

Interest expense	4,101		4,855		8,049		8,895
Interest income	(30)		(18)		(46)		(42)
Other expense (income), net	3,770		(1,331)		3,903		600

Loss before income taxes	(3,300)		(2,183)		(5,729)		(6,684)
Income tax expense (benefit)	959		(5)		1,919		(1,368)

Net loss	$	(4,259)	$	(2,178)	$	(7,648)	$	(5,316)

Loss per share:
Basic	$	(0.11)	$	(0.06)	$	(0.19)	$	(0.14)
Diluted	$	(0.11)	$	(0.06)	$	(0.19)	$	(0.14)

Weighted-average common shares outstanding:
Basic	40,031		38,943		39,941		38,841
Diluted	40,031		38,943		39,941		38,841

Net loss	$	(4,259)	$	(2,178)	$	(7,648)	$	(5,316)
Other comprehensive (loss) income:
Foreign currency translation adjustments	(14,796)		2,973		(18,571)		(7,317)
Comprehensive (loss) income	$	(19,055)	$	795	$	(26,219)	$	(12,633)

See accompanying Notes to ~~Summary~~Condensed Consolidated Financial ~~Statements.~~

Statements

~~CRYOLIFE, INC. AND SUBSIDIARIES~~

~~SUMMARY CONSOLIDATED BALANCE SHEETS~~

~~(IN THOUSANDS)~~

       September 30,
    2017     December 31,
2016


     (Unaudited)
ASSETS

Current assets:

Cash and cash equivalents
   $ 54,242 $ 56,642
Restricted securities
   771 699
Receivables, net
   33,659 30,096
Inventories
   27,763 26,293
Deferred preservation costs
   35,008 30,688
Prepaid expenses and other
   4,142 2,815


Total current assets
   155,585 147,233



Property and equipment, net
   20,607 18,502
Goodwill
   78,294 78,294
Patents, net
   827 1,008
Trademarks and other intangibles, net
   62,454 65,633
Deferred income taxes
   1,190 --
Investment in company owned life insurance
   4,360 2,991
Other
   2,823 2,479


Total assets
   $ 326,140 $ 316,140



LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable
   $ 5,066 $ 5,744
Accrued expenses and other
   17,813 19,796
Current portion of long-term debt
   3,234 4,562


Total current liabilities
   26,113 30,102



Long-term debt
   64,835 67,012
Deferred compensation liability
   3,753 2,600
Deferred rent obligations
   2,982 2,355
Other
   5,101 5,088


Total liabilities
   102,784 107,157



Commitments and contingencies


Shareholders’ equity:

Preferred stock
   -- --
Common stock (issued shares of 34,844 in 2017 and 34,230 in 2016)
   348 342
Additionalpaid-in capital
   194,958 187,061
Retained earnings
   40,616 34,143
Accumulated other comprehensive income (loss)
   153 (429)
Treasury stock at cost (shares of 1,387 in 2017 and 1,356 in 2016)
   (12,719 ) (12,134)


Total shareholders’ equity
   223,356 208,983



Total liabilities and shareholders’ equity
   $ 326,140 $ 316,140

Table of Contents

Artivion, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

In Thousands


	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	40,382	$	55,010
Trade receivables, net	57,558		53,019
Other receivables	7,995		5,086
Inventories, net	74,318		76,971
Deferred preservation costs, net	44,785		42,863
Prepaid expenses and other	15,390		14,748
Total current assets	240,428		247,697

Goodwill	240,939		250,000
Acquired technology, net	154,866		166,994
Operating lease right-of-use assets, net	42,659		45,714
Property and equipment, net	36,268		37,521
Other intangibles, net	32,470		34,502
Deferred income taxes	9,916		2,357
Other assets	7,318		8,267
Total assets	$	764,864	$	793,052

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	10,545	$	10,395
Accrued compensation	9,732		13,163
Accrued expenses	7,842		7,687
Taxes payable	4,709		3,634
Accrued procurement fees	2,130		3,689
Current maturities of operating leases	3,207		3,149
Current portion of long-term debt	1,590		1,630
Other liabilities	1,891		1,606
Total current liabilities	41,646		44,953

Long-term debt	306,941		307,493
Contingent consideration	44,400		49,400
Non-current maturities of operating leases	42,141		44,869
Non-current finance lease obligation	3,766		4,374
Deferred income taxes	32,609		28,799
Deferred compensation liability	5,154		5,952
Other liabilities	6,698		6,484
Total liabilities	$	483,355	$	492,324

Commitments and contingencies	0		0

Shareholders' equity:
Preferred stock	—		—
Common stock (issued shares of 41,744 in 2022 and 41,397 in 2021)	417		414
Additional paid-in capital	329,871		322,874
Retained (deficit) earnings	(5,673)		1,975
Accumulated other comprehensive loss	(28,458)		(9,887)
Treasury stock, at cost, 1,487 shares as of June 30, 2022 and December 31, 2021	(14,648)		(14,648)
Total shareholders' equity	281,509		300,728

Total liabilities and shareholders' equity	$	764,864	$	793,052

See accompanying Notes to ~~Summary~~Condensed Consolidated Financial ~~Statements.~~

Statements

~~CRYOLIFE, INC. AND SUBSIDIARIES~~

~~SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(IN THOUSANDS)~~

   Nine Months Ended
September 30,


               2017             2016


   (Unaudited)
Net cash flows from operating activities:

Net income
   $ 6,711 $               7,881

Adjustments to reconcile net income to net cash from operating activities:

Gain from sale of business components
   -- (7,915)
Depreciation and amortization
   6,683 6,248
Non-cash compensation
   5,652 4,617
Othernon-cash adjustments to income
   879 5,595

Changes in operating assets and liabilities:

Receivables
   (4,303 ) 3,729
Inventories and deferred preservation costs
   (6,901 ) (5,739)
Prepaid expenses and other assets
   (3,040 ) (46)
Accounts payable, accrued expenses, and other liabilities
   (855 ) 304


Net cash flows provided by operating activities
   4,826 14,674



Net cash flows from investing activities:

Acquisition ofOn-X, net of cash acquired
   -- (91,152)
Acquisition of PhotoFix technology
   -- (1,226)
Proceeds from sale of business components
   740 19,795
Decrease in restricted cash
   -- 5,000
Capital expenditures
   (5,384 ) (3,511)
Other
   5 (12)


Net cash flows used in investing activities
   (4,639 ) (71,106)



Net cash flows from financing activities:

Proceeds from issuance of term loan
   -- 75,000
Repayment of term loan
   (3,916 ) (1,406)
Payment of debt issuance costs
   -- (2,289)
Proceeds from exercise of stock options and issuance of common stock
   2,599 2,116
Redemption and repurchase of stock to cover tax withholdings
   (1,600 ) (599)
Other
   (3 ) 571


Net cash flows (used in) provided by financing activities
   (2,920 ) 73,393



Effect of exchange rate changes on cash
   333 (418)


(Decrease) increase in cash and cash equivalents
   (2,400 ) 16,543

Cash and cash equivalents, beginning of period
   56,642 37,588


Cash and cash equivalents, end of period
   $ 54,242 $ 54,131

Table of Contents

Artivion, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

In Thousands

(Unaudited)


	Six Months Ended June 30,
	2022		2021
Net cash flows from operating activities:
Net loss	$	(7,648)	$	(5,316)

Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	11,497		11,999
Non-cash compensation	6,100		4,595
Non-cash lease expense	3,803		3,575
Write-down of inventories and deferred preservation costs	2,177		2,988
Change in fair value of contingent consideration	(5,000)		4,270
Deferred income taxes	(1,611)		(4,269)
Other	940		2,174
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(205)		(2,076)
Inventories and deferred preservation costs	(3,653)		(11,712)
Receivables	(9,635)		(5,454)
Accounts payable, accrued expenses, and other liabilities	(5,677)		(1,166)
Net cash flows used in operating activities	(8,912)		(392)

Net cash flows from investing activities:
Capital expenditures	(4,055)		(7,249)
Other	(939)		205
Net cash flows used in investing activities	(4,994)		(7,044)

Net cash flows from financing activities:
Proceeds from exercise of stock options and issuance of common stock	2,318		2,321
Payment of debt issuance costs	—		(2,219)
Redemption and repurchase of stock to cover tax withholdings	(1,739)		(1,831)
Repayment of term loan	(1,370)		(1,405)
Other	(241)		(603)
Net cash flows used in financing activities	(1,032)		(3,737)

Effect of exchange rate changes on cash and cash equivalents	310		242
Decrease in cash and cash equivalents	(14,628)		(10,931)

Cash and cash equivalents beginning of period	55,010		61,958
Cash and cash equivalents end of period	$	40,382	$	51,027

See accompanying Notes to ~~Summary~~Condensed Consolidated Financial ~~Statements.~~

Statements

~~CRYOLIFE, INC. AND SUBSIDIARIES~~

~~NOTES TO SUMMARY CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Table of Contents

Artivion, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

In Thousands

(Unaudited)


	Common Stock			Additional Paid-In Capital		Retained Deficit		Accumulated Other Comprehensive Loss		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at March 31, 2022	41,688	$	417	$	326,799	$	(1,414)	$	(13,662)	(1,487)	$	(14,648)	$	297,492
Net loss	—	—		—		(4,259)		—		—	—		(4,259)
Other comprehensive loss	—	—		—		—		(14,796)		—	—		(14,796)
Equity compensation	57	—		3,081		—		—		—	—		3,081


Redemption and repurchase of stock to cover tax withholdings	(1)	—		(9)		—		—		—	—		(9)
Balance at June 30, 2022	41,744	$	417	$	329,871	$	(5,673)	$	(28,458)	(1,487)	$	(14,648)	$	281,509


	Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2021	41,397	$	414	$	322,874	$	1,975	$	(9,887)	(1,487)	$	(14,648)	$	300,728
Net loss	—	—		—		(7,648)		—		—	—		(7,648)
Other comprehensive loss	—	—		—		—		(18,571)		—	—		(18,571)
Equity compensation	262	2		6,419		—		—		—	—		6,421
Exercise of options	140	2		1,678		—		—		—	—		1,680
Employee stock purchase plan	37	—		638		—		—		—	—		638
Redemption and repurchase of stock to cover tax withholdings	(92)	(1)		(1,738)		—		—		—	—		(1,739)
Balance at June 30, 2022	41,744	$	417	$	329,871	$	(5,673)	$	(28,458)	(1,487)	$	(14,648)	$	281,509

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

Artivion, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity (continued)

In Thousands

(Unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at March 31, 2021	40,585	$	406	$	301,449	$	13,671	$	(3,547)	(1,487)	$	(14,648)	$	297,331
Net loss	—	—		—		(2,178)		—		—	—		(2,178)
Other comprehensive income	—	—		—		—		2,973		—	—		2,973
Equity compensation	37	—		2,267		—		—		—	—		2,267
Exercise of options	121	1		1,459		—		—		—	—		1,460

Redemption and repurchase of stock to cover tax withholdings	(1)	—		(18)		—		—		—	—		(18)
Balance at June 30, 2021	40,742	$	407	$	305,157	$	11,493	$	(574)	(1,487)	$	(14,648)	$	301,835


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2020	40,394	$	404	$	316,192	$	20,022	$	6,743	(1,487)	$	(14,648)	$	328,713
Net loss	—	—		—		(5,316)		—		—	—		(5,316)
Other comprehensive loss	—	—		—		—		(7,317)		—	—		(7,317)
Impact of adoption of ASU 2020-06	—	—		(16,426)		(3,213)		—		—	—		(19,639)
Equity compensation	244	2		4,902		—		—		—	—		4,904
Exercise of options	140	1		1,730		—		—		—	—		1,731
Employee stock purchase plan	37	1		589		—		—		—	—		590
Redemption and repurchase of stock to cover tax withholdings	(73)	(1)		(1,830)		—		—		—	—		(1,831)
Balance at June 30, 2021	40,742	$	407	$	305,157	$	11,493	$	(574)	(1,487)	$	(14,648)	$	301,835

Table of Contents

Artivion, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

and Summary of Significant Accounting Policies

Overview

The accompanying ~~summary consolidated financial statements~~Condensed Consolidated Financial Statements include the accounts of ~~CryoLife,~~Artivion, Inc. and its subsidiaries (“~~CryoLife,~~Artivion,” the “Company,” “we,” or “us”). All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying ~~Summary~~Condensed Consolidated Balance Sheet as of December 31, ~~2016~~2021 has been derived from audited financial statements. The accompanying unaudited ~~summary consolidated financial statements~~Condensed Consolidated Financial Statements as of, and for the three and ~~nine~~six months ended, ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 have been prepared in accordance with (i) accounting principles generally accepted in the ~~U.S.~~US for interim financial information and (ii) the instructions to Form10-Q and Rule10-01 of RegulationS-X of the ~~U.S.~~US Securities and Exchange Commission ~~(“SEC”~~(the “SEC”). Accordingly, such statements do not include all of the information and disclosures that are required by accounting principles generally accepted in the ~~U.S.~~US for a complete presentation of financial statements. In the opinion of management, all adjustments (including those of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2022. These ~~summary consolidated financial statements~~Condensed Consolidated Financial Statements should be read in conjunction with the ~~consolidated financial statements~~Consolidated Financial Statements and ~~notes thereto~~Notes included in ~~CryoLife’s~~Artivion’s Annual Report on Form10-K for the year ended December 31, ~~2016~~2021 filed with the SEC on February ~~16, 2017.~~

~~Change~~22, 2022.

Significant Accounting Policies

A summary of our significant accounting policies is included in ~~Accounting~~Note 1 of the “Notes to Consolidated Financial Statements” contained in our Form 10-K for ~~Employee Share-Based Payments~~

Asthe year ended December 31, 2021. Management believes that the consistent application of ~~January 1, 2017 we made an entity-wide accounting policy election~~these policies enables us to provide users of the financial statements with useful and reliable information about our operating results and financial condition. The Condensed Consolidated Financial Statements are prepared in accordance with ~~ASU2016-09,~~~~Improvements to Employee Share-Based Payment Accounting,~~ ~~(“ASU2016-09”)~~ ~~to change our~~ accounting ~~policy to account for stock compensation forfeitures~~principles generally accepted in the ~~period awards are forfeited rather than estimating the effect of forfeitures. We elected~~US, which require us to make ~~this accounting policy change to simplify~~estimates and assumptions. We did not experience any significant changes during the three and six months ended June 30, 2022 in any of our Significant Accounting Policies from those contained in our Form 10-K for the year ended December 31, 2021.

New Accounting Standards

Recently Adopted

In August 2020 the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). The update simplifies the accounting for ~~share-based compensation~~convertible instruments by eliminating two accounting models (i.e., the cash conversion model and ~~believe this method provides a more accurate reflection~~beneficial conversion feature model) and reducing the number of ~~periodic share-based compensation cost~~embedded conversion features that could be recognized separately from the ~~grant date forward. We used~~host contract. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. On January 1, 2021 we adopted ASU 2020-06 using the modified retrospective ~~transition method~~approach. See Note 8 for further discussion of convertible debt.

Not Yet Effective

In March 2020 the FASB issued ASU 2020-04, Reference Rate Reform Topic 848 (“ASC 848”). The amendments in this ASU were put forth in response to ~~record a net $238,000 cumulative-effect adjustment decrease to retained earnings for~~ the ~~accounting policy change, which included a $379,000 increase to additionalpaid-in~~ ~~capital and a $141,000 increase in deferred tax assets.~~

~~Additionally, as of January 1, 2017 and in accordance with the guidance in ASU2016-09,~~ ~~we made a change to account for excess tax benefits and deficiencies resulting~~market transition from the ~~settlement~~LIBOR and other interbank offered rates to alternative reference rates. Accounting principles generally accepted in the United States of America require entities to evaluate whether a contract modification, such as the replacement or ~~vesting~~change of ~~share-based awards~~a reference rate, results in ~~income tax expense~~the establishment of a new contract or continuation of an existing contract. ASC 848 allows an entity to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform. The standard provides this temporary election through December 31, 2022 and cannot be applied to contract modifications that occur after December 31, 2022. We are in the process of evaluating the effect that the adoption of this standard will have on our ~~Summary Consolidated Statement~~financial position and results of ~~Operations and Comprehensive Income instead~~operations.

Table of ~~accounting for these effects through additional paidin-capital~~ ~~on our Summary Consolidated Balance Sheets. We applied this amendment prospectively and prior periods have not been adjusted.~~

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2. Financial Instruments

The following is a summary of our financial instruments measured at fair value on a recurring basis (in thousands):

September 30, 2017
Level 1 Level 2 Level 3 Total
Cash equivalents:

Money market funds
$ 371 $ -- $ -- $ 371
Restricted securities:

Money market funds
771 -- -- 771

Total assets
$ 1,142 $ -- $ -- $ 1,142

December 31, 2016
Level 1 Level 2 Level 3 Total
Cash equivalents:

Money market funds
$ 3,466 $ -- $ -- $ 3,466
Restricted securities:

Money market funds
699 -- -- 699

Total assets
$ 4,165 $ -- $ -- $ 4,165


June 30, 2022	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	10,025	$	—	$	—	$	10,025
Total assets	$	10,025	$	—	$	—	$	10,025

Long-term liabilities:
Contingent consideration	—		—		(44,400)		(44,400)
Total liabilities	$	—	$	—	$	(44,400)	$	(44,400)


December 31, 2021	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	10,015	$	—	$	—	$	10,015
Total assets	$	10,015	$	—	$	—	$	10,015

Long-term liabilities:
Contingent consideration	—		—		(49,400)		(49,400)
Total liabilities	$	—	$	—	$	(49,400)	$	(49,400)

We used prices quoted from our investment ~~management companies~~advisors to determine the Level 1 valuation of our investments in money market funds.

On September 2, 2020 we entered into a Securities Purchase Agreement to acquire 100% of the outstanding equity interests of Ascyrus Medical LLC (“Ascyrus”). Ascyrus developed the AMDS, the world’s first aortic arch remodeling device for use in the treatment of acute Type A aortic dissections. As part of the acquisition, we may be required to pay additional consideration in cash of up to $100.0 million to the former shareholders of Ascyrus upon the achievement of certain milestones and the sales-based additional earn-out.

The contingent consideration represents the estimated fair value of future potential payments. The fair value of the contingent consideration liability was estimated by discounting to present value the contingent payments expected to be made based on a probability-weighted scenario approach. We applied a discount rate based on our unsecured credit spread and the term commensurate risk-free rate to the additional consideration to be paid, and then applied a risk-based estimate of the probability of achieving each scenario to calculate the fair value of the contingent consideration. This fair value measurement was based on unobservable inputs, including management estimates and assumptions about the future achievement of milestones and future estimate of revenues, and is, therefore, classified as Level 3 within the fair value hierarchy. We used a discount rate of approximately 12% and estimated future achievement of milestone dates between 2025 and 2026 to calculate the fair value of contingent consideration as of June 30, 2022. We will remeasure this liability at each reporting date and will record changes in the fair value of the contingent consideration in General, administrative, and marketing expenses on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. Increases or decreases in the fair value of the contingent consideration liability can result from changes in passage of time, discount rates, the timing and amount of our revenue estimates, and the timing and expectation of regulatory approvals.

We performed an assessment of the fair value of the contingent consideration and recorded income of $3.2 million and $5.0 million for the three and six months ended June 30, 2022, respectively, and expense of $3.3 million and $4.3 million for the three and six months ended June 30, 2021, respectively, in General, administrative, and marketing expenses on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income, as a result of this assessment.

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The fair value of the contingent consideration component of the Ascyrus acquisition was updated using Level 3 inputs. Changes in fair value of Level 3 assets and liabilities are listed in the tables below (in thousands):


	Contingent Consideration
Balance as of December 31, 2021	$	(49,400)
Change in valuation	5,000
Balance as of June 30, 2022	$	(44,400)

3. Cash Equivalents ~~and Restricted Securities~~

The following is a summary of cash equivalents ~~and restricted securities~~ (in thousands):

September 30, 2017
         Cost Basis     Unrealized
Holding
          Gains           Estimated
Market
          Value
Cash equivalents:

Money market funds
     $ 371 $ -- $             371
Restricted securities:

Money market funds
     771                  -- 771
December 31, 2016
     Cost Basis Unrealized
Holding
Gains Estimated
Market
Value
Cash equivalents:

Money market funds
     $ 3,466 $ -- $ 3,466
Restricted securities:

Money market funds
     699 -- 699

As of September 30, 2017 and December 31, 2016 $771,000 and $699,000, respectively, of our money market funds were designated as short-term restricted securities due to a contractual commitment to hold the securities as pledged collateral relating primarily to international tax obligations.


June 30, 2022	Cost Basis		Unrealized Holding Gains		Estimated Market Value
Cash equivalents:
Money market funds	$	10,025	$	—	$	10,025
Total assets	$	10,025	$	—	$	10,025


December 31, 2021	Cost Basis		Unrealized Holding Gains		Estimated Market Value
Cash equivalents:
Money market funds	$	10,015	$	—	$	10,015
Total assets	$	10,015	$	—	$	10,015

There were no gross realized gains or losses on cash equivalents infor the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and 2016. As of September 30, 2017 $235,000 of our restricted securities had a maturity date within three months and $536,000 had a maturity date between three months and one year. As of December 31, 2016 $490,000 of our restricted securities had a maturity date within three months and $209,000 had a maturity date between three months and one year.

2021.

4. ~~Acquisition ofOn-X~~ ~~Life Technologies~~

~~Overview~~

~~On December 22, 2015 we entered into an agreement and plan of merger to acquireOn-X~~ ~~Life Technologies Holdings, Inc.(“On-X”),~~ ~~an Austin, Texas-based, privately held mechanical heart valve company, for approximately $130.0 million, subject to certain adjustments. The transaction closed on January 20, 2016, andOn-X~~ ~~is being operated as a wholly owned subsidiary of CryoLife.~~

~~TheOn-X~~ ~~catalogue of products includes theOn-X~~ ~~prosthetic aortic and mitral heart valves and theOn-X~~ ~~ascending aortic prosthesis.On-X~~ ~~also distributes CarbonAid CO~~₂ ~~diffusion catheters and manufacturesChord-X~~ ~~ePTFE sutures for mitral chordal replacement.On-X~~ ~~also generates revenue from pyrolytic carbon coating products produced for other medical device manufacturers. We believe that theOn-X~~ products fit well into our product portfolio of medical devices for cardiac surgery and that we are capitalizing on the significant opportunity for CryoLife’s sales team to leverage their strong relationships with cardiac surgeons to introduce and to expand utilization of the~~On-X~~ ~~valves in the U.S. and internationally.~~

~~Accounting for the Transaction~~

~~The purchase price of theOn-X~~ transaction totaled $128.2 million, consisting of cash of $93.6 million and 3,703,699 shares of CryoLife common stock, with a value of $34.6 million as determined on the date of the closing. We recorded an allocation of the $128.2 million purchase price to~~On-X’s~~ tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated fair values as of January 20, 2016. Goodwill was recorded based on the amount by which the purchase price exceeded the fair value of theInventories, net ~~assets acquired and is not deductible for tax purposes. Goodwill from this transaction has been allocated to our Medical Devices segment.~~

~~The purchase price allocation is as follows (in thousands):~~


	~~Opening~~ ~~Balance Sheet~~
~~Cash and cash equivalents~~	$	~~2,472~~
~~Receivables~~		~~6,826~~
~~Inventories~~		~~12,889~~
~~Intangible assets~~		~~53,950~~
~~Goodwill~~		~~68,229~~
~~Other assets~~		~~6,891~~
~~Liabilities assumed~~		~~(23,040)~~

~~Total purchase price~~	$	~~128,217~~

We incurred transaction and integration costs of $7.4 million for the year ended December 31, 2016 related to the acquisition, which include, among other costs, expenses related to the termination of international and domestic distribution agreements. These costs were expensed as incurred and were primarily recorded as general, administrative, and marketing expenses on our Summary Consolidated Statements of Operations and Comprehensive Income.

~~We paid approximately $10 million of the purchase price into an escrow account upon closing of theOn-X~~ ~~transaction. We are currently in litigation with the representative of the formerOn-X~~ shareholders concerning the resolution of these escrow funds. We believe that we are entitled to recover the escrow funds and additional damages, but the outcome of litigation is inherently uncertain, and we may not recover any of the escrow funds.

~~Pro Forma Results~~

~~On-X~~ ~~revenues were $34.2 million from the date of acquisition through December 31, 2016. Our pro forma results of operations for the years ended December 31, 2016 and 2015, assuming theOn-X~~ ~~acquisition had occurred as of January 1, 2015, are presented for comparative purposes below. These amounts are based on available information of the results of operations ofOn-X~~ prior to the acquisition date and are not necessarily indicative of what the results of operations would have been had the acquisition been completed on January 1, 2015. This unaudited pro forma information does not project operating results post acquisition.

~~This pro forma information is as follows (in thousands, except per share amounts):~~

Twelve Months Ended
December 31,



   2016    2015


Total revenues
   $                   182,007        $               179,266
Net income (loss)
   17,692    (4,787)

Pro forma income (loss) per common share - basic
   $ 0.54        $ (0.15)
Pro forma income (loss) per common share - diluted
   $ 0.53        $ (0.15)

~~Pro forma net income (loss) was calculated using a normalized tax rate of approximately 38%.~~

~~5. Sale of Business Components~~

~~Divestiture of the HeRO Graft Product Line~~

~~On February 3, 2016 we sold our Hemodialysis Reliable Outflow Graft (“HeRO~~^® Graft”) product line to Merit Medical Systems, Inc. (“Merit”) for $18.5 million in cash (“HeRO Sale”), of which $17.8 million was received on the transaction date and the remaining $740,000 was received in the first quarter of 2017. Under terms of the agreement, Merit acquired the HeRO Graft product line, including worldwide marketing rights, customer relationships, intellectual property, inventory, and certain property and equipment. We continued to manufacture the HeRO Graft under a transition supply agreement until the manufacturing transfer to Merit was completed in the second quarter of 2016. Sales prices under the transition supply agreement were at lower average prices than our previous sales to hospitals at~~end-user~~ ~~prices. The HeRO Graft product line was included as part of our Medical Devices segment. We recorded apre-tax~~ ~~gain of approximately $8.8 million on the HeRO Sale.~~

~~ProCol Distribution Agreement and Divestiture of the ProCol Product Line~~

~~In 2014 we acquired the exclusive worldwide distribution rights to ProCol~~^® Vascular Bioprosthesis (“ProCol”) from Hancock Jaffe Laboratories, Inc. (“Hancock Jaffe”). In accordance with the terms of the agreement, we made payments to Hancock Jaffe totaling $3.4 million for which we obtained the right to receive a designated amount of ProCol inventory for resale. As of March 18, 2016 we had received $1.7 million in inventory. The remaining $1.7 million in prepayments for inventory not yet delivered to us were settled as part of the ProCol Sale, described below.

On March 18, 2016 we sold our ProCol distribution rights and purchase option to LeMaitre Vascular, Inc. (“LeMaitre”) for $2.0 million in cash (“ProCol Sale”), all of which was received by March 31, 2016. Under the terms of the agreement, LeMaitre acquired the ProCol related assets, including inventory, customer lists, related marketing assets, and our purchase option to acquire ProCol. LeMaitre exercised the option to acquire ProCol from Hancock Jaffe. The ProCol product was included as part of our Medical Devices segment. We recorded a~~pre-tax~~ ~~loss of approximately $845,000 on the ProCol Sale.~~

~~Disclosure of the HeRO Sale and the ProCol Sale~~

~~Financial Accounting Standards Board ASU2014-08,~~~~Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,~~ ~~(“ASU2014-08”)~~ defines the criteria for reporting discontinued operations and requires additional disclosures about discontinued operations. The standard requires that an entity report a disposal as a discontinued operation only if the disposal represents a strategic shift in operations that has a major effect on our operations and financial results.

In the first quarter of 2016 we completed and recorded the HeRO Sale and the ProCol Sale and received cash for these transactions. Therefore, as of March 31, 2016 both transactions met the disposed of by sale criteria under ASU~~2014-08.~~

We evaluated the impact of the HeRO Sale and the ProCol Sale on our business to determine whether these disposals represent a strategic shift that has, or will have, a major effect on our financial position, results of operations, or cash flows. As the HeRO Graft and ProCol product lines combined represented less than 10% of our total revenues for the year ended December 31, 2015 and our total assets as of December 31, 2015, we believe that these transactions did not have a major effect on our operations and financial condition, either individually or in the aggregate, and therefore, we did not disclose these transactions as discontinued operations. The combined net gain from the HeRO Sale and ProCol Sale was therefore reported as gain from sale of business components on our Summary Consolidated Statements of Operations and Comprehensive Income.

~~6. PhotoFix Distribution Agreement and Acquisition~~

~~Overview~~

~~In 2014 we entered into an exclusive supply and distribution agreement with Genesee Biomedical, Inc. (“GBI”) to acquire the distribution rights to PhotoFix~~^TM~~, a bovine pericardial patch stabilized using adye-mediated~~ photo-fixation process that requires no glutaraldehyde. PhotoFix has received U.S. Food and Drug Administration (“FDA”) 510(k) clearance and is indicated for use in intracardiac repair, including ventricular repair and atrial repair, great vessel repair and suture line buttressing, and pericardial closure. We believe that PhotoFix fits well into our product portfolio of medical devices for cardiac surgery. In January 2015 we received our initial shipments and launched our distribution of PhotoFix.

~~The agreement between CryoLife and GBI (the “GBI Agreement”) had an initial five-year term and was renewable for twoone-year~~ periods at our option. Under the terms of the GBI Agreement, we purchased PhotoFix inventory for resale at an agreed upon transfer price and had the option, which became effective in March 2015, to acquire the PhotoFix product line from GBI.

~~Accounting for the Transaction~~

On April 13, 2016 we exercised our right to acquire the PhotoFix technology from GBI for approximately $2.3 million, of which $1.2 million was paid in cash at closing, approximately $600,000 was previously provided to GBI as an advance under the distribution agreement, and approximately $400,000 is payable to GBI within 18 months of signing or earlier, subject to certain conditions. Our allocation of the purchase price to the tangible and identifiable intangible assets acquired, based on their estimated fair values, resulted in the allocation of the majority of the purchase price to amortizable intangible assets. GBI will continue to manufacture PhotoFix until we are able to fully establish manufacturing operations which is expected to occur in 2018.

~~7. Inventories~~ and Deferred Preservation Costs

Inventories at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016 are~~2021 were comprised of the following (in thousands):

  September 30,
  2017

            December 31,
            2016



Raw materials and supplies
     $ 11,153       $ 9,321
Work-in-process
   4,028 3,321
Finished goods
   12,582 13,651


Total inventories
     $                         27,763       $           26,293

~~Deferred preservation costs at September 30, 2017 and December 31, 2016 are comprised of the following (in thousands):~~

  September 30,
  2017
            December 31,
             2016


Cardiac tissues
     $ 17,195       $ 15,768
Vascular tissues
   17,813 14,920


Total deferred preservation costs
     $                         35,008       $           30,688


	June 30, 2022		December 31, 2021
Raw materials and supplies	$	34,565	$	35,780
Work-in-process	11,856		9,712
Finished goods	27,897		31,479
Total inventories, net	$	74,318	$	76,971

To facilitate product usage, we maintain consignment inventory ~~included in finished goods inventories,~~ of ourOn-X heart valves at domestic ~~and foreign~~ hospital locations ~~to facilitate usage.~~and On-X heart valves and aortic stent grafts at international hospital locations. We retain title toand control over this consignment inventory until the ~~valve~~device is implanted, at which time we invoice the ~~hospital.~~hospital and recognize revenue. As of ~~September~~June 30, ~~2017~~2022 we had ~~$5.8~~$14.2 million in consignment inventory, with approximately ~~85%~~39% in domestic locations and ~~15%~~61% in ~~foreign~~international locations. As of December 31, ~~2016~~2021 we had ~~$4.9~~$12.9 million in consignment inventory, with approximately ~~80%~~43% in domestic locations and ~~20%~~57% in ~~foreign~~international locations.

Total deferred preservation costs were $44.8 million and $42.9 million as of June 30, 2022 and December 31, 2021, respectively.

Inventory and deferred preservation costs obsolescence reserves were $2.6 million and $3.2 million as of June 30, 2022 and December 31, 2021, respectively.

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5. Goodwill and Other Intangible Assets

Indefinite Lived Intangible Assets

As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 the carrying values of our indefinite lived intangible assets ~~are~~were as follows (in thousands):

  September 30,
  2017

            December 31,
            2016



Goodwill
     $                       78,294          $      78,294
Procurement contracts and agreements
   2,013    2,013
Trademarks
   841    841


	June 30, 2022		December 31, 2021
Goodwill	$	240,939	$	250,000
In-process R&D	2,025		2,208
Procurement contracts and agreements	2,013		2,013
Trademarks	226		66

We monitor the phases of development of our acquired in-process research and development projects, including the risks associated with further development and the amount and timing of benefits expected to be derived from the completed projects. Incremental costs associated with development are charged to expense as incurred. Capitalized costs are amortized over the estimated useful life of the developed asset once completed. Our in-process research and development projects are reviewed for impairment annually, or more frequently, if events or changes in circumstances indicate that the asset might be impaired. We did not record any impairment of indefinite lived intangible assets during the three and six months ended June 30, 2022. In-process research and development, procurement contracts and agreements, and trademarks are included in Other intangibles, net on the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021.

Based on our experience with similar agreements, we believe that our acquired procurement contracts and agreements have indefinite useful lives, as we expect to continue to renew these contracts for the foreseeable future. We believe that our trademarks have indefinite useful lives as we currently anticipate that our trademarks will contribute to our cash flows indefinitely.

We evaluate our goodwill and non-amortizing intangible assets for impairment on an annual basis during the fourth quarter of the year, and, if necessary, during interim periods if factors indicate that an impairment review is warranted. As of ~~September~~June 30, ~~2017~~2022 we concluded that our assessment of current factors did not indicate that goodwill or non-amortizing intangible assets are more likely than not to be impaired. We will continue to evaluate the recoverability of these non-amortizing intangible assets in future periods as necessary.

As of June 30, 2022 and December 31, ~~2016 our entire~~2021 the carrying value of goodwill, ~~balance~~all of which is related to our Medical ~~Devices~~devices segment, ~~and there has been no change from the balance recorded~~is as follows (in thousands):


	Medical Devices Segment
Balance as of December 31, 2021	$	250,000
Foreign currency translation	(9,061)
Balance as of June 30, 2022	$	240,939

Table of ~~December 31, 2016.~~

Contents

Definite Lived Intangible Assets

The definite lived intangible assets balance includes balances related to acquired technology, customer relationships, distribution and manufacturing rights and know-how, patents, and other definite lived intangible assets. As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 the gross carrying values, accumulated amortization, and approximate amortization period of our definite lived intangible assets ~~are~~were as follows (in thousands):

September 30, 2017
       Gross Carrying
        Value             Accumulated
    Amortization          Amortization
Period
Acquired technology
     $ 38,478      $ 7,615    11  –  22   Years
Patents
   3,593    2,766    17   Years
Distribution and manufacturing rights andknow-how
   4,059    1,748    11  –  15   Years
Customer lists and relationships
   29,140    3,190    13  –  22   Years
Other
   1,418    942    3   Years
December 31, 2016
   Gross Carrying
        Value            Accumulated
    Amortization          Amortization
Period
Acquired technology
     $ 38,478      $ 5,956    11  –  22   Years
Patents
   3,710    2,702    17   Years
Distribution and manufacturing rights andknow-how
   4,059    1,532    11  –  15   Years
Customer lists and relationships
   29,140    2,141    13  –  22   Years
Non-compete agreement
   381    381    10   Years
Other
   1,262    531    3   Years

June 30, 2022 Gross Carrying
Value Accumulated
Amortization Net Carrying
Value Weighted Average
Useful Life
(Years)
Acquired technology $ 205,124 $ 50,258 $ 154,866 17.7
Other intangibles:
Customer lists and relationships 30,981 10,332 20,649 20.6
Distribution and manufacturing rights and know-how 9,031 4,798 4,233 5.0
Patents 4,136 3,160 976 17.0
Other 4,403 2,055 2,348 4.5
Total other intangibles $ 48,551 $ 20,345 $ 28,206 10.7

December 31, 2021 Gross Carrying
Value Accumulated
Amortization Net Carrying
Value Weighted Average
Useful Life
(Years)
Acquired technology $ 213,626 $ 46,632 $ 166,994 17.7
Other intangibles:
Customer lists and relationships 31,148 9,618 21,530 20.5
Distribution and manufacturing rights and know-how 9,847 4,308 5,539 5.0
Patents 4,083 3,144 939 17.0
Other 3,969 1,762 2,207 4.4
Total other intangibles $ 49,047 $ 18,832 $ 30,215 10.6

Amortization Expense

The following is a summary of amortization expense as recorded in ~~general,~~General, administrative, and marketing expenses on our ~~Summary~~Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income (in thousands):

   Three Months Ended
September 30,    Nine Months Ended
September 30,




           2017                    2016                  2017                2016




Amortization expense
   $ 1,140    $ 1,155    $ 3,423    $ 3,273


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Amortization expense	$	3,905	$	4,238	$	7,989	$	8,498

As of ~~September~~June 30, ~~2017~~2022 scheduled amortization of intangible assets for the next five years is as follows (in thousands):

     Remainder
of 2017          2018                2019                2020                2021                2022
Amortization expense
   $ 1,140    $ 4,444    $ 4,102    $ 3,939    $ 3,918    $ 3,390


	Remainder of 2022		2023	2024	2025	2026	2027	Total
Amortization expense	$	7,437	14,662	14,302	12,452	12,233	12,113	$	73,199

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6. Income Taxes

Income Tax Expense

~~Our income tax rate for the three and nine months ended September 30, 2017 was favorably affected by excess tax benefits, primarily related to the exercise ofnon-qualified~~ ~~stock options and the vesting of stock awards, as discussed in Note 1 above, which decreased income tax expense by approximately $1.1 million and $2.7 million, respectively.~~

Our effective income tax rate was ~~37%~~an expense of 29% and ~~46%~~34% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2022, respectively, as compared to a benefit of under 1% and 20% for the three and six months ended June 30, 2021, respectively. Our income tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2022 was ~~unfavorably~~primarily impacted by changes in our valuation allowance against our net deferred tax assets, non-deductible executive compensation, the foreign derived intangible income deduction, the research and development tax ~~treatment of certain expenses related to theOn-X~~ ~~acquisition, which had a larger impact~~credit, changes in our uncertain tax position liabilities, and tax shortfalls on ~~the tax rate in first quarter of 2016.~~stock compensation. Our income tax rate for the ~~nine~~three and six months ended ~~September~~June 30, ~~2016~~2021 was ~~also unfavorably~~primarily impacted by ~~book/~~non-deductible executive compensation, changes in our valuation allowance against our net deferred tax ~~basis differences related to~~assets, changes in our uncertain tax position liabilities, the ~~HeRO Sale.~~

research and development tax credit, and excess tax benefits on stock compensation.

Deferred Income Taxes

We generate deferred tax assets primarily as a result of write-downs of inventory and deferred preservation costs; accruals for product and tissue processing liability claims; investment and asset impairments; and, in prior periods, due to operating losses. We acquired significant deferred tax assets, primarilyfinance leases, net operating ~~loss carryforwards, from our acquisitions~~losses, amortization of~~On-X~~ ~~in 2016,~~

~~Hemosphere in 2012,~~ research and ~~Cardiogenesis in 2011. We recorded significant~~development expenses, excess interest carryforward, stock compensation, and accrued compensation. Our deferred tax liabilities ~~in 2016 related to the~~are primarily made up of intangible assets acquired in ~~theOn-X~~ ~~acquisition.~~

~~As of September 30, 2017 we~~previous years, finance leases, and unrealized gains and losses.

We maintained a total of $1.8 million in valuation allowances against deferred tax assets, related to state net operating loss carryforwards, and had a net deferred tax asset of $1.2 million. As of December 31, 2016 we had a total of $2.2 million in valuation allowances against deferred tax assets, related to state net operating loss carryforwards, and a net deferred tax liability of ~~$7,000.~~

~~10. Debt~~

~~Amended Debt Agreement~~

~~In connection with~~$22.7 million and $26.4 million as of June 30, 2022 and December 31, 2021, respectively. Our valuation allowance against our deferred tax assets was $16.2 million and $13.3 million as of June 30, 2022 and December 31, 2021, respectively, primarily related to net operating loss carryforwards and disallowed excess interest carryforwards.

7. Leases

We have operating and finance lease obligations resulting from the ~~closing~~lease of land and buildings that comprise our corporate headquarters and various manufacturing facilities; leases related to additional manufacturing, office, and warehouse space; leases on company vehicles; and leases on a variety of office and other equipment.

On January 6, 2021 we executed a modification to extend the lease of our headquarters located in Kennesaw, Georgia. This modification resulted in an increase in the present value of future lease obligations and corresponding right-of-use asset of $23.3 million, using a discount rate of 6.41%.

On June 1, 2021 we began occupancy of the~~On-X~~ ~~acquisition, discussed above~~ newly constructed addition to our leased international headquarters located in ~~Note 4,~~Hechingen, Germany. This lease resulted in an increase in the present value of future lease obligations and corresponding right-of-use asset of $9.8 million, using a discount rate of 5.46%.

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Information related to leases included in the Condensed Consolidated Balance Sheets is as follows (in thousands, except lease term and discount rate):


Operating leases:	June 30, 2022		December 31, 2021
Operating lease right-of-use assets	$	56,376	$	58,097
Accumulated amortization	(13,717)		(12,383)
Operating lease right-of-use assets, net	$	42,659	$	45,714

Current maturities of operating leases	$	3,207	$	3,149
Non-current maturities of operating leases	42,141		44,869
Total operating lease liabilities	$	45,348	$	48,018

Finance leases:
Property and equipment, at cost	$	6,200	$	6,759
Accumulated amortization	(2,180)		(2,105)
Property and equipment, net	$	4,020	$	4,654

Current maturities of finance leases	$	489	$	528
Non-current maturities of finance leases	3,766		4,374
Total finance lease liabilities	$	4,255	$	4,902

Weighted average remaining lease term (in years):
Operating leases	12.3		12.5
Finance leases	8.4		8.8

Weighted average discount rate:
Operating leases	5.9%		5.8%
Finance leases	2.0%		2.0%

Current maturities of finance leases are included as a component of Other current liabilities on ~~January 20, 2016, CryoLife~~our Condensed Consolidated Balance Sheets. A summary of lease expenses for our finance and ~~certain~~operating leases included in General, administrative, and marketing expenses on our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Amortization of property and equipment	$	131	$	155	$	268	$	310
Interest expense on finance leases	22		28		47		57
Total finance lease expense	153		183		315		367
Operating lease expense	1,883		1,809		3,803		3,575
Sublease income	(91)		(92)		(183)		(216)
Total lease expense	$	1,945	$	1,900	$	3,935	$	3,726

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A summary of our ~~subsidiaries~~cash flow information related to leases is as follows (in thousands):


	Six Months Ended June 30,
Cash paid for amounts included in the measurement of lease liabilities:	2022		2021
Operating cash flows for operating leases	$	3,210	$	2,957
Financing cash flows for finance leases	244		306
Operating cash flows for finance leases	44		57

Future minimum lease payments and sublease rental income are as follows (in thousands):


	Finance Leases		Operating Leases		Sublease Income
Remainder of 2022	$	268	$	2,506	$	122
2023	575		5,606		—
2024	570		6,198		—
2025	549		5,124		—
2026	531		4,703		—
Thereafter	2,127		41,447		—
Total minimum lease payments	$	4,620	$	65,584	$	122
Less amount representing interest	(365)		(20,236)
Present value of net minimum lease payments	4,255		45,348
Less current maturities	(489)		(3,207)
Lease liabilities, less current maturities	$	3,766	$	42,141

8. Debt

Credit Agreement

On December 1, 2017 we entered into ~~the Third Amended~~a credit and Restated Credit Agreement (“Amended Debt Agreement”) with Capital One, National Association, who acquired GE Capital’s Healthcare Financial Services lending business in late 2015. The designated credit parties are Healthcare Financial Solutions, LLC; Fifth Third Bank; and Citizens Bank, National Association. The Amended Debt Agreement amended and restated our prior creditguaranty agreement ~~and provides us with~~for a $255.0 million senior secured credit facility, ~~in an aggregate principal amount~~consisting of ~~$95~~a $225.0 million ~~which includes a $75 million~~secured term loan facility (the “Term Loan Facility”) and a ~~$20~~$30.0 million secured revolving credit facility ~~(including a $4 million letter~~(the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Agreement”). We and each of ~~creditsub-facility~~ ~~and a $3 million swing-linesub-facility).~~ ~~The $75 million term loan was used to finance, in part, the acquisition ofOn-X~~ ~~and will mature on January 20, 2021.~~

~~CryoLife and~~ our existing domestic subsidiaries ~~subject~~(subject to certain exceptions and ~~exclusions, have guaranteed~~exclusions) guarantee the obligations ~~of the Amended Debt Agreement. Borrowings~~ under the ~~Amended Debt~~Credit Agreement ~~are~~(the “Guarantors”). The Credit Agreement is secured by a security interest in substantially all ~~of CryoLife’s,~~existing and ~~certain of our subsidiaries’,~~after-acquired real and personal ~~property.~~

~~The loans under~~property (subject to certain exceptions and exclusions) of us and the ~~Amended Debt~~Guarantors.

On June 2, 2021 we entered into an amendment to our Credit Agreement ~~(other than~~to extend the ~~swing-line loans) bear~~maturity dates of our Term Loan and Revolving Credit Facility. As part of the amendment, the maturity dates of both our Term Loan and Revolving Credit Facility were each extended by two and one-half years, until June 1, 2027 and June 1, 2025, respectively, subject to earlier springing maturities triggered if our 4.25% Convertible Senior Notes, described below, remain outstanding on April 1, 2025 and December 31, 2024, respectively. With respect to the Term Loan, if the Convertible Senior Notes remain outstanding on April 1, 2025, the Term Loan’s maturity date will be April 1, 2025, or, if the Convertible Senior Notes’ own maturity date has been extended, the earlier of (i) 91 days prior to the Convertible Senior Notes’ new maturity date and (ii) June 1, 2027. In the case of the Revolving Credit Facility, if the Convertible Senior Notes are still outstanding on December 31, 2024, the Revolving Credit Facility’s maturity date will be either December 31, 2024 or, if the Convertible Senior Notes’ own maturity date has been extended, the earlier of (i) 182 days prior to the Convertible Senior Notes’ new maturity date and (ii) June 1, 2025. Under the amendment, the Term Loan Facility bears interest, at our option, at ~~either~~ a floating annual rate equal to the base rate, as defined in the Amended Debt Agreement, plus a margin of between 1.75% and 2.75%, depending on our consolidated leverage ratio, or a per annum rate equal to LIBOR plus a margin of between 2.75% and 3.75%, depending on our consolidated leverage ratio. As of September 30, 2017 the aggregate interest rate was approximately 3.99%. Swing-line loans under the Amended Debt Agreement bear interest at a floating rate equal toeither the base rate, plus a margin of ~~between 1.75% and 2.75%~~2.50%, ~~depending on our consolidated leverage ratio. We are obligated~~or LIBOR, plus a margin of 3.50%. Prior to ~~pay an unused commitment fee~~the amendment, the optional floating annual rate was equal to ~~0.50%~~either the base rate plus a margin of 2.25%, or LIBOR, plus a margin of 3.25%. We paid debt issuance costs of $2.1 million, of which $1.8 million will be amortized over the~~un-utilized~~ ~~portion~~ life of the ~~revolving loans. In addition, we are also obligated to pay other customary fees for a credit facility of this size~~Term Loan Facility and ~~type. If~~included in current and ~~while a payment event of default exists, we are obligated to pay a per annum default rate of interest of 2.00% above the applicable interest rate~~long-term debt on the ~~past due principal amount~~Condensed Consolidated Balance Sheets. The remaining $361,000 of ~~the loans outstanding. If~~debt issuance costs and ~~while a bankruptcy or insolvency event~~$474,000 of ~~default exists, we are obligated to pay a per annum default rate of interest of 2.00% above the applicable interest rate on all loans outstanding.~~

non-cash debt extinguishment costs were recorded in Interest ~~is due and payable, with respect to base rate loans, on a quarterly basis. Interest is due and payable, with respect to LIBOR loans,~~expense on the ~~last day~~Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

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As discussed in our Annual Report on Form 10-K for the ~~applicable interest period, if~~year ended December 31, 2021 the ~~interest period is shorter than six months, or on the last day of each three month interval, if the interest period is six months or greater.~~

The Amended Debt Agreement prohibits us from exceeding a maximum consolidated leverage ratio during the term of the Amended Debt Agreement and requires us to maintain a minimum interest coverage ratio. In addition, the Amended DebtCredit Agreement contains certain customary affirmative and negative covenants, including covenants that limit our ability and the ability of our subsidiaries ~~which are parties to the loan agreement~~ to, among other things, grant ~~liens;~~liens, incur ~~debt;~~debt, dispose of ~~assets;~~assets, make loans and ~~investments;~~investments, make ~~acquisitions;~~acquisitions, make certain restricted ~~payments;~~payments (including cash dividends), merge or ~~consolidate; and~~consolidate, change ~~our~~ business ~~and~~or accounting or reporting practices, in each case subject to customary exceptions for a credit facility of this size and type. ~~As of October 31, 2017 CryoLife~~Beginning in 2021 if we repay borrowings under our Revolving Credit Facility to 25% or less, no financial maintenance covenants, including the minimum liquidity covenant and ~~our subsidiaries were~~the maximum first lien net leverage ratio covenant, are applicable. We are in compliance with our debt covenants as of June 30, 2022.

Convertible Senior Notes

On June 18, 2020 we issued $100.0 million aggregate principal amount of 4.25% Convertible Senior Notes with a maturity date of July 1, 2025 (the “Convertible Senior Notes”). The net proceeds from this offering, after deducting initial purchasers’ discounts and costs directly related to this offering, were approximately $96.5 million. On January 1, 2021 we adopted ASU 2020-06 and adjusted the ~~covenants~~carrying balance of the ~~Amended Debt Agreement.~~

Convertible Senior Notes to notional. The ~~Amended Debt Agreement~~Convertible Senior Notes balance was $100.0 million recorded in Long-term debt on the Condensed Consolidated Balance Sheets as of June 30, 2022. The Convertible Senior Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. The initial conversion rate of the Convertible Senior Notes is 42.6203 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $23.46 per share, subject to adjustments. We use the if-converted method for assumed conversion of the Convertible Senior Notes for the diluted earnings per share calculation. The fair value and the effective interest rate of the Convertible Senior Notes as of June 30, 2022 was approximately $107.0 million and 5.05%, respectively. The fair value was based on market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy.

The interest expense recognized on the Convertible Senior Notes includes ~~certain customary events~~$1.2 million and $2.5 million for the three and six months ended June 30, 2022, respectively, and $1.2 million and $2.4 million for the three and six months ended June 30, 2021, respectively, related to the aggregate of ~~default that include, among other things,non-payment~~the contractual coupon interest, and the amortization of the debt issuance costs. Interest on the Convertible Senior Notes began accruing upon issuance and is payable semi-annually. As of June 30, 2022 there were $2.2 million of unamortized debt issuance costs related to Convertible Senior Notes.

Holders of the Convertible Senior Notes may convert their notes at their option at any time prior to January 1, 2025, but only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the 5 business day period after any 5 consecutive trading day period in which the trading price per $1,000 principal ~~interest~~amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (iii) we give a notice of redemption with respect to any or ~~fees; inaccuracy~~all of ~~representations and warranties; violation~~the notes, at any time prior to the close of ~~covenants; cross-default~~business on ~~certain other indebtedness; bankruptcy and insolvency; and change of control. Upon~~the second scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events. On or after January 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances.

We cannot redeem the Convertible Senior Notes before July 5, 2023. We can redeem them on or after July 5, 2023, in whole or in part, at our option, if the last reported sale price per share of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and ~~during~~including, the ~~continuance~~trading day immediately preceding the date on which we provide notice of ~~an event~~redemption. We may redeem for cash all or part of ~~default,~~ the ~~lenders may declare all outstanding~~Convertible Senior Notes at a redemption price equal to 100% of the principal ~~and~~amount of the redeemable Convertible Senior Notes, plus accrued ~~but~~and unpaid interest ~~under~~to, but excluding, the ~~Amended Debt Agreement immediately~~redemption date. No principal payments are due on the Convertible Senior Notes prior to maturity. Other than restrictions relating to certain fundamental changes and ~~payable,~~consolidations, mergers or asset sales and ~~may exercise~~customary anti-dilution adjustments, the Convertible Senior Notes do not contain any financial covenants and do not restrict us from conducting significant restructuring transactions or issuing or repurchasing any of its other ~~rights and remedies provided for under the Amended Debt Agreement and related loan documents.~~

securities.

Table of ~~both September 30, 2017 and December 31, 2016 there were no outstanding balances on our revolving credit facility and the remaining availability was $20.0 million.~~ Contents

Loan Balances

The short-term and long-term balances of our term loan ~~are~~and other long-term borrowings were as follows (in thousands):

     September 30,
  2017      December 31,
      2016


Term loan balance
   $ 69,678    $ 73,594
Less unamortized loan origination costs
   (1,609)    (2,020)




Net borrowings
   68,069    71,574
Less short-term loan balance
   (3,234)    (4,562)




Long-term loan balance
   $                 64,835    $ 67,012

June 30,
2022 December 31,
2021
Term loan balance $ 214,875 $ 216,000
Convertible senior notes 100,000 100,000
2.45% Sparkasse Zollernalb (KFW Loan 1) 403 566
1.40% Sparkasse Zollernalb (KFW Loan 2) 844 1,061
Total loan balance 316,122 317,627
Less unamortized loan origination costs (7,591) (8,504)
Net borrowings 308,531 309,123
Less short-term loan balance (1,590) (1,630)
Long-term loan balance $ 306,941 $ 307,493

Interest Expense

Interest expense was ~~$851,000~~$4.1 million and ~~$2.5~~$8.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, respectively, as compared to $4.9 million and ~~$742,000 and $2.3~~$8.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2021, respectively. ~~Interest expense in 2017 and 2016 included interest on debt and uncertain tax positions.~~

~~11.~~

9. Commitments and Contingencies

Liability Claims

~~Our estimated unreported loss~~

In the normal course of business, we are made aware of adverse events involving our products and tissues. Future adverse events could ultimately give rise to a lawsuit against us, and liability ~~was $1.6 million as~~claims may be asserted against us in the future based on past events that we are not aware of ~~September 30, 2017 and $1.5 million as of December 31, 2016. As of September 30, 2017 and December 31, 2016,~~at the ~~related recoverable~~present time. We maintain claims-made insurance ~~amounts were $716,000 and $626,000, respectively. We accrue~~policies to mitigate our ~~estimate of unreported~~financial exposure to product and tissue processing liability claims. Claims-made insurance policies generally cover only those asserted claims and incidents that are reported to the insurance carrier while the policy is in effect. The amounts recorded in these Condensed Consolidated Financial Statements as of June 30, 2022 represent our estimate of the probable losses and anticipated recoveries for incurred but not reported claims related to products sold and services performed prior to the balance sheet date.

10. Revenue Recognition

Sources of Revenue

We have identified the following revenues disaggregated by revenue source:

•Domestic hospitals – direct sales of products and preservation services.

•International hospitals – direct sales of products and preservation services.

•International distributors – generally these contracts specify a ~~component~~geographic area that the distributor will service, terms and conditions of ~~otherlong-term~~ ~~liabilities~~the relationship, and ~~record~~purchase targets for the next calendar year.

•CardioGenesis cardiac laser console trials and sales – CardioGenesis cardiac trialed laser consoles are delivered under separate agreements.

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For the three and six months ended June 30, 2022 and 2021 the sources of revenue were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Domestic hospitals	$	39,508	$	38,932	$	76,501	$	75,161
International hospitals	27,235		27,638		55,649		53,765
International distributors	12,152		9,504		23,216		18,146
CardioGenesis cardiac laser therapy	1,445		74		2,187		163
Total sources of revenue	$	80,340	$	76,148	$	157,553	$	147,235

Also see segment disaggregation information in Note 13 below.

Contract Balances

We may generate contract assets during the pre-delivery design and manufacturing stage of E-xtra Design Engineering product order fulfillment. We assess the balance related to any arrangements in process and determine if the enforceable right to payment creates a material contract asset requiring disclosure. No material arrangements in process existed as of June 30, 2022 and 2021.

We also incur contract obligations on general customer purchase orders that have been accepted but unfulfilled. Due to the short duration of time between order acceptance and delivery of the related ~~recoverable insurance amount as a component of otherlong-term~~ ~~assets, as appropriate. Further analysis indicated~~product or service, we have determined that the ~~estimated liability~~balance related to these contract obligations is generally immaterial at any point in time. We monitor the value of orders accepted but unfulfilled at the close of each reporting period to determine if disclosure is appropriate. The value of orders accepted but unfulfilled as of ~~September~~June 30, ~~2017 could have been as high as $3.0 million, after including a reasonable margin for statistical fluctuations calculated based on actuarial simulation techniques.~~

~~Employment Agreements~~

~~The employment agreement of our Chairman, President,~~2022 and Chief Executive Officer (“CEO”), Mr. J. Patrick Mackin, provides for a severance payment, which would become payable upon the occurrence of certain employment termination events, including termination by us without cause.

~~PerClot Technology~~

On September 28, 2010 we entered into a worldwide distribution agreement (the “Distribution Agreement”) and a license and manufacturing agreement (the “License Agreement”) with Starch Medical, Inc. (“SMI”), for PerClot, a polysaccharide hemostatic agent used in surgery. The Distribution Agreement has a term of 15 years, but can be terminated for any reason before the expiration date by us by providing 180 days’ notice. The Distribution Agreement also contains minimum purchase requirements that expire upon the termination of the Distribution Agreement or following U.S. regulatory approval for PerClot. Separate and apart from the terms of the Distribution Agreement, pursuant to the License Agreement, as amended by a September 2, 2011 technology transfer agreement, we can manufacture and sell PerClot, assuming appropriate regulatory approvals, in the U.S. and certain other jurisdictions and may be required to pay royalties to SMI at certain rates on net revenues of products.

~~We may make contingent payments to SMI of up to $1.0 million if certain U.S. regulatory and certain commercial milestones are achieved.~~

We are conducting our pivotal clinical trial to gain approval to commercialize PerClot for surgical indications in the U.S. We resumed enrollment into the trial in the fourth quarter of 2016 and, assuming enrollment proceeds as anticipated, we could receive Premarket Approval from the FDA in 2019.

As of September 30, 2017 we had $1.5 million in prepaid royalties, $2.7 million in net intangible assets, and $1.4 million in property and equipment, net on our Summary Consolidated Balance Sheets related to the PerClot product line. If we do2021 was not ~~ultimately pursue or receive FDA approval to commercialize PerClot in the U.S., these assets could be materially impaired in future periods.~~

~~12. Shareholders’ Equity~~

~~Change in Accounting for Employee Share-Based Payments~~

~~As discussed in Note 1 above, as a result of the adoption of ASU2016-09,~~ ~~we recorded a net $238,000 cumulative-effect adjustment decrease to retained earnings, which included a $379,000 increase to additionalpaid-in~~ ~~capital and a $141,000 increase in deferred tax assets.~~

~~Common Shares Issued~~

~~In January 2016 we issued 3,703,699 shares of CryoLife common stock, as part of the consideration for the acquisition ofOn-X.~~ ~~The stock had a value of $34.6 million as determined on the date of the closing. See Note 4 for further discussion of theOn-X~~ ~~acquisition.~~

~~13.~~material.

11. Stock Compensation

Overview

We have stock option and stock incentive plans for employees andnon-employee Directors that provide for grants of restricted stock awards (“RSAs”~~), performance stock awards (“PSAs”~~), restricted stock units (“RSUs”), performance stock units (“PSUs”), and options to purchase shares of our common stock at exercise prices generally equal to the fair value of such stock at the dates of grant. We also maintain a shareholder-approved Employee Stock Purchase Plan ~~(the “ESPP”~~(“ESPP”) for the benefit of our employees. The ESPP allows eligible employees to purchase common stock on a regular basis at the lower of 85% of the market price at the beginning or end of each offering period.

Equity Grants

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 the Compensation Committee of our Board of Directors (the “Committee”) authorized awards from approved stock incentive plans of RSAs to non-employee directors and RSUs and PSUs to certain employees and company officers, which, assuming that performance under the PSUs were to be achieved at target levels, together totaled 509,000 shares and had an aggregate grant date fair value of $9.4 million.

During the six months ended June 30, 2021 the Committee authorized awards from approved stock incentive plans of RSAs to non-employee directors, RSUs to certain employees, and RSAs and PSUs to certain Company officers, which, assuming that performance under the PSUs were to be achieved at target levels, together totaled ~~384,000~~487,000 shares and had an aggregate grant date ~~market~~fair value of ~~$6.3~~$12.3 million. The PSUs granted in 2017 represent the right to receive from 60% to 150% of the target number of shares of common stock. The performance component of PSU awards granted in 2017 is based on attaining specified levels of adjusted EBITDA, adjusted inventory levels, and trade accounts receivable days’ sales outstanding, each as defined in the PSU grant documents, for the 2017 calendar year. We currently believe that achievement of the performance component is probable, and we reevaluate this likelihood on a quarterly basis.

During the nine months ended September 30, 2016 the Committee authorized awards from approved stock incentive plans of RSUs to certain employees and RSAs and PSUs to certain Company officers, which, including PSUs at target levels, together totaled 478,000 shares of common stock and had an aggregate grant date market value of $5.3 million. The PSUs granted in 2016 represented the right to receive from 60% to 150% of the target number of shares of common stock. The performance component of PSU awards granted in 2016 was based on attaining specified levels of adjusted EBITDA, adjusted inventory levels, and trade accounts receivable days’ sales outstanding, each as defined in the PSU grant documents, for the 2016 calendar year. The PSUs granted in 2016 earned 142% of the target number of shares.

The Committee authorized, from approved stock incentive plans, grants of stock options to purchase a total of ~~260,000~~314,000 and ~~387,000~~226,000 shares to certain Company officers during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. The exercise prices of the options were equal to the closing stock prices on their respective grant dates.

Employees purchased common stock totaling ~~47,000 and 93,000~~37,000 shares in both the ~~three and nine~~six months ended ~~September~~June 30, ~~2017, respectively,~~2022 and ~~52,000 and 90,000 shares in the three and nine months ended September 30, 2016, respectively,~~2021 through the ESPP.

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Stock Compensation Expense

The followingweighted-average assumptions were used to determine the fair value of ~~options:~~

   Three Months Ended
September 30, 2017    Nine Months Ended
September 30, 2017
   Stock Options         ESPP Options    Stock Options        ESPP Options




Expected life of options
   N/A    0.5 Years    4.8 Years    0.5 Years
Expected stock price volatility
   N/A    0.43    0.40    0.35
Risk-free interest rate
   N/A    1.14%    1.87%    0.62%
   Three Months Ended
September 30, 2016    Nine Months Ended
September 30, 2016
   Stock Options         ESPP Options    Stock Options        ESPP Options




Expected life of options
   4.8 Years    0.5 Years    4.8 Years    0.5 Years
Expected stock price volatility
   0.40    0.30    0.40    0.30
Risk-free interest rate
   1.19%    0.49%    1.20%    0.49%

options and shares purchased under the ESPP:

Three Months Ended
June 30, 2022

Six Months Ended
June 30, 2022

Stock Options

ESPP

Stock
Options

ESPP

Expected life

N/A

0.5 Years

5.0 Years

0.5 Years

Expected stock price volatility

N/A

0.31

0.40

0.31

Risk-free interest rate

N/A

0.22%

1.89%

0.22%

The following table summarizes total stock compensation expenses prior to the capitalization of amounts into ~~deferred~~Deferred preservation and ~~inventory~~Inventory costs (in thousands):

   Three Months Ended
September 30,    Nine Months Ended
September 30,
         2017                2016                2017                2016




RSA, PSA, RSU, and PSU expense
   $ 1,448    $ 1,397    $ 4,326    $ 3,616
Stock option and ESPP option expense
   519    421    1,614    1,203




Total stock compensation expense
   $ 1,967    $ 1,818    $ 5,940    $ 4,819


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
RSA, RSU, and PSU expense	$	2,470	$	1,695	$	5,238	$	3,745
Stock option and ESPP expense	611		572		1,183		1,159
Total stock compensation expense	$	3,081	$	2,267	$	6,421	$	4,904

Included in the total stock compensation expense, as applicable in each period, were expenses related to RSAs, ~~PSAs,~~ RSUs, PSUs, and stock options issued in each respective year, as well as those issued in prior periods that continue to vest during the period, and compensation related to the ESPP. These amounts were recorded as stock compensation expense and were subject to our normal allocation of expenses to inventory costs and deferred preservation costs. We capitalized ~~$111,000~~$147,000 and ~~$288,000~~$321,000 in the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, respectively, and ~~$70,000~~$152,000 and ~~$202,000~~$309,000 in the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2021, respectively, of the stock compensation expense into our inventory costs and deferred preservation costs.

As of September 30, 2017 we had total unrecognized compensation costs of $6.8 million related to RSUs, RSAs, and PSUs and $2.1 million related to unvested stock options. As of September 30, 2017 this expense is expected to be recognized over a weighted-average period of 2.1 years for RSUs, 1.7 years for stock options, 1.3 years for RSAs, and 1.0 years for PSUs.

~~14. Income~~

12. Loss Per Common Share

The following table sets forth the computation of basic and diluted ~~income~~loss per common share (in thousands, except per share data):

   Three Months Ended
September 30,    Nine Months Ended
September 30,
Basic income per common share
         2017                2016                2017                2016




Net income
   $ 1,325    $ 2,993    $ 6,711    $ 7,881
Net income allocated to participating securities
   (22)    (58)    (126)    (152)




Net income allocated to common shareholders
   $ 1,303    $ 2,935    $ 6,585    $ 7,729





Basic weighted-average common shares outstanding
   32,887    32,151    32,665    31,731




Basic income per common share
   $ 0.04    $ 0.09    $ 0.20    $ 0.24


	Three Months Ended June 30,				Six Months Ended June 30,
Basic loss per common share	2022		2021		2022		2021
Net loss	$	(4,259)	$	(2,178)	$	(7,648)	$	(5,316)
Net loss allocated to participating securities	21		14		39		36
Net loss allocated to common shareholders	$	(4,238)	$	(2,164)	$	(7,609)	$	(5,280)

Basic weighted-average common shares outstanding	40,031		38,943		39,941		38,841
Basic loss per common share	$	(0.11)	$	(0.06)	$	(0.19)	$	(0.14)

   Three Months Ended
September 30,    Nine Months Ended
September 30,
Diluted income per common share
       2017            2016            2017            2016




Net income
   $     1,325        $     2,993    $     6,711        $     7,881
Net income allocated to participating securities
   (22)    (56)    (122)    (148)




Net income allocated to common shareholders
   $ 1,303        $ 2,937    $ 6,589        $ 7,733





Basic weighted-average common shares outstanding
   32,887    32,151    32,665    31,731
Effect of dilutive stock options and awards^a
   1,170    1,014    1,186    837




Diluted weighted-average common shares outstanding
   34,057    33,165    33,851    32,568




Diluted income per common share
   $ 0.04        $ 0.09    $ 0.19        $ 0.24

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	Three Months Ended June 30,				Six Months Ended June 30,
Diluted loss per common share	2022		2021		2022		2021
Net loss	$	(4,259)	$	(2,178)	$	(7,648)	$	(5,316)
Net loss allocated to participating securities	21		14		39		36
Net loss allocated to common shareholders	$	(4,238)	$	(2,164)	$	(7,609)	$	(5,280)


Diluted weighted-average common shares outstanding	40,031		38,943		39,941		38,841
Diluted loss per common share	$	(0.11)	$	(0.06)	$	(0.19)	$	(0.14)

We excluded stock options from the calculation of diluted weighted-average common shares outstanding if the per share value, including the sum of (i) the exercise price of the options and (ii) the amount of the compensation cost attributed to future services and not yet recognized, was greater than the average market price of the shares because the inclusion of these stock options would be antidilutive to ~~income~~loss per common share. ~~Accordingly, stock options to purchase a weighted-average 264,000 and 215,000 shares for~~For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively,~~2022 and ~~1,000~~2021 all stock options and ~~810,000 shares for the three and nine months ended September 30, 2016, respectively,~~awards were excluded from the calculation of diluted weighted-average common shares ~~outstanding.~~

~~15.~~outstanding as these would be antidilutive due to the net loss.

13. Segment Information

We have ~~two~~2 reportable segments organized according to our products and services: Medical ~~Devices~~devices and Preservation ~~Services.~~services. The Medical ~~Devices~~devices segment includes external revenues from product sales of ~~BioGlue~~^®aortic stent grafts, surgical sealants, On-X, and other product revenues. Aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, and synthetic vascular grafts. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, NEXUS, E-vita Thoracic 3G, and E-nya products. Abdominal stent grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, and E-liac products. Surgical ~~Adhesive; BioFoam~~^®sealants include BioGlue Surgical ~~Matrix;On-X~~ ~~products, since the acquisition ofOn-X;~~ CardioGenesis cardiac laser therapy; PerClot; PhotoFix; HeRO Graft, through the second quarter of 2016; and ProCol, through the date of the sale of the ProCol product line in the first quarter of 2016.Adhesive products. The Preservation Services segment includes external services revenues from the preservation of cardiac and vascular tissues. There are no intersegment revenues.

The primary measure of segment performance, as viewed by our management, is segment gross margin or net external revenues less cost of products and preservation services. We do not segregate assets by ~~segment;~~segment, therefore, asset information is excluded from the segment disclosures below.

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The following table summarizes revenues, cost of products and preservation services, and gross margins for our operating segments (in thousands):

   Three Months Ended
September 30,    Nine Months Ended
September 30,




       2017            2016            2017            2016




Revenues:

Medical devices
     $     27,029        $     28,004    $     84,519        $     85,067
Preservation services
   16,970    17,248    52,357    50,284




Total revenues
   43,999    45,252    136,876    135,351

Cost of products and preservation services:

Medical devices
   6,220    6,598    21,196    21,299
Preservation services
   7,917    8,872    23,401    26,348




Total cost of products and preservation services
   14,137    15,470    44,597    47,647

Gross margin:

Medical devices
   20,809    21,406    63,323    63,768
Preservation services
   9,053    8,376    28,956    23,936




Total gross margin
     $ 29,862        $ 29,782        $ 92,279        $ 87,704


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues:
Medical devices	$	58,936	$	56,076	$	116,478	$	109,421
Preservation services	21,404		20,072		41,075		37,814
Total revenues	80,340		76,148		157,553		147,235

Cost of products and preservation services:
Medical devices	18,230		16,178		35,638		31,089
Preservation services	9,938		9,457		19,024		17,795
Total cost of products and preservation services	28,168		25,635		54,662		48,884

Gross margin:
Medical devices	40,706		39,898		80,840		78,332
Preservation services	11,466		10,615		22,051		20,019
Total gross margin	$	52,172	$	50,513	$	102,891	$	98,351

The following table summarizes net revenues by product and service (in thousands):

   Three Months Ended
September 30,    Nine Months Ended
September 30,




       2017            2016            2017            2016




Products:

BioGlue and BioFoam
     $ 15,730    $ 15,976    $ 48,094    $ 47,479
On-X
   8,326    8,890    27,048    25,159
CardioGenesis cardiac laser therapy
   1,489    1,653    5,130    5,497
PerClot
   886    950    2,641    2,983
PhotoFix
   598    535    1,606    1,406
HeRO Graft
   --    --    --    2,325
ProCol
   --    --    --    218




Total products
   27,029    28,004    84,519    85,067

Preservation services:

Cardiac tissue
   7,932    8,279    23,911    22,255
Vascular tissue
   9,038    8,969    28,446    28,029




Total preservation services
   16,970    17,248    52,357    50,284





Total revenues
   $         43,999    $         45,252    $         136,876    $         135,351

~~16. JOTEC Acquisition~~

On October 10, 2017 we announced that we entered into a definitive agreement to acquire JOTEC AG (“JOTEC”). The transaction is expected to close later this year, subject to customary closing conditions. JOTEC is a German-based, privately-held developer


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Products:
Aortic stent grafts	$	23,833	$	21,064	$	49,339	$	41,269
Surgical sealants	15,967		17,864		31,648		35,692
On-X	16,255		14,726		30,626		27,821
Other	2,881		2,422		4,865		4,639
Total products	58,936		56,076		116,478		109,421

Preservation services	21,404		20,072		41,075		37,814
Total revenues	$	80,340	$	76,148	$	157,553	$	147,235

Table of technologically differentiated endovascular stent grafts, and cardiac and vascular surgical grafts, focused on aortic repair. The combination of CryoLife and JOTEC will create a company with a broad and highly competitive product portfolio focused on aortic surgery, and will position us to compete strongly in the important and growing endovascular surgical markets.

Under terms of the definitive agreement, we will acquire JOTEC for a purchase price of $225 million, subject to certain adjustments, consisting of 75% in cash and 25% in CryoLife common stock issued to JOTEC’s shareholders. We expect to finance the transaction and related expenses, as well as refinance our existing approximately $69 million term loan, with a new $255 million senior secured credit facility, consisting of a $225 million institutional term loan B and a $30 million undrawn revolving credit facility, $56.25 million in CryoLife common stock as determined on the date of signing of the agreement, and available cash on hand. The senior secured credit facility is fully underwritten by Deutsche Bank, Capital One and Fifth Third Bank and is expected to be syndicated to investors prior to closing of the acquisition.

Contents

Forward-Looking Statements

This Form10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements give our ~~current~~ expectations or forecasts of future ~~events. The~~events as of the date of this Form 10-Q. In some cases, words such as “could,” “may,” “might,” “will,” “would,” “shall,” “should,” “pro forma,” “potential,” “pending,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “future,” “assume,” and variations of these types of words or other similar expressions ~~generally~~ identify forward-looking statements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements, which are made as of the date of this Form10-Q. Such forward-looking statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions, including, without limitation, in addition to those identified in the text surrounding such statements, those identified under “Risks and Uncertainties” and elsewhere in this Form~~10-Q.~~

All statements included herein, other than statements of historical facts, that address activities, events, or developments that we expect or anticipate will or may occur in the future, or that reflect our beliefs about the future and/or expectations, are forward-looking statements, including statements about the following:

●

~~The market and growth opportunities for BioGlue in China;~~

●

~~The expected decrease in cardiac laser therapy revenues in 2017 relative to 2016 due to a projected decrease in handpiece sales;~~

●

~~The plans, costs, and expected~~

•Our belief that new products, new indications, global expansion, and business development are the four growth areas that will drive our business in the future;

•The potential impact of the COVID-19 pandemic and the war in Ukraine on demand for and sales of our products and services, business operations, manufacturing operations, supply chain, cash flow, workforce, clinical and regulatory timelines, and our research and development projects;

•Our belief that our distributors may delay or reduce purchases of products in US Dollars depending on the relative price of goods in their local currencies;

•Our beliefs that the use of surgical adhesives and sealants, with or without sutures and staples, for certain indications can enhance the efficacy and cost-effectiveness of certain procedures through more effective and rapid wound closure;

•Our beliefs and anticipation regarding the favorable attributes and benefits of our products and services, the basis on which our products and services compete, our physician education activities, the advantages of our relationships with organ and tissue procurement organizations and tissue banks, the FDA classification of our medical devices, our compliance with applicable laws and regulations, and the advantages of our intellectual property and its significance to our segments and our business as a whole, our relations with our employees, timelines regarding product launches and regulatory certifications, clearances, renewals, and approvals;

•Our beliefs about potential competition and competitive products and services, potential adverse regulatory consequences, potential security vulnerabilities, and the associated potential adverse effects on our business;

•Our beliefs regarding our global expansion efforts, including the international growth opportunity that would be provided by obtaining regulatory approval for BioGlue in China;

•The dependencies affecting our ability to realize the anticipated business opportunities, growth prospects, synergies, and other benefits of the agreements with Endospan and Baxter and our acquisition of Ascyrus, and our beliefs about the costs and timelines for certain clinical trial milestones for the regulatory approvals of the NEXUS stent graft system in the US and the AMDS globally;

•Our beliefs regarding the fair value of our acquisitions, divestitures, and other business development activities and the estimates and assumptions about the future achievements of milestones and future revenues and cash flows related to those business development activities, including our ability to achieve the milestones in the Baxter Transaction;

•Our beliefs about the anticipated benefits from our corporate reincorporation and rebranding and the risks posed by the same;

•Our beliefs about the present value and potential impairment of our intangible assets and leases;

•Our beliefs about handpiece availability and CardioGenesis cardiac laser therapy revenue;

•Our beliefs regarding the impact alternative anticoagulation therapy and transcatheter heart valve replacement may have on the number of patients choosing On-X mechanical heart valves;

•Our beliefs about our ability to make timely transitions to our notified bodies and obtain renewals for our CE Marks impacted by Brexit and the transition to the Medical Device Regulation (“MDR”) in Europe, our ability to obtain derogations related to the same, and the impact these renewals and derogations may have on our business;

•Our beliefs about our R&D and product pipeline, including our beliefs about the timing of our clinical trials and product launches;

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•Our belief that revenues for preservation services, particularly revenues for certain high-demand cardiac tissues, can vary from quarter to quarter and year to year due to a variety of factors including: quantity and type of incoming tissues, yields of tissue through the preservation process, timing of receipt of donor information, staffing levels, timing of the release of tissues to an implantable status, demand for certain tissue types due to the number and type of procedures being performed, and pressures from competing products or services;

•Our beliefs regarding ~~clinical trials to obtain U.S. regulatory approval for PerClot;~~

●

~~The market and growth opportunities for PhotoFix into~~ the ~~U.S;~~

●

The variability of 2017 tissue preservation services revenues due to a variety of factors including quantity and type of incoming tissues, yields of tissue through the preservation process, timing of receipt of donor information, timing of the release of tissues to an implantable status, demand for certain tissue types due to the number and type of procedures being performed, and pressures from competing products or services;

●

~~The expected decrease in cost of preservation services in 2017 relative to 2016 as a result of the decrease in the per unit cost of processing tissues that we experienced in 2016;~~

●

~~The potential impact on our income tax rate of certain nondeductible business development costs as determined after the close of the JOTEC acquisition;~~

●

~~The~~ seasonal nature of the demand for some of our products and ~~preservation~~ services and the ~~related~~ reasons for such seasonality, if any, and regarding the impact of consignment inventory on product sales, if any;

•Our belief that our cash from operations and existing cash and cash equivalents will enable us to meet our current operational liquidity needs for at least the next twelve months, our expectations regarding future cash requirements, and the impact that our cash requirements might have on our cash flows for the next twelve months;

•Our expectation regarding the impact on cash flows of undertaking significant business development activities and the potential need to obtain additional debt financing or equity financing;

•Our belief that we will incur expenses for research and development projects, including for clinical research projects to gain regulatory approvals for products or indications, including On-X, aortic stent grafts, and BioGlue products, and for research and development for new products despite reduced planned spending due to COVID-19 and that our efforts to develop new products and technologies will likely require additional investment, research, and new clinical studies or data;

•Our beliefs about pending and potential legal or other governmental or regulatory proceedings;

•Our expectations regarding the timing of clinical research work and regulatory approvals for and expected distribution of products or indications, including On-X, aortic stent grafts, and BioGlue products, and CryoValve SGPV if the FDA reclassifies allograft heart valves as Class III medical devices;

•Our beliefs and expectations regarding the utilization of net operating loss carryforwards from our acquisitions of JOTEC, On-X, Hemosphere, Inc., and Cardiogenesis Corporation;

•Our beliefs about our operating results which may fluctuate significantly on a periodic basis as a result of internal and external factors, including reduced demand for our products, availability of products, materials, and supplies, strategic actions we take such as acquisitions or divestitures, unanticipated costs and expenses, market reception of our new or improved product offerings, and interest rate and currency fluctuations; and

•Other statements regarding projections of future financial and business performance; anticipated growth and trends in our business and the markets relevant to our business, including as our growth relates to our competitors; the robustness and reliability of our workforce and supply chain; future production capacity and product supply; the availability and benefits of our products in the future; and the expected timing and impact of our strategic initiatives.

These and other forward-looking statements reflect the views of management at the time such ~~seasonality, if any, and our belief that the demand for CardioGenesis is not seasonal;~~

●

Our having sufficient cash to meet our current operational liquidity needs and expected operational liquidity needs for at least the next twelve months, our expectations regarding future cash requirements, and the impact that our cash requirements for 2017 may have on our cash flows for 2017;

●

~~The potential impact of constraints imposed on us by our lenders under the existing credit facility;~~

●

~~The impact of certain changes in interest rates or exchange rates on our financial position, sales to distributors, profitability, or cash flows;~~

●

~~The potential impact of the combination of CryoLife and JOTEC; and~~

●

~~The impact of certain new accounting pronouncements.~~

~~These~~ statements are originally made based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, and expected future developments as well as other factors we believe are appropriate in the ~~circumstances. However, whether~~circumstances and are subject to a number of risks, uncertainties, estimates, and assumptions. Whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties which could cause actual results to differ materially and adversely from our expectations, including, without limitation, in addition to those specified in the text surrounding such statements, the ~~risk factors set forth below under~~risks described in Part II, Item 1A, ~~as well as~~“Risks Factors” in this Form 10-Q and elsewhere throughout this report, the risks described in our other filings with the Securities and Exchange Commission including the risks described in Part I, Item 1A, of“Risk Factors” in our Annual Report on Form10-K for the year ended December 31, ~~2016,~~2021 and elsewhere throughout that report, and other ~~factors,~~risks which we may not be able to identify in advance, many of which are beyond our control. Consequently, all of the forward-looking statements made in this Form10-Q are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. We assume no obligation, and expressly disclaim any duty, to update publicly any such forward-looking statements, whether as a result of new information, future events, or otherwise.

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PART I - FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

~~CryoLife,~~

Artivion, Inc. (“~~CryoLife,~~Artivion,” the “Company,” “we,” or “us”), ~~incorporated in 1984 in Florida,~~ is a leader in the manufacturing, processing, and distribution of medical devices and implantable human tissues used in cardiac and vascular surgical ~~procedures. CryoLife’s medical devices include:~~procedures for patients with aortic disease. We have four major product families: aortic stent grafts, surgical sealants, On-X® mechanical heart valves and related surgical products, and implantable cardiac and vascular human tissues. Aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, and synthetic vascular grafts. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, NEXUS, E-vita Thoracic 3G, and E-nya products. Abdominal stent grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, and E-liac products. Surgical sealants include BioGlue® Surgical Adhesive (“BioGlue”)~~; BioFoam~~^{products. In addition to these four major product families, we sell or distribute PhotoFix}® ~~Surgical Matrix (“BioFoam”);On-X~~ ~~Life Technologies Holdings, Inc.(“On-X”)~~ ~~valves and~~ bovine surgical ~~products;~~patches, CardioGenesis® cardiac laser therapy, ~~product line, which includes~~Therion® chorioamniotic allografts (previously marketed as NeoPatch®), and PerClot® hemostatic powder (prior to the sale to a ~~laser console system andsingle-use,~~ ~~fiber-optic handpieces that are used for the treatment~~subsidiary of ~~coronary artery disease in patients with severe angina; PerClot~~^®~~, an absorbable powdered hemostat, which we distribute internationally for Starch Medical, Inc.~~Baxter International, Inc (“~~SMI”~~Baxter”)~~; and PhotoFix~~^TM~~, a bovine pericardial patch stabilized using adye-mediated~~ ~~photo-fixation process that requires no glutaraldehyde. The cardiac and vascular human tissues distributed by us include the CryoValve~~^® ~~SG pulmonary heart valve (“CryoValve SGPV”~~) ~~and the CryoPatch~~^® ~~SG pulmonary cardiac patch (“CryoPatch SG”), both of which are processed using our proprietary SynerGraft~~^® ~~technology.~~

We reported quarterly revenues of ~~$44.0~~$80.3 million infor the three months ended ~~September~~June 30, ~~2017,~~2022, a ~~3% decrease~~6% increase from the quarter ended September 30, 2016. Third quarter revenues were adversely affected by the impact of delayed surgical procedures on our business in Florida and Texas caused by recent hurricanes, which we estimate to be approximately $1.0 million, and due to the continued delay in obtaining the~~re-certification~~ ~~of ourOn-X~~ ascending aortic prosthesis (“AAP”). Additionally, in connection with the anticipated JOTEC AG (“JOTEC”) transaction discussed below, we reversed revenues of $1.1 million related to the estimated buyback of inventory at the end of the contracts for certain distributors in countries in which we anticipate establishing a direct market. In connection with the JOTEC transaction, we spent $2.8 million on business development expenses in the three months ended ~~September~~June 30, ~~2017.~~ 2021. The increase in revenues for the three months ended June 30, 2022 was primarily due to increases in aortic stent grafts revenues, preservation service revenues, and On-X product revenues, partially offset by decreases in surgical sealants and other product revenues.

See the “Results of Operations” section below for additional analysis of the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~

~~Recent Events~~

~~Acquisition~~2022.

Effects of ~~JOTEC AG~~

OnCOVID-19

In December 2019 an outbreak of a respiratory illness caused by a new coronavirus named “2019-nCoV” (“COVID-19”) was detected, and by March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak a “pandemic.”

Beginning in March 2020 we took steps to address the potential impact of COVID-19 on our employees and operations, and to preserve cash, including reducing expenditures and delaying investments. These steps included, but were not limited to, implementing specific protocols to minimize workplace exposures to COVID-19 by our employees; implementing remote work arrangements for most employees we deemed able to do so; restricting business travel; implementing hiring restrictions; reducing planned expenditures on some pending clinical trials; imposing senior management cash salary reductions in exchange for cash payments in the second quarter of 2021; requiring our Board of Directors to accept Artivion stock instead of cash compensation for a six month period through October ~~10, 2017~~2020; and suspending management merit increases for seven months in 2020.

Our efforts to protect our supply chain and reduce the spread of COVID-19 among our employees, including our work-from-home arrangements, have been successful to date as we ~~announced~~have continued to operate all manufacturing sites at full production. These efforts have not materially affected our ability to maintain our business operations, including the operation of financial reporting systems, internal control over financial reporting, or disclosure controls and procedures; however, there is no guarantee that these efforts and arrangements, if they are continued, will continue to be successful in the future. Further, our reductions or delays in expenditures slowed our progress on certain key R&D initiatives and could in the future continue to adversely impact our business operations or further delay our recovery from the pandemic.

Although we ~~entered into a definitive agreement~~have scaled back many of our COVID-19 mitigation efforts, we continue to acquire JOTEC. JOTEC is a German-based, privately-held developer of technologically differentiated endovascular stent grafts, and cardiac and vascular surgical grafts, focused on aortic repair. Under termsmonitor the impact of the ~~definitive agreement,~~pandemic and the emergence of new variants on our business and recognize that COVID-19 and its effects could continue to negatively impact our business and results of operations during the remainder of 2022 and beyond. As an example, the COVID-19 pandemic has impacted certain aspects of the global supply chain and resulted in supply chain inflation. Although we have yet to experience any material effects of this impact on our supply chain or operations, we face an increasing risk that upstream disruptions may occur or worsen. As global economies continue to recover from the COVID-19 downturn, the expiration of COVID-19 related hiring freezes, increased opportunities for remote work, and increasing compensation pressure have resulted in competition for talent and an unprecedented number of retirements or career changes. The resulting worker shortages at all levels have impacted supply chains, distribution channels, and employers’ and our own ability to adequately staff operations. These shortages to date, including a shortage of trained staff capable of meeting the increased demand associated with releasing quarantined tissue, have impacted, and may impact our operations going forward. Hospitals and other healthcare providers have also experienced staffing shortages impacting our

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business including increased restrictions on elective and non-emergent procedures, restrictions on access to healthcare facilities, cancellation of elective procedures, and the re-allocation of scarce resources to some critically ill patients. New variants of COVID-19 continue to emerge around the globe, increasing the case numbers and short-term quarantines which can each further impact our workforce and those of our customers and suppliers.

The extent to which our operations and financial performance will ~~acquire JOTEC~~be impacted by the pandemic for ~~a purchase price~~the remainder of ~~$225 million, subject to certain adjustments, consisting~~2022 and beyond will depend largely on future developments, including changes in hospital utilization rates and staffing, prevalence and severity of ~~75 percent in cash~~new variants and ~~25 percent in CryoLife common stock issued to JOTEC’s shareholders. We expect to finance~~their impact on case numbers and short-term quarantines, the ~~transaction and related expenses, as well as refinance our existing approximately $69 million term loan, with a new $255 million senior secured credit facility, consisting~~impact of ~~a $225 million institutional term loan B and a $30 million undrawn revolving credit facility, $56.25 million in CryoLife common stock as determined~~vaccines on the ~~date~~spread of ~~signing~~COVID-19 and its variants, global availability and acceptance of vaccines and their effectiveness against variants, disruptions to workforce availability, and any continuing impact on the ~~agreement,~~global supply chain. If COVID-19 or its variants become more contagious, if efforts to further contain the effects of COVID-19 or its variants, including vaccine availability, are unsuccessful, if COVID-19, its variants, or disruptions to the global supply chain impact our supply chain or employee availability or productivity, or if we continue to experience periods of uncertainty due to COVID-19 or its variants, it could materially, adversely affect our revenues, financial condition, profitability, and ~~available~~ cash ~~on hand. The transaction is expected~~flows.

See the “Risk Factors” identified in Part II, Item 1A of this form 10-Q for risks related to ~~close later this year, subject to customary closing conditions.~~

~~Critical~~COVID-19.

New Accounting ~~Policies~~

~~A summary of our significant accounting policies is included in~~Pronouncements

See Note 1 of ~~the~~ “Notes to Condensed Consolidated Financial ~~Statements,” contained~~Statements” identified in ~~our Form10-K~~ for the year ended December 31, 2016. Management believes that the consistent application of these policies enables us to provide users of the financial statements with useful and reliable information about our operating results and financial condition. The summary consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which require us to make estimates and assumptions. We did not experience any significant changes during the quarter ended September 30, 2017 in any of our Critical Accounting Policies from those contained in our Form~~10-K~~ ~~for the year ended December 31, 2016.~~

~~New Accounting Pronouncements~~

~~In February 2016 the Financial Accounting Standards Board (“FASB”) amended its Accounting Standards Codification and created a new Topic 842,~~~~Leases~~~~. The final guidance requires lessees to recognize aright-of-use~~ ~~asset and a lease liability for all leases (with the exception of short-term leases) at the commencement date and recognize expenses on their income statements similar to the current Topic 840,~~~~Leases~~~~. It is effective for fiscal years and interim periods beginning after December 15, 2018, and early adoption is permitted. We are evaluating the impact the adoption~~Part I, Item I of this ~~standard will have on our financial position, results~~form 10-Q for further discussion of ~~operations, and cash flows.~~

~~In May 2014 the FASB issued ASUNo. 2014-09,~~~~Revenue from Contracts with Customers.~~ ~~Since ASU2014-09~~ ~~was issued, several additional ASUs~~new accounting standards that have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Adoption of the new standard is effective for reporting periods beginning after December 15, 2017. We plan to use the modified retrospective method of adoption. We have completed an initial evaluation of the potential impact from adopting the new standard, including a detailed review of performance obligations for all material revenue streams. Based on this initial evaluation, we do not expect adoption will have a material impact on our financial position, results of operations, or cash flows. Related disclosures will be expanded in line with the requirements of the standard. We will continue our evaluation, including additional revenue streams associated with the proposed acquisition of JOTEC, until our adoption of the new standard.

adopted.

Results of Operations

(Tables in thousands)

Revenues

   Revenues for the
              Three Months Ended
September 30,    Revenues as a Percentage of
Total Revenues for the
Three Months Ended
September 30,
   2017    2016    2017 2016




Products:

BioGlue and BioFoam
   $ 15,730    $ 15,976    36 % 35 %
On-X
   8,326    8,890    19 % 20 %
CardioGenesis cardiac laser therapy
   1,489    1,653    3 % 4 %
PerClot
   886    950    2 % 2 %
PhotoFix
   598    535    1 % 1 %




Total products
   27,029    28,004    61 % 62 %

Preservation services:

Cardiac tissue
   7,932    8,279    18 % 18 %
Vascular tissue
   9,038    8,969    21 % 20 %




Total preservation services
   16,970    17,248    39 % 38 %




Total
   $ 43,999    $ 45,252    100 % 100 %

   Revenues for the
                Nine Months Ended
September 30,    Revenues as a Percentage of
Total Revenues for the
Nine Months Ended
September 30,
   2017    2016    2017 2016




Products:

BioGlue and BioFoam
   $ 48,094    $ 47,479    35 % 35 %
On-X
   27,048    25,159    20 % 19 %
CardioGenesis cardiac laser therapy
   5,130    5,497    4 % 4 %
PerClot
   2,641    2,983    2 % 2 %
PhotoFix
   1,606    1,406    1 % 1 %
HeRO Graft
   --    2,325    -- % 2 %
ProCol
   --    218    -- % -- %




Total products
   84,519    85,067    62 % 63 %

Preservation services:

Cardiac tissue
   23,911    22,255    17 % 16 %
Vascular tissue
   28,446    28,029    21 % 21 %




Total preservation services
   52,357    50,284    38 % 37 %




Total
   $ 136,876    $ 135,351    100 % 100 %


	Revenues for the Three Months Ended June 30,				Percent Change From Prior Year	Revenues as a Percentage of Total Revenues for the Three Months Ended June 30,
	2022		2021			2022	2021
Products:
Aortic stent grafts	$	23,833	$	21,064	13%	30%	28%
Surgical sealants	15,967		17,864		(11)%	20%	24%
On-X	16,255		14,726		10%	20%	19%
Other	2,881		2,422		19%	3%	3%
Total products	58,936		56,076		5%	73%	74%

Preservation services	21,404		20,072		7%	27%	26%
Total	$	80,340	$	76,148	6%	100%	100%

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	Revenues for the Six Months Ended June 30,				Percent Change From Prior Year	Revenues as a Percentage of Total Revenues for the Six Months Ended June 30,
	2022		2021			2022	2021
Products:
Aortic stent grafts	$	49,339	$	41,269	20%	31%	28%
Surgical sealants	31,648		35,692		(11)%	20%	24%
On-X	30,626		27,821		10%	20%	19%
Other	4,865		4,639		5%	3%	3%
Total products	116,478		109,421		6%	74%	74%

Preservation services	41,075		37,814		9%	26%	26%
Total	$	157,553	$	147,235	7%	100%	100%

Revenues ~~decreased 3%~~increased 6% and ~~increased 1%~~7% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, respectively, as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively.~~2021. The ~~decrease~~increase in revenues for the three months ended ~~September~~June 30, ~~2017~~2022 was ~~primarily~~ due to an increase in revenues from aortic stent grafts, On-X products, preservation services, and other products, partially offset by a decrease in~~On-X~~ ~~and BioGlue product~~ revenues ~~and preservation services revenues.~~from surgical sealants. The increase in revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was ~~primarily~~ due to an increase in revenues from aortic stent grafts, preservation services, ~~revenues,~~On-X products, and~~On-X~~ ~~and BioGlue product revenues,~~ other products, partially offset by a decrease in ~~Hemodialysis Reliable Outflow Graft (“HeRO Graft”)~~ revenues ~~following~~from surgical sealants. Excluding the ~~sale~~effects of foreign exchange, revenues increased 9% and 10% for the ~~product line.~~three and six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021. Revenues for the three and six months ended June 30, 2022 and 2021 were negatively impacted in certain regions by delays or cancellations of some surgical procedures as a result of reduced hospital capacity and staffing and hospital restrictions due to the COVID-19 pandemic. A detailed discussion of the changes in product revenues and preservation services revenues for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 is presented below.

Products

Revenues from products ~~decreased 3%~~increased 5% and 1%6% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, respectively, as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively.~~2021. The increase for the three and six months ended June 30, 2022 was due to an increase in revenues from aortic stent grafts, On-X products, and other products, partially offset by a decrease in revenues ~~for the three months ended September 30, 2017 was primarily due to a decrease inOn-X~~ ~~and BioGlue revenues. The decrease~~ in revenues for the nine months ended September 30, 2017 was primary due to a decrease in HeRO Graft revenues following the sale of the product line and a decrease in CardioGenesis cardiac laser therapy revenues, partially offset by an increase in~~On-X~~ ~~and BioGlue revenues.~~surgical sealants. A ~~detailed~~ discussion of the changes in product revenues for ~~BioGlue~~aortic stent grafts, surgical sealants, On-X products, and ~~BioFoam;On-X;~~ ~~CardioGenesis cardiac laser therapy; PerClot; PhotoFix; HeRO Graft; and ProCol~~^® ~~Vascular Bioprosthesis (“ProCol”)~~other product revenues is presented below.

~~Our sales~~

Sales of certain products through our direct sales force ~~to U.K. hospitals~~and distributors across Europe and various other countries are denominated in a variety of currencies including Euros, British Pounds, Polish Zlotys, Swiss Francs, Brazilian Reals, and ~~our sales to German, Austrian, French, and Irish hospitals and certain distributors are~~Canadian Dollars, with a concentration denominated in ~~Euros and are, therefore,~~Euros. Each currency is subject to ~~changes in foreign~~ exchange ~~rates. During 2016~~rate fluctuations. For the ~~U.S. Dollar strengthened materially,~~three and six months ended June 30, 2022, as compared to the ~~British Pound~~three and ~~Euro and, as a result, our revenues~~six months ended June 30, 2021, the US Dollar strengthened in comparison to major currencies, resulting in revenue decreases when these foreign currency denominated ~~in these currencies decreased less than 1% when~~transactions were translated into ~~U.S.~~US Dollars. ~~The U.S. Dollar remained strong during the nine months ended September 30, 2017. Any further change~~Future changes in these exchange rates could have a material, adverse effect on our revenues denominated in these currencies. Additionally, our sales to many distributors around the world are denominated in ~~U.S.~~US Dollars, and although these sales are not directly impacted by ~~the strong U.S. Dollar,~~currency exchange rates, we believe that some of our distributors may ~~be delaying~~delay or ~~reducing~~reduce purchases of products in ~~U.S.~~US Dollars ~~due to~~depending on the relative price of these goods in their local currencies.

~~BioGlue~~

Aortic Stent Grafts

Aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, synthetic vascular grafts, and ~~BioFoam~~

original equipment manufacturing (“OEM”) aortic stent grafts products. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, NEXUS, E-vita Thoracic 3G, and E-nya products. Abdominal stent grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, and E-liac products. Aortic stent grafts are used in endovascular and open vascular surgery for the treatment of complex aortic arch, thoracic, and abdominal aortic diseases. Our aortic stent grafts are primarily distributed in international markets.

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Revenues from aortic stent grafts increased 13% and 20% for the ~~sale of surgical sealants, consisting of BioGlue~~three and ~~BioFoam, decreased 2%~~six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021.

Revenues from aortic stent grafts, excluding OEM, increased 16% for the three months ended ~~September~~June 30, ~~2017,~~2022, as compared to the three months ended ~~September~~June 30, 2016. This decrease was primarily due to a 3% decrease in the volume of milliliters sold, which decreased revenues by 3%, partially offset by the favorable effect of foreign currency exchange, which increased revenues by 1%.

Revenues from the sale of surgical sealants increased 1% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. This increase was primarily due to a 3% increase in the volume of milliliters sold, which increased revenues by 1% and an increase in average sales prices, which increased revenues by 1%, partially offset by the unfavorable effect of foreign currency exchange, which decreased revenues by 1%.

The decrease in sales volume of surgical sealants for the three months ended September 30, 2017 was primarily due to a decrease in sales of BioGlue in Japan due to changes in distributor buying patterns. The increase in sales volume of surgical sealants for the nine months ended September 30, 2017 was primarily due to an increase in sales of BioGlue in Japan and Brazil, due to increased usage, partially offset by a decrease in sales in U.S. markets.

We are currently seeking regulatory approval for BioGlue in China, and if this effort is successful, management believes this will provide an additional international growth opportunity for BioGlue in future years.

Domestic revenues accounted for 52% and 54% of total BioGlue revenues for the three and nine months ended September 30, 2017, respectively, and 51% and 55% of total BioGlue revenues for the three and nine months ended September 30, 2016. BioFoam revenues accounted for less than 1% of surgical sealant revenues for the three and nine months ended September 30, 2017 and 2016. BioFoam is approved for sale in certain international markets.

~~On-X~~

~~On January 20, 2016 we acquiredOn-X,~~ ~~an Austin, Texas-based, privately held mechanical heart valve company. TheOn-X~~ ~~catalogue of products includes theOn-X~~ ~~prosthetic aortic and mitral heart valves and theOn-X~~ ~~AAP.On-X~~ ~~product revenues also include revenues from the distribution of CarbonAid CO~~₂ ~~diffusion catheters and from the sale ofChord-X~~ ~~ePTFE sutures for mitral chordal replacement.On-X~~ ~~products are distributed in both domestic and international markets.On-X~~ ~~also generates revenue from pyrolytic carbon coating products produced for other medical device manufacturers (“OEM”).~~

~~On-X~~ product revenues decreased 6% for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. This decrease was primarily due to a 17% decrease in volume of units sold, which decreased revenues by 1% and a decrease in average sales prices, which decreased revenues by 5%. The volume decrease of~~On-X~~ products was primarily due to a revenue reversal of $1.0 million related to the estimated buyback of inventory at the end of the contracts for certain distributors in countries in which we anticipate establishing a direct market as well as reduced~~On-X~~ ~~AAP shipments due to the delay in obtaining recertification of theOn-X~~ ~~AAP CE Mark in Europe, partially offset by an increase in volume in the U.S.On-X~~ ~~product revenues, excluding the revenue reversal of $1.0 million related to the estimated buyback of inventory, increased 6% for~~

the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. The decrease in average selling prices was due to price reductions to certain customers in Europe as a result of pricing pressures from competitive products.

~~On-X~~ ~~product revenues increased 10% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. This increase in sales volume ofOn-X~~ products for the September 30, 2017 was primarily due to volume increases in the U.S. and our direct markets in Europe, partially offset by revenue reversals related to the estimated buyback of inventory at the end the contract for certain distributors in countries in which the company anticipates establishing a direct market, reduced~~On-X~~ ~~AAP shipments due to the delay in obtainingre-certification~~ ~~of theOn-X~~ ~~AAP CE Mark in Europe, and decreases in sales to certain distributors in Asia.On-X~~ product revenues, excluding the revenue reversal of $1.0 million related to the estimated buyback of inventory, increased 14% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016.

~~On-X~~ ~~OEM revenues decreased 11% for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016.On-X~~ ~~OEM revenues decreased 32% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016.On-X~~ OEM revenues were $358,000 and $402,000 for the three months ended September 30, 2017 and 2016, respectively and $1.0 million and $1.5 million for the nine months ended September 30, 2017 and 2016, respectively.~~On-X~~ ~~OEM revenues decreased for the three and nine months ended September 30, 2017 due to an anticipated decrease in OEM activities for a major OEM customer.~~

~~CardioGenesis Cardiac Laser Therapy~~

Revenues from our CardioGenesis cardiac laser therapy product line consist primarily of sales of handpieces and, in certain periods, the sale of laser consoles. Revenues from cardiac laser therapy decreased 10% for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. This decrease was primarily due to a 15% decrease in unit shipments of handpieces, partially offset by an increase in laser sales. Revenues from the sale of laser consoles were $140,000 and zero for the three months ended September 30, 2017 and 2016, respectively.

Revenues from cardiac laser therapy decreased 7% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. This decrease was primarily due to a 12% decrease in unit shipments of handpieces, partially offset by an increase in laser sales. Revenues from the sale of laser consoles were $432,000 and zero for the nine months ended September 30, 2017 and 2016, respectively.

Cardiac laser therapy is generally used adjunctively with cardiac bypass surgery by a limited number of physicians who perform these procedures. We expect that cardiac laser therapy revenues will decrease for the full year of 2017 as compared to the full year of 2016, due to a projected decrease in handpiece sales. Revenues from laser console sales are difficult to predict and can vary significantly from quarter to quarter.

~~PerClot~~

Revenues from the sale of PerClot decreased 7% for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. This decrease was primarily due to a 9% decrease in the volume of grams sold, which decreased revenues by 7%, and a decrease in average sales prices, which decreased revenues by 1%, partially offset by the favorable effect of foreign currency exchange, which increased revenues by 1%.

Revenues from the sale of PerClot decreased 11% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. This decrease was primarily due to a 10% decrease in the volume of grams sold, which decreased revenues by 8%, a decrease in average sales prices, which decreased revenues by 2%, and the unfavorable effect of foreign currency exchange, which decreased revenues by 1%.

The volume decrease for the three and nine months ended September 30, 2017 was primarily due to a decline in sales of PerClot in Europe due to competitive pressures. The decrease in average selling prices for the three and nine months ended September 30, 2017 was primarily due to price reductions to certain customers in Europe as a result of pricing pressures from competitive products.

We are conducting our pivotal clinical trial to gain approval to commercialize PerClot for surgical indications in the U.S. We resumed enrollment into the PerClot U.S. clinical trial in the fourth quarter of 2016, and assuming enrollment proceeds as anticipated, we could receive Premarket Approval (“PMA”) from the U.S. Food and Drug Administration (“FDA”) in 2019.

~~PhotoFix~~

~~PhotoFix revenues increased 12% for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016.~~2021. This increase was primarily due to an increase in units sold, which increased revenues by ~~12%.~~

PhotoFix revenues increased 14% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. This increase was primarily due to a 14% increase in units sold, which increased revenues by 13%22%, and an increase in average sales prices, which increased revenues by 1%3%, partially offset by the effect of foreign exchange rates, which decreased revenues by 9%.

~~The increase in volume~~

Revenues from aortic stent grafts, excluding OEM, increased 21% for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017 is primarily due to an increase in the number of implanting physicians when compared to the prior year period, as this product continues to penetrate domestic markets.~~

~~PhotoFix is distributed in the U.S. for use in intracardiac repair, including ventricular repair and atrial repair, great vessel repair and suture line buttressing, and pericardial closure.~~

~~HeRO Graft and ProCol~~

On February 3, 2016 we sold our HeRO Graft product line to Merit Medical Systems, Inc. (“Merit”), and we agreed to continue to manufacture the HeRO Graft for Merit for up to six months under a transition supply agreement. Revenues include sales to hospitals through February 3, 2016 and to Merit from that date through the second quarter of 2016. The sales transfer to Merit was completed in the second quarter of 2016, at which time we ceased sales of the HeRO Graft.

~~On March 18, 2016 we sold our ProCol product line to LeMaitre Vascular, Inc., at which time we ceased sales of these products.~~

~~Preservation Services~~

~~Revenues from preservation services decreased 2% and increased 4% for the three and nine months ended September 30, 2017, respectively,~~2022, as compared to the ~~three and nine~~six months ended ~~September~~June 30, ~~2016, respectively. A detailed discussion of the changes in cardiac and vascular preservation services revenues is presented below.~~

Preservation services revenues, particularly revenues for certain high-demand cardiac tissues, can vary from quarter to quarter and year to year due to a variety of factors including: quantity and type of incoming tissues, yields of tissue through the preservation process, timing of receipt of donor information, timing of the release of tissues to an implantable status, demand for certain tissue types due to the number and type of procedures being performed, and pressures from competing products or services. See further discussion below of specific items affecting cardiac and vascular preservation services revenues for the three and nine months ended September 30, 2017.

~~Cardiac Preservation Services~~

Revenues from cardiac preservation services, consisting of revenues from the distribution of heart valves and cardiac patch tissues, decreased 4% for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016.2021. This ~~decrease was primarily due to a 4% decrease in unit shipments of cardiac tissues, which decreased revenues by 6%, partially offset by an~~ increase ~~in average service fees, which increased revenues by 2%.~~

Revenues from cardiac preservation services increased 7% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. This increase was primarily due to a 5% increase in unit shipments of cardiac tissues, which increased revenues by 5% and an increase in average service fees, which increased revenues by 2%.

The decrease in cardiac volume for the three months ended September 30, 2017 was primarily due to the impact of recent hurricanes in Florida and Texas which delayed surgical procedures and the timing of tissue releases to an implantable status. The increase in cardiac volume for the nine months ended September 30, 2017 was primarily due to an increase in the volume of ~~cardiac valve tissue shipments for the nine months ended September 30, 2017. The~~units sold, which increased revenues by 20%, and an increase in average ~~service fees~~sales prices, which increased revenues by 10%, partially offset by the effect of foreign exchange rates, which decreased revenues by 9%.

On a constant currency basis, revenues from aortic stent grafts, excluding OEM, increased 26% and 31% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022, respectively, as compared to the three and six months ended June 30, 2021. The increase in revenues was partially due to improved conditions from the COVID-19 pandemic for the three and six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021. Revenues for the three and six months ended June 30, 2022 increased primarily in Europe, the Middle East, and Africa (collectively, "EMEA") and Asia Pacific ("APAC"). The revenue increase in EMEA was primarily due to ~~list fee~~buying patterns in certain direct and indirect markets. The revenue increase in APAC was primarily due to an increase in sales of newly launched aortic stent grafts and distributor buying patterns in certain markets. OEM sales of aortic stent grafts accounted for less than 1% of product revenues for the three and six months ended June 30, 2022 and 2021.

Surgical Sealants

Surgical sealants include BioGlue products used as an adjunct to standard methods of achieving hemostasis (such as sutures and staples) in adult patients in open surgical repair of large vessels (such as aorta, femoral, and carotid arteries).

Revenues from the sales of surgical sealants decreased 11% for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. This decrease was primarily due to a decrease in volume of milliliters sold, which decreased revenues by 9%, and the effect of foreign exchange rates, which decreased revenues by 2%.

Revenues from the sales of surgical sealants decreased 11% for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. This decrease was primarily due to a decrease in volume of milliliters sold, which decreased revenues by 11%, and the effect of foreign exchange rates, which decreased revenues by 2%, partially offset by an increase in average sales prices, which increased revenues by 2%.

On a constant currency basis, revenues from sales of surgical sealants decreased 9% and 10% for the three and six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021 primarily due to revenue decreases in North America and EMEA. During the three and six months ended June 30, 2021 revenues from the sales of surgical sealants in North America were larger than in the three and six months ended June 30, 2022 primarily due to inventory restocking orders placed in the first half of 2021 as hospitals experienced reduced impact from the COVID-19 pandemic and began resuming more normal operations. Revenues were negatively impacted during the first quarter of 2022 due to delays and cancellations of some surgical procedures due to hospital staffing challenges as a result of a new COVID-19 variant.

The decrease in surgical sealant revenue in EMEA during the three and six months ended June 30, 2022 was primarily due to temporary commercialization restrictions resulting from the expiration of our BioGlue CE Mark during our transition to a new notified body. During this transition period, we have requested, and certain countries have granted, derogations to allow us to continue to commercialize BioGlue in those countries until we can complete our transition to a new notified body. We currently anticipate completing this transition and the renewal of our BioGlue CE Mark in the third or fourth quarter of 2022. See Part II, Item 1A, “Risk Factors—Industry Risks— Our products and tissues are highly regulated and subject to significant quality and regulatory risks.” for further background on our transition to a new notified body; see also, Part II, Item 1A, “Risk Factors—Operational Risks— We may not be successful in obtaining necessary clinical results or regulatory clearances/approvals for new and existing products and services, and our approved products and services may not achieve market acceptance.”

Domestic revenues from surgical sealants accounted for 51% and 50% of total surgical sealant revenues for the three and six months ended June 30, 2022, respectively, and 54% and 53% of total surgical sealant revenues for the three and six months ended June 30, 2021, respectively.

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On-X

The On-X products include the On-X prosthetic aortic and mitral heart valves and the On-X ascending aortic prosthesis (“AAP”) for heart valve replacement. On-X product revenues also include revenues from the distribution of CarbonAid® CO2 diffusion catheters and from the sale of Chord-X® ePTFE sutures for mitral chordal replacement. On-X also generates revenue from pyrolytic carbon coating products produced for OEM customers.

On-X product revenues increased 10% for both the three and six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021.

On-X product revenues, excluding OEM, increased 11% for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. This increase was primarily due to an increase in volume of units sold, which increased revenues by 9%, and an increase in average sales prices, which increased revenues by 3%, partially offset by the effect of foreign exchange rates, which decreased revenues by 1%.

On-X product revenues, excluding OEM, increased 10% for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. This increase was primarily due to an increase in volume of units sold, which increased revenues by 9%, and an increase in average sales prices, which increased revenues by 2%, partially offset by the effect of foreign exchange rates, which decreased revenues by 1%.

On a constant currency basis, On-X revenues, excluding OEM, increased 13% and 12% for the three and six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021. The increase in revenues in the three and six months ended June 30, 2022 was primarily due to revenue increases in ~~domestic~~North America, Latin America and EMEA. The revenue increases in these markets were partially due to improved conditions from the COVID-19 pandemic for the three and six months ended June 30, 2022, as compared to the ~~routine negotiation~~three and six months ended June 30, 2021. The increase in revenues in North America was also impacted by increases in market share. The increase in revenues in Latin America was also impacted by market penetration in certain regions. The increase in revenues in EMEA was also primarily impacted by increase of ~~pricing contracts~~shipments in direct markets. On-X OEM sales accounted for less than 1% of product revenues for both the three and six months ended June 30, 2022 and 2021.

Other

Other revenues are comprised of PhotoFix, PerClot (prior to the Baxter Transaction, described below), and CardioGenesis cardiac laser therapy product revenues. Other revenues increased 19% and 5% for the three and six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021.

The increase in other revenues for the three and six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021 was primarily due to an increase in CardioGenesis cardiac laser therapy product revenues, partially offset by a decrease in PerClot product revenues. The increase in CardioGenesis cardiac laser therapy product revenues for the three and six months ended June 30, 2022 was primarily due to our ability to resume limited sales of handpieces starting during the fourth quarter of 2021, as further described below. The decrease in PerClot product revenues for the three and six months ended June 30, 2022 was due to the Baxter Transaction, described in more detail in Part II, Item 7, “Sale of PerClot” of our annual report on Form 10-K for the year ended December 31, 2021.

Revenues from our CardioGenesis cardiac laser therapy product line historically consisted primarily of sales of handpieces and, in certain periods, the sale of laser consoles. During the three and six months ended June 30, 2021 we had minimal revenues from the CardioGenesis cardiac laser therapy product line as we did not have a supply of handpieces due to the FDA’s review of our supplier’s change in manufacturing location. After obtaining approval, our supplier resumed manufacturing a limited supply of handpieces allowing us to resume limited sales during the fourth quarter of 2021.

On July 28, 2021 we entered into an asset purchase agreement and other ancillary agreements related to the sale of PerClot, a polysaccharide hemostatic agent used in surgery, to Baxter, and an agreement to terminate all of our material agreements with ~~certain customers.~~

Starch Medical, Inc. (“SMI”) related to PerClot (collectively the “Baxter Transaction”).

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Preservation Services

Preservation services include service revenues from processing cardiac and vascular tissues. Our cardiac valves are primarily used in cardiac replacement and reconstruction surgeries, including the Ross procedure, for patients with endocarditis or congenital heart defects. Our cardiac tissues are primarily distributed in domestic markets.

~~Vascular Preservation Services~~

Revenues from vascular preservation services increased 1% for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. This increase was primarily due to a 4% increase in vascular tissue shipments, which increased revenues by 3%, and a decrease in average service fees, which decreased revenues by 2%.

Revenues from vascular preservation services increased 1% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. This increase was primarily due to a 3% increase in vascular tissue shipments, which increased revenues by 3%, partially offset by a decrease in average service fees, which decreased revenues by 2%.

The increase in vascular volume for the three and nine months ended September 30, 2017 was primarily due to increases in saphenous veins and femoral artery shipments. The decrease in average service fees for the three and nine months ended September 30, 2017 was primarily due to fee differences due to physical characteristics of vascular tissues and the negotiation of pricing contracts with certain customers.

The majority of our vascular preservation services revenues are related to shipments of saphenous veins, which are mainly used in peripheral vascular reconstruction surgeries to avoid limb amputations. ~~These~~Competition with synthetic product alternatives and the availability of tissues for processing are key factors affecting revenue volume that can fluctuate from quarter to quarter. Our vascular tissues are primarily distributed in domestic markets.

We continue to evaluate modifications to our tissue processing procedures in an effort to improve tissue processing throughput, reduce costs, and maintain quality across our tissue processing business. Preservation services revenues, particularly revenues for certain high-demand cardiac tissues, can vary from quarter to quarter and year to year due to a variety of factors, including quantity and type of incoming tissues, yields of tissue through the preservation process, timing of receipt of donor information, timing of the release of tissues for implant, demand for certain tissue types due to the number and type of procedures being performed, and pressures from competing products or services.

In the fourth quarter of 2020 we became aware that a supplier shipped to us a saline solution lot that we use in our tissue processing that contained some contamination in a small number of bottles of the solution lot. The contamination was identified by our in-process quality controls. The contaminated solution was estimated to have impacted a small percentage of tissue processed with this solution lot, causing us to write-off approximately $826,000 of tissue in the fourth quarter of 2020. An additional $5.0 million of tissue was quarantined in process pending further testing. Upon completion, and FDA acceptance of the testing, we began releasing tissue meeting our release criteria late in the second quarter of 2021. We believe that the written-off and quarantined tissue impacted the availability of tissue for distribution, which had a negative impact on revenue in the first quarter of 2021, and, to a lesser extent, the second quarter of 2021.

Revenues from tissue processing increased 7% for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The increase in revenues for the three months ended June 30, 2022 was primarily due to an increase in average sales prices, which increased revenues by 4%, and an increase in tissue shipments, which increased revenues by 3%.

Revenues from tissue processing increased 9% for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase in revenues for the six months ended June 30, 2022 was primarily due to a change in the mix and an increase of tissues shipped, which increased revenues by 6%, and an increase in average sales prices, which increased revenues by 3%.

Cost of Products and Preservation Services

Cost of Products

           Three Months Ended
September 30,            Nine Months Ended
September 30,
           2017                    2016                  2017                2016




Cost of products
   $       6,220    $       6,598    $       21,196    $       21,299


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Cost of products	$	18,230	$	16,178	$	35,638	$	31,089

Cost of products ~~decreased 6%~~increased 13% and ~~was flat~~15% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, respectively, as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively. Cost of products for 2017 and 2016 includes costs related to BioGlue, BioFoam,On-X,~~ ~~CardioGenesis cardiac laser therapy, PerClot, and PhotoFix. Cost of products for the nine months ended September 30, 2016 also includes ProCol and HeRO Grafts.~~

2021. Cost of products for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 includes $32,000~~2022 and ~~$2.1 million in inventory basisstep-up~~ ~~expense, primarily~~2021 included costs related to ~~costs for~~aortic stent grafts, surgical sealants, On-X, ~~productsre-purchased~~ ~~from previous international~~ and domestic distributors in excess of the unit cost to manufacture the inventory. Cost of products for the three and nine months ended September 30, 2016 includes $750,000 and $2.2 million, respectively, in acquisition inventory basis~~step-up~~ ~~expense, related to theOn-X~~ ~~inventory fair value adjustment recorded in purchase accounting.~~

other products.

The ~~decrease~~increase in cost of products for the three and six months ended ~~September~~June 30, ~~2017~~2022 was primarily due to an increase in shipments of aortic stent grafts in certain regions due to improved conditions from the COVID-19 pandemic as well as an increase in the cost of aortic stent grafts, and, to a ~~significant reduction of inventory basisstep-up~~ ~~expense differences, as compared to the prior year period as discussed above. The inventory basisstep-up~~ ~~expense for the nine months ended September 30, 2017 was largely offset by a similar expense for the nine months ended September 30, 2016.~~

~~Cost of Preservation Services~~

           Three Months Ended
September 30,            Nine Months Ended
September 30,
           2017                    2016                  2017                2016




Cost of preservation services
   $       7,917    $       8,872    $       23,401    $       26,348

~~Cost of preservation services decreased 11% for both the three and nine months ended September 30, 2017,~~lesser extent, surgical sealants, as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2016.~~ 2021.

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Cost of Preservation Services


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Cost of preservation services	$	9,938	$	9,457	$	19,024	$	17,795

Cost of preservation services ~~includes~~increased 5% and 7% for the three and six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021. Cost of preservation services included costs for cardiac and vascular tissue preservation services.

~~Cost of preservation services decreased in the three and nine months ended September 30, 2017 primarily due to a decrease in the per unit cost of processing tissues, partially offset by a slight~~

The increase in ~~the number of tissue shipments. We expect that per unit~~ cost of preservation services will decrease for the full year of 2017 when compared to 2016, primarily resulting from the impact of higher volume on the per unit cost of processing tissues during 2016 which have shipped during the current year.

~~Gross Margin~~

           Three Months Ended
September 30,            Nine Months Ended
September 30,
           2017                    2016                  2017                2016




Gross margin
   $       29,862    $       29,782    $       92,279    $       87,704
Gross margin as a percentage of total revenues
   68%    66%    67%    65%

~~Gross margin was flat~~ for the three months ended ~~September~~June 30, ~~2017~~2022 was primarily due to an increase in the processing cost of cardiac and ~~increased 5% for the nine months ended September 30, 2017,~~vascular tissues, as compared to the three ~~and nine~~ months ended ~~September~~June 30, ~~2016, respectively.~~ 2021.

The increase in cost of preservation services for the six months ended June 30, 2022 was primarily due to an increase in the processing cost of cardiac and vascular tissues, and, to a lesser extent, due to an increase in shipments resulting from improved conditions from the COVID-19 pandemic, as compared to the six months ended June 30, 2021.

Gross Margin


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Gross margin	$	52,172	$	50,513	$	102,891	$	98,351
Gross margin as a percentage of total revenues	65%		66%		65%		67%

Gross margin ~~was flat~~increased 3% for the three months ended ~~September~~June 30, ~~2017~~2022, as ~~a result of a significant reduction of inventory basisstep-up~~ ~~expenses in~~compared to the three months ended ~~September~~June 30, ~~2017~~2021. The increase for the three months ended June 30, 2022, as compared to the ~~prior year period, largely~~three months ended June 30, 2021, was primarily due to an increase in shipments of cardiac tissues, aortic stent grafts, and On-X products, partially offset by a decrease in ~~revenues from the sale~~shipments of BioGlue. Gross margin increased in the nine months ended September 30, 2017 primarily due to increases in tissue margins due to higher revenues and a decrease in the per unit cost of preservation services.

surgical sealants. Gross margin as a percentage of total revenues decreased for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, primarily due to an increase in product costs of certain products sold resulting from inflationary pressures of materials and labor, partially offset by a favorable mix of certain products sold during the three months ended June 30, 2022.

Gross margin increased 5% for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to an increase in ~~both~~shipments of aortic stent grafts, cardiac tissues, and On-X products, partially offset by a decrease in shipments of surgical sealants. Gross margin as a percentage of total revenues decreased for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, primarily due to an increase in product costs of certain products sold resulting from inflationary pressures of materials and labor and, to a lesser degree, due to an unfavorable mix of certain aortic stent grafts sold in certain regions during the six months ended June 30, 2022.

Operating Expenses

General, Administrative, and Marketing Expenses


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
General, administrative, and marketing expenses	$	38,983	$	40,830	$	77,938	$	79,468
General, administrative, and marketing expenses as a percentage of total revenues	49%		54%		49%		54%

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General, administrative, and marketing expenses decreased 5% and 2% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively.~~2021. The ~~increases in the three and nine months ended September 30, 2017 were primarily due to increases in tissue margins as a result of a~~ decrease in ~~the per unit cost of processing tissues. The increase in the three months ended September 30, 2017 was additionally affected by a significant reduction of inventory basisstep-up~~ ~~expense as compared to the prior year period.~~

~~Operating Expenses~~

~~General, Administrative, and Marketing Expenses~~

           Three Months Ended
September 30,            Nine Months Ended
September 30,
         2017                2016                2017                2016




General, administrative, and marketing expenses
   $       24,756    $       20,592    $       71,016    $       69,302
General, administrative, and marketing expenses as a percentage of total revenues
   56%    46%    52%    51%

General, administrative, and marketing expenses increased 20% and 2% for the three and nine months ended September 30, 2017, respectively, as compared to the three and nine months ended September 30, 2016, respectively.

General, administrative, and marketing expenses for the three and ~~nine~~six months ended ~~September~~June 30, 2017 included $3.0 million and $4.4 million, respectively, in business development costs, primarily related to the proposed acquisition of JOTEC. General, administrative, and marketing expenses for the three and nine months ended September 30, 2016 included $413,000 and $7.0 million, respectively, in transaction and integration costs primarily related to the acquisition of~~On-X~~ ~~in January 2016, which include, among other costs, expenses related to the termination of international and domestic distribution agreements.~~

The increase in general, administrative, and marketing expenses for the three months ended September 30, 2017 was primarily due to the increase in business development expenses, as well as higher expenses to support the Company’s increasing revenue base, international expansion, and increasing employee headcount. The increase in general, administrative, and marketing expenses for the nine months ended September 30, 2017 was primarily due to higher expenses to support the Company’s increasing revenue base, international expansion, and increasing employee headcount.

~~Research and Development Expenses~~

           Three Months Ended
September 30,            Nine Months Ended
September 30,
   2017    2016    2017    2016




Research and development expenses
   $         4,277    $         3,714    $         13,098    $         9,602
Research and development expenses as a percentage of total revenues
   10%    8%    10%    7%

~~Research and development expenses increased 15% and 36% for the three and nine months ended September 30, 2017, respectively,~~2022, as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively. Research and development~~

spending in these periods was primarily focused on clinical work with respect to our pivotal clinical trial to gain approval to commercialize PerClot for surgical indications in the U.S, and to a lesser extent, NeoPatch^TM,~~On-X~~ ~~products, and BioGlue projects.~~

~~Gain from Sale of Business Components~~

Gain from sale of business components for the three months ended September 30, 2016 consisted of the net of an $8.8 million gain on the HeRO Sale and an $845,000 loss on the ProCol Sale. We sold our HeRO Graft and ProCol product lines during the first quarter of 2016.

~~Interest Expense~~

Interest expense was $851,000 and $2.5 million for the three and nine months ended September 30, 2017, respectively, and $742,000 and $2.3 million for the three and nine months ended September 30, 2016, respectively. Interest expense in 2017 and 2016 included interest on debt and uncertain tax positions.

~~Earnings~~

   Three Months Ended
September 30,    Nine Months Ended
September 30,
         2017             2016                2017             2016




Income before income taxes
   $ 21 $ 4,731    $ 5,908 $ 14,653
Income tax (benefit) expense
   (1,304 ) 1,738    (803 ) 6,772




Net income
   $ 1,325 $ 2,993    $ 6,711 $ 7,881





Diluted income per common share
   $ 0.04 $ 0.09    $ 0.19 $ 0.24




Diluted weighted-average common shares outstanding
   34,057 33,165    33,851 32,568

Income before income taxes decreased for the three and nine months ended September 30, 2017, as compared to the three and nine months ended September 30, 2016, respectively. The decrease in income before income taxes for the three months ended September 30, 2017 was due to an increase in operating expenses largely as a result of increased business development costs, primarily related to the proposed acquisition of JOTEC. The decrease in income before income taxes for the nine months ended September 30, 20172021, was primarily due to ~~the gain from sale of~~a decrease in business ~~components in 2016, which did not recur in 2017, and an increase in research and~~ development expenses, partially offset by an increase in ~~gross margins.~~

personnel related and marketing costs.

General, administrative, and marketing expenses included $3.1 million and $4.7 million of business development income for the three and six months ended June 30, 2022, respectively, as compared to $3.4 million and $4.8 million of expense for the three and six months ended June 30, 2021, respectively. Business development expenses included $3.2 million and $5.0 million of income during the three and six months ended June 30, 2022, respectively, related to the fair value adjustments for the Ascyrus contingent consideration, as compared to $3.3 million and $4.3 million of expense during the three and six months ended June 30, 2021, respectively.

Research and Development Expenses


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Research and development expenses	$	8,648	$	8,360	$	18,776	$	16,114
Research and development expenses as a percentage of total revenues	11%		11%		12%		11%

Research and development expenses increased 3% and 17% for the three and six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021. Research and development spending for the three and six months ended June 30, 2022 was primarily focused on clinical work to gain regulatory approvals for On-X, certain aortic stent grafts, and PerClot products.

Interest Expense

Interest expense was $4.1 million and $8.0 million for the three and six months ended June 30, 2022, respectively, as compared to $4.9 million and $8.9 million for the three and six months ended June 30, 2021, respectively. Interest expense for the three and six months ended June 30, 2022 and 2021 relates to interest on debt and uncertain tax positions.

Other Expense (Income), Net

Other expense, net was $3.8 million and $3.9 million for the three and six months ended June 30, 2022, respectively. Other income, net was $1.3 million for the three months ended June 30, 2021. Other expense, net was $600,000 for the six months ended June 30, 2021. Other expense (income), net primarily includes the realized and unrealized effects of foreign currency gains and losses.

Earnings

(Table in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Loss before income taxes	$	(3,300)	$	(2,183)	$	(5,729)	$	(6,684)
Income tax expense (benefit)	959		(5)		1,919		(1,368)
Net loss	$	(4,259)	$	(2,178)	$	(7,648)	$	(5,316)

Diluted loss per common share	$	(0.11)	$	(0.06)	$	(0.19)	$	(0.14)
Diluted weighted-average common shares outstanding	40,031		38,943		39,941		38,841

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We incurred a loss before income taxes for the three and six months ended June 30, 2022 and 2021. The loss before income taxes for the three and six months ended June 30, 2022 was negatively impacted by an increase in operating expenses to support revenue expansion, an increase in investments in the research and development pipeline, and an unfavorable impact of foreign currency gains and losses, partially offset by the change in fair value of our financial instruments. The loss before income taxes for the three and six months ended June 30, 2021 was due to business development, integration and severance expenses primarily related to the Ascyrus acquisition, and investments in the research and development pipeline. The loss before income taxes for three and six months ended June 30, 2022 and 2021 was also impacted by reduced revenue resulting from delays or cancellations of some surgical procedures as a result of reduced hospital capacity and staffing and hospital restrictions due to the COVID-19 pandemic.

Our effective income tax rate was an expense of 29% and 34% for the three and six months ended June 30, 2022, respectively, as compared to a benefit of under 1% and 20% for the three and six months ended June 30, 2021, respectively. The change in the tax rate for the three and six months ended June 30, 2022 was primarily due to changes in pre-tax book income, a decrease in the excess tax benefit related to stock compensation, and an increase in the estimated current year valuation allowance, as compared to the three and six months ended June 30, 2021.

Our income tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was ~~favorably affected~~primarily impacted by ~~excess~~changes in our valuation allowance against our net deferred tax ~~benefits related to~~assets, non-deductible executive compensation, the ~~exercise ofnon-qualified~~foreign derived intangible income deduction, the research and development tax credit, changes in our uncertain tax position liabilities, and tax shortfalls on stock options and the vesting of stock awards, which decreased income tax expense by approximately $1.1 million and $2.7 million, respectively. Our effective income tax rate was 37% and 46% for the three and nine months ended September 30, 2016, respectively. Business development costs included in general, administrative and marketing expenses for the three and nine months ended September 30, 2017 may impact our income tax rate in future reporting periods. Upon the close of the acquisition of JOTEC, the income tax deductibility of these costs must be evaluated and certain of these costs will be permanently capitalized for income tax purposes. The capitalization of these costs will substantially increase our income tax rate, primarily in the quarter and year of the acquisition. compensation.

Our income tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2021 was ~~unfavorably~~primarily impacted by non-deductible executive compensation, changes in our valuation allowance against our net deferred tax assets, changes in our uncertain tax position liabilities, the research and development tax ~~treatment of certain expenses related to theOn-X~~ ~~acquisition, which had a larger impact~~credit, and excess tax benefits on ~~the tax rate in first quarter of 2016. Our income tax rate for the nine months ended September 30, 2016 was also unfavorably impacted by book/tax basis differences related to the HeRO Sale.~~

~~Net income~~stock compensation.

We experienced net loss and diluted ~~income~~loss per common share ~~decreased~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, as compared to the three~~2022 and ~~nine months ended September 30, 2016, respectively. The decrease~~2021. Net loss and diluted loss per common share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was primarily due to ~~a decrease in income~~loss before income taxes, ~~partially offset by an income tax benefit,~~ as discussed above.

Seasonality

As a result of the uncertainty and other impacts of the COVID-19 pandemic and the resulting shifts of timing in some revenue, our historically observable seasonality of revenues has been impacted or obscured in 2021 and 2022 and potentially beyond.

Historically, we believe the demand for most of our aortic stent grafts is seasonal, with a decline in demand generally occurring in the third quarter due to the summer holiday season in Europe. We are uncertain whether the demand for AMDS and NEXUS products is seasonal, as these products have not fully penetrated many markets and, therefore, the nature of any seasonal trends may not yet be obvious.

Historically, we believe the demand for BioGlue and On-X products is seasonal, with a decline in demand generally occurring in the third quarter followed by stronger demand in the fourth quarter. We believe that this trend ~~for BioGlue~~ may be due to the summer holiday season in Europe and the U.S. We further believe that demand for BioGlue in Japan may continue to be lowest in the second quarter of each year due to distributor ordering patterns driven by the slower summer holiday season in Japan, although this trend could vary somewhat from year to year.

~~We are uncertain whether the demand forOn-X~~ ~~products, PerClot, or PhotoFix will be seasonal, as these products have not fully penetrated many markets and, therefore, the nature of any seasonal trends may be obscured.~~

US.

We do not believe the demand for ~~CardioGenesis cardiac laser therapy~~our other products is ~~seasonal, as our data does not indicate a significant trend.~~

seasonal.

Demand for our cardiac preservation services has traditionally been seasonal, with peak demand generally occurring in the third quarter. We believe ~~that~~ this trend for cardiac preservation services is primarily due to the high number of surgeries scheduled during the summer months for school-aged patients. Based on experience in recent years, we believe that this trend is lessening as we are distributing a higher percentage of our tissues for use in adult populations.

~~Our demand~~

Demand for our vascular preservation services ishas also traditionally been seasonal, with lowest demand generally occurring in the fourth quarter. We believe this trend for vascular preservation services iswas primarily due to fewer vascular surgeries being scheduled during the winter holiday months.

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Liquidity and Capital Resources

Net Working Capital

As of ~~September~~June 30, ~~2017~~2022 net working capital (current assets of ~~$155.6~~$240.4 million less current liabilities of ~~$26.1~~$41.6 million) was ~~$129.5~~$198.8 million, with a current ratio (current assets divided by current liabilities) of 6 to 1, compared to net working capital of ~~$117.1~~$202.7 million and a current ratio of 56 to 1 at December 31, ~~2016.~~

2021.

Overall Liquidity and Capital Resources

Our primary cash requirements for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 were for general working capital needs, capital expenditures for facilities and equipment, interest and principal payments under our ~~debt agreement, capital expenditures for facilities~~Credit Agreement (defined below), interest payments under our Convertible Senior Notes (defined below), and ~~equipment, business development expenses, and to a lesser extentrepurchases~~repurchases of stock to cover tax withholdings. We funded our cash requirements through our existing cash reserves and ~~our operating activities, which generated cash during the period.~~

proceeds from stock option exercises.

We believe ~~that~~ our cash from operations and existing cash and cash equivalents will enable us to meet our current operational liquidity needs for at least the next twelve months. Our future cash requirements are expected to include ~~funding for the acquisition of JOTEC and the related~~ interest and principal payments under ~~a new senior secured credit facility, as discussed~~our Credit Agreement and Convertible Senior Notes (described in ~~Recent Events, as well as~~“Significant Sources and Uses of Liquidity” section below), expenditures for clinical trials, ~~additional~~ research and development expenditures, general working capital needs, capital expenditures, and other corporate purposes and may include cash to fund ~~other~~ business development ~~activities.~~activities including obligations in the agreements related to the Endospan and Ascyrus transactions. These items may have a significant effect on our future cash flows during the next twelve months.

Subject to the terms of our Credit Agreement, we may seek additional borrowing capacity or financing, pursuant to our current or any future shelf registration statement, for general corporate purposes or to fund other future cash requirements. If we undertake any further significant business development activity, we may need to finance such activities by obtaining additional debt financing or using a registration statement to sell equity securities. There can be no assurance that we will be able to obtain any additional debt or equity financing at the time needed or that such financing will be available on terms that are favorable or acceptable to us.

Significant Sources and Uses of Liquidity

~~In connection with the closing of theOn-X~~ ~~acquisition on January 20, 2016, CryoLife and certain of our subsidiaries~~

On December 1, 2017 we entered into ~~the Third Amended~~a credit and Restated Credit Agreement (“Amended Debt Agreement”) with Capital One, National Association. Capital One Financial Corporation acquired GE Capital’s Healthcare Financial Services lending business in late 2015. The designated credit parties are Healthcare Financial Solutions, LLC; Fifth Third Bank; and Citizens Bank, National Association. The Amended Debt Agreement amended and restated our prior creditguaranty agreement ~~and provides us with~~for a $255.0 million senior secured credit facility, consisting of a $225.0 million secured term loan facility (the “Term Loan Facility”) and a $30.0 million secured revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Agreement”). We and each of our existing domestic subsidiaries (subject to certain exceptions and exclusions) guarantee the obligations under the Credit Agreement (the “Guarantors”). The Credit Agreement is secured by a security interest in substantially all existing and after-acquired real and personal property (subject to certain exceptions and exclusions) of us and the Guarantors.

On June 2, 2021 we entered into an amendment to our Credit Agreement to extend the maturity dates of both our Term Loan and Revolving Credit Facility. As part of the amendment, the maturity dates of both our Term Loan and Revolving Credit Facility were each extended by two and one-half years, until June 1, 2027 and June 1, 2025, respectively, subject to earlier springing maturities triggered if our 4.25% Convertible Senior Notes, described below, remain outstanding on April 1, 2025 and December 31, 2024, respectively. With respect to the Term Loan, if the Convertible Senior Notes remain outstanding on April 1, 2025, the Term Loan’s Maturity Date will be April 1, 2025, or, if the Convertible Senior Notes’ own maturity date has been extended, the earlier of (i) 91 days prior to the Convertible Senior Notes’ new maturity date and (ii) June 1, 2027. In the case of the Revolving Credit Facility, if the Convertible Senior Notes are still outstanding on December 31, 2024, the Revolving Credit Facility’s Maturity Date will be either December 31, 2024 or, if the Convertible Senior Notes’ own maturity date has been extended, the earlier of (i) 182 days prior to the Convertible Senior Notes’ new maturity date and (ii) June 1, 2025. Under the amendment, the Term Loan Facility bears interest, at our option, at a floating annual rate equal to either the base rate, plus a margin of 2.50%, or LIBOR, plus a margin of 3.50%. Prior to the amendment, the optional floating annual rate was equal to either the base rate plus a margin of 2.25%, or LIBOR, plus a margin of 3.25%.

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On June 18, 2020 we issued $100.0 million aggregate principal amount of ~~$95~~4.25% Convertible Senior Notes with a maturity date of July 1, 2025 (the “Convertible Senior Notes”). The net proceeds from this offering, after deducting initial purchasers’ discounts and costs directly related to this offering, were approximately $96.5 million. On January 1, 2021 we adopted ASU 2020-06 and adjusted the carrying balance of the Convertible Senior Notes to notional. The Convertible Senior Notes balance was $100.0 million recorded in Long-term debt on the Condensed Consolidated Balance Sheets as of June 30, 2022. The Convertible Senior Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. The initial conversion rate of the Convertible Senior Notes is 42.6203 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $23.46 per share, subject to adjustments. We use the if-converted method for assumed conversion of the Convertible Senior Notes for the diluted earnings per share calculation. The fair value and the effective interest rate of the Convertible Senior Notes as of June 30, 2022 was approximately $107.0 million and 5.05%, respectively. The fair value was based on market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy.

The interest expense recognized on the Convertible Senior Notes includes $1.2 million and $2.5 million for the three and six months ended June 30, 2022, respectively, and $1.2 million and $2.4 million for the three and six months ended June 30, 2021, respectively, related to the aggregate of the contractual coupon interest, and the amortization of the debt issuance costs. Interest on the Convertible Senior Notes began accruing upon issuance and is payable semi-annually.

Holders of the Convertible Senior Notes may convert their notes at their option at any time prior to January 1, 2025 but only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a ~~$75 million term loan~~period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (iii) we give a ~~$20 million revolving credit facility (including a $4 million letter~~notice of ~~creditsub-facility~~ ~~and a $3 million swing-linesub-facility).~~ ~~The $75 million term loan was used~~redemption with respect to ~~finance,~~any or all of the notes, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events. On or after January 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances.

We cannot redeem the Convertible Senior Notes before July 5, 2023. We can redeem them on or after July 5, 2023, in whole or in part, at our option, if the ~~acquisition~~last reported sale price per share of~~On-X~~ our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and ~~will mature~~including, the trading day immediately preceding the date on ~~January 20, 2021. CryoLife~~which we provide notice of redemption. We may redeem for cash all or part of the Convertible Senior Notes at a redemption price equal to 100% of the principal amount of the redeemable Convertible Senior Notes, plus accrued and ~~our domestic subsidiaries, subject~~unpaid interest to, but excluding, the redemption date. No principal payments are due on the Convertible Senior Notes prior to maturity. Other than restrictions relating to certain ~~exceptions~~fundamental changes and ~~exclusions, have guaranteed~~consolidations, mergers or asset sales and customary anti-dilution adjustments, the ~~obligations~~Convertible Senior Notes do not contain any financial covenants and do not restrict us from conducting significant restructuring transactions or issuing or repurchasing any of ~~the Amended Debt Agreement. Borrowings under the Amended Debt Agreement are secured by substantially all of CryoLife’s, and certain of our subsidiaries’, real and personal property.~~ its other securities.

As of ~~September~~June 30, ~~2017 the remaining availability on our revolving credit facility was $20.0 million.~~

~~As of September 30, 2017~~2022 approximately 6%37% of our cash and cash equivalents were held in foreign jurisdictions.

The following table summarizes cash flows from operating activities, investing activities, and financing activities for the periods indicated (in thousands):

Six Months Ended
June 30,
2022 2021
Cash flows used in:
Operating activities $ (8,912) $ (392)
Investing activities (4,994) (7,044)
Financing activities (1,032) (3,737)
Effect of exchange rate changes on cash and cash equivalents 310 242
Decrease in cash and cash equivalents $ (14,628) $ (10,931)

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Net Cash Flows from Operating Activities

Net cash ~~provided by~~used in operating activities was ~~$4.8~~$8.9 million and $392,000 for the ~~nine~~six months ended ~~September~~June 30, 2017, as compared to $14.7 million for the nine months ended September 30, 2016. The decrease in current year cash provided was primarily due to an increase in working capital needs, as discussed below.

2022 and 2021, respectively.

We use the indirect method to prepare our cash flow statement and, accordingly, the operating cash flows are based on our net income, which is then adjusted to removenon-cash items, items classified as investing and financing cash flows, and ~~for~~ changes

in operating assets and liabilities from the prior year end. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 thesenon-cash items included ~~$6.7~~$11.5 million in depreciation and amortization expenses, ~~and $5.7~~$6.1 million innon-cash ~~compensation. The prior yearnon-cash~~ ~~items included aone-time~~ ~~$7.9~~ compensation, $5.0 million ~~gain from sale~~in fair value adjustments of ~~business components.~~

financial instruments, $3.8 million of lease expenses, and $1.6 million of deferred income tax changes.

Our working capital needs, or changes in operating assets and liabilities, also affected cash from operations. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 these ~~changes~~ included anthe unfavorable ~~adjustment~~effect of ~~$6.9~~$5.7 million due to ~~increases in inventory balances~~timing differences between the recording of accounts payable and ~~deferred preservation costs; $4.3~~other current liabilities, $9.6 million due to the timing ~~difference~~differences between recording receivables and the receipt of ~~cash; $3.0~~cash, $3.7 million due to ~~increases~~an increase in inventory balances and deferred preservation costs, and $0.2 million due to an increase in prepaid expenses and other ~~assets; and $855,000 due to timing differences between recording accounts payable, accrued expenses, and other liabilities and the payment of cash.~~

assets.

Net Cash Flows from Investing Activities

Net cash used in investing activities was ~~$4.6~~$5.0 million and $7.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, as compared to $71.1 million for~~2022 and 2021, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2016. The prior year~~2022 cash used ~~was~~in investing activities primarily ~~due to $91.2~~included $4.1 million ~~for the acquisition ofOn-X,~~ ~~net~~ of cash ~~acquired, partially offset by the proceeds from the sale of business components of $19.8 million. The current year cash~~ used ~~was primarily due to $5.4 million in~~for capital ~~expenditures, partially offset by $740,000 in proceeds related to the HeRO Sale.~~

expenditures.

Net Cash Flows from Financing Activities

Net cash used in financing activities was ~~$2.9~~$1.0 million and $3.7 million for the ~~nine~~six months ended ~~September~~June 30, 2017, as compared to cash provided of $73.4 million for the nine months ended September 30, 2016. The prior year cash provided was primarily due to $75.0 million in proceeds from the issuance of a term loan, which was used to finance, in part, the acquisition of~~On-X,~~ ~~partially offset by $2.3 million in debt issuance costs.~~2022 and 2021, respectively. The current year cash used in financing activities was primarily due to ~~$3.9 million in principal payments on debt and $1.6~~$1.7 million for repurchases of common stock to cover tax withholdings and $1.4 million for the repayment of debt, partially offset by ~~$2.6~~$2.3 million inof proceeds from the exercise of stock options and ~~issuance~~issuances of common stock.

~~Off-Balance~~ ~~Sheet Arrangements~~

~~We have nooff-balance~~ ~~sheet arrangements.~~

Scheduled Contractual Obligations and Future Payments

~~Scheduled contractual obligations and the related future payments as of September 30, 2017 were as follows (in thousands):~~

Remainder of

   Total    2017    2018    2019    2020    2021    Thereafter
Long-term debt obligations
   $     68,741    $ --    $ 3,750    $ 3,750    $ 5,157    $ 56,084    $ --
Operating leases
   23,002    909    5,093    5,024    4,381    3,807    3,788
Interest payments
   8,336    686    2,649    2,499    2,321    181    --
Research obligations
   6,037    1,522    3,817    328    235    135    --
Purchase commitments
   3,582    1,709    1,696    177    --    --    --
Contingent payments
   1,000    �� --    --    1,000    --    --    --
Other long-term liabilities
   475    465    10    --    --    --    --














Total contractual obligations
   $ 111,173    $     5,291    $     17,015    $     12,778    $     12,094    $     60,207    $ 3,788

Our long-term debt obligations and interest payments ~~obligations result from~~include $316.1 million of scheduled principal payments and $72.0 million in anticipated interest payments related to our ~~Amended Debt Agreement.~~

Credit Agreement, Convertible Senior Notes, and other governmental loans.

We have contingent payment obligations that include up to $100.0 million to be paid to the former shareholders of Ascyrus, upon the achievement of certain milestones. We are obliged to make a $5.0 million third tranche payment under our loan agreement with Endospan upon receipt of certification that certain clinical trial milestones have been achieved. As part of the Baxter Transaction, we may be required to pay up to $9.0 million if certain milestones are met.

Our operating and finance lease obligations result from the lease of land and buildings that comprise our corporate headquarters and our various manufacturing ~~facilities,~~facilities; leases related to additional manufacturing, office, and warehouse ~~space,~~space; leases on ~~our vehicles,~~Company vehicles; and leases on a variety of office ~~equipment.~~

~~Our research obligations represent commitments for ongoing studies~~equipment and ~~payments to support research and development activities.~~

Our purchase commitments include obligations from agreements with suppliers, one of which is the minimum purchase requirements for PerClot under a worldwide distribution agreement (the “Distribution Agreement”) with Starch Medical, Inc. (“SMI”). Pursuant to the terms of the Distribution Agreement, we may terminate that agreement, including the minimum purchase

requirements set forth in the agreement for various reasons, one of which is if we obtain FDA approval for PerClot. These minimum purchases are included in the table above through 2018, based on the assumption that we will not terminate the Distribution Agreement before our target date for receiving FDA approval for PerClot in 2019. However, if we do not obtain FDA approval for PerClot, and if we choose not to terminate the Distribution Agreement, CryoLife may have minimum purchase obligations of up to $1.75 million per year through the end of the contract term in 2025.

The contingent payments obligation includes payments that we may make if certain U.S. regulatory approvals and certain commercial milestones are achieved related to our transaction with SMI for PerClot.

~~The schedule of contractual obligations above excludes (i) obligations for estimated liability claims unless they are due as a result of a settlement agreement or~~ other contractual obligation, as no assessments have been made for specific litigation, and (ii) any estimated liability for uncertain tax positions and interest and penalties, currently estimated to be $3.4 million, as no specific assessments have been made by any taxing authorities.

equipment.

Capital Expenditures

Capital expenditures were ~~$5.4~~$4.1 million and ~~$3.5~~$7.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. Capital expenditures infor the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 were primarily related to ~~the~~ routine purchases of manufacturing and tissue processing ~~equipment;~~equipment, computer software, leasehold improvements needed to support our ~~business; computer software;~~business, and computer ~~and office~~ equipment.

Risks and Uncertainties

See the ~~risks~~“Risk Factors” identified in Part II, Item 1A of this Form10-Q.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Our interest income and interest expense are sensitive to changes in the general level of ~~U.S.~~US interest rates. In this regard, changes in ~~U.S.~~US interest rates affect the interest earned on our cash and cash equivalents of ~~$54.2~~$40.4 million as of ~~September~~June 30, ~~2017~~2022 and interest paid on the outstanding balances, if any, of our ~~revolving credit facility~~variable rate Revolving Credit Facility, Term Loan Facility, and ~~$69.7 million term loan balance.~~Convertible Senior Notes. A 10% adverse change in interest rates, as compared to the rates experienced by us infor the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, affecting our cash and cash equivalents, ~~restricted cash~~Term Loan Facility, Revolving Credit Facility, and ~~securities, $69.7 million term loan balance, and revolving credit facility~~Convertible Senior Notes would not have a material effect on our financial position, results of operations, or cash flows.

Foreign Currency Exchange Rate Risk

We have balances, such as cash, accounts receivable, accounts payable, and accruals that are denominated in foreign currencies. These foreign currency denominated balances are sensitive to changes in exchange rates. In this regard, changes in exchange rates could cause a change in the ~~U.S.~~US Dollar equivalent of cash or funds that we will receive in payment for assets or that we would have to pay to settle liabilities. As a result, we could be required to record these changes as gains or losses on foreign currency translation.

We have revenues and expenses that are denominated in foreign currencies. Specifically, a portion of our international ~~BioGlue,~~revenues from aortic stent grafts, surgical sealants, On-X, and ~~PerClot revenues~~other products are denominated in Euros, British Pounds, ~~Euros,~~Swiss Francs, Polish Zlotys, Canadian Dollars, and ~~Canadian Dollars~~Brazilian Reals and a portion of our ~~general,~~General, administrative, and marketing expenses are denominated in Euros, British Pounds, ~~Euros,~~ Swiss Francs, Polish Zlotys, Canadian Dollars, Brazilian Reals, and Singapore Dollars. These foreign currency transactions are sensitive to changes in exchange rates. In this regard, changes in exchange rates could cause a change in the ~~U.S.~~US Dollar equivalent of net income from transactions conducted in other currencies. As a result, we could recognize a reduction in revenues or an increase in expenses related to a change in exchange rates.

An additional 10% adverse change in exchange rates from the exchange rates in effect on ~~September~~June 30, ~~2017,~~2022 affecting our third-party balances denominated in foreign currencies ~~would not have had a material effect on~~could impact our financial position ~~results of operations,~~ or cash ~~flows.~~flows by approximately $7.0 million. An additional 10% adverse change in exchange rates from the weighted-average exchange rates experienced by us for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022 affecting our revenue and expense transactions denominated in foreign currencies would not have had a material ~~effect~~impact on our financial position, ~~results of operations,~~profitability, or cash flows.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (“Disclosure Controls”) as such term is defined under Rule13a-15(e) promulgated under the Exchange Act. These Disclosure Controls are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including to the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures.

Our management, including our President and CEO and our Executive Vice President of Finance ~~Chief Operating Officer,~~ and CFO, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within ~~the Company~~Artivion have been detected. These inherent limitations include the realities that judgments indecision-making can be faulty and that breakdowns can occur because of simple error or mistake. Our Disclosure Controls have been designed to provide reasonable assurance of achieving their objectives.

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Our management utilizes the criteria set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our Disclosure Controls over financial reporting. Based upon the most recent Disclosure Controls evaluation conducted by management with the participation of the CEO and CFO, as of ~~September~~June 30, ~~2017,~~2022 the CEO and CFO have concluded that our Disclosure Controls were effective at ~~the~~a reasonable assurance level to satisfy their objectives and to ensure that the information required to be disclosed by us in our periodic reports is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding disclosure and is recorded, processed, summarized, and reported within the time periods specified in the ~~U.S.~~US Securities and Exchange Commission’s rules and forms. ~~During the quarter ended September 30, 2017 there~~

Changes to Disclosure Controls and Procedures

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2022 that have materially affected, or ~~that~~ are reasonably likely to materially affect, our internal control over financial reporting.

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Part II -– OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are involved in legal proceedings concerning matters arising from the conduct of our business activities. We regularly evaluate the status of legal proceedings in which we are involved in order to assess whether a loss is probable or whether there is a reasonable possibility that a loss or additional loss may have been incurred and to determine if accruals are appropriate. We further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made.

Based on current knowledge, we do not believe that there are any pending matters that could potentially have a material adverse effect on our business, financial condition, results of operations, or cash flows. We are, ~~currently~~however, engaged in various legal actions in the normal course of business. There can be no assurances in light of the inherent uncertainties involved in ~~litigation with the representative~~any potential legal proceedings, some of ~~the former shareholders~~which are beyond our control, and an adverse outcome in any legal proceeding could be material to our results of~~On-X~~ ~~Life Technologies Holdings, Inc.(“On-X”)~~ ~~over our indemnification claims under theOn-X~~ ~~purchase agreement and the approximately $10 million of the purchase price paid into escrow. TheOn-X~~ shareholder representative filed a complaint in Delaware Chancery Court on June 1, 2017, seeking declaratory relief that our indemnification claims were invalid. We timely filed an answer and counterclaim on June 22, 2017, and initial discovery is underway.

operations or cash flows for any particular reporting period.

Item 1A. Risk Factors.

Risks Relating Toto Our Business

~~We are significantly dependent on our revenues from BioGlue and are subject to~~

Our business involves a variety of risks ~~affecting them.~~

~~BioGlue~~^® ~~Surgical Adhesive (“BioGlue”) is~~and uncertainties, known and unknown, including, among others, the risks discussed below. These risks should be carefully considered together with the other information provided in this Quarterly Report on Form 10-Q and in our other filings with the SEC. Our failure to adequately anticipate or address these risks and uncertainties may have a ~~significant source~~material, adverse impact on our business, reputation, revenues, financial condition, profitability, and cash flows. Additional risks and uncertainties not presently known or knowable to us, or that we currently believe to be immaterial, may also adversely affect our business.

Business and Economic Risks

COVID-19, and similar outbreaks, could have a material, adverse impact on us.

Since early 2020, businesses, communities, and governments worldwide have taken, and continue to take, a wide range of actions to mitigate the spread and impact of COVID-19, leading to an unprecedented impact on the global economy. Hospitals and other healthcare providers have adopted differing approaches to address the surge and resurgence of COVID-19 cases, including their impact on healthcare workers and related global healthcare worker shortages, such as postponing elective and non-emergent procedures, restricting access to their facilities, cancelling elective procedures, or re-allocating scarce resources to some critically ill patients. Although many areas have seen a decline in COVID-19 cases, the potential for additional impact from new variants of COVID-19 remains. These conditions have, and could continue to, impact our ~~revenues, representing approximately 36% and 35% of~~activities, including:

•Our product sales. Certain regions experienced continued impact on revenues in the ~~three months ended September 30, 2017~~second quarter of 2022 due to the COVID-19 pandemic, and ~~2016, respectively.~~in particular, the emergence of new variants. In addition to COVID-19’s impact on procedure volumes, including an impact on procedure volumes due in part to COVID-19-related healthcare staffing shortages and shortages from workers exiting healthcare, we have observed additional downstream effects on our business, including an increase in delays or difficulty in collecting certain outstanding receivables, particularly with certain governmental payors in regions heavily impacted by COVID-19. The ~~following~~extent to which our financial performance will be impacted by the pandemic through the remainder of 2022 and beyond will depend largely on future developments, including changes in hospital utilization rates and staffing, the prevalence and severity of new variants and their impact on case numbers and short-term quarantines, and the global availability and acceptance of COVID-19 vaccines and their effectiveness against variants. COVID-19’s continued or increased impact on our financial performance may also increase the risks we face with respect to managing our indebtedness.

•Our business operations. In 2020 we took several steps to address the impact of COVID-19 on our employees, cash consumption, and operations, including reducing expenditures and delaying investments. Although we have begun to scale back many of these steps in most geographies, the COVID-19 virus and its variants remain highly contagious and may have additional impact on our business operations, including the potential to impact our workforce availability as case numbers and short-term quarantines increase due to the spread of new variants. COVID-19 also continues to impact our business partners, including the various regulators and notified bodies that we rely on, which increases the regulatory risks we face, and specifically, the risks we face with respect to timely review and approval of new and renewal certifications, clearances, and approvals for our products.

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•Our manufacturing operations. The COVID-19 pandemic has continued to impact the global supply chain; the pandemic’s impact on workforces, global mobility, material availability, demand, costs, and shipping and reorder time and reliability has reportedly continued or worsened in many cases. Although we have yet to experience any material effects of this impact on our supply chain or operations, we have faced increasing costs and face an increasing risk that upstream disruptions may occur and that increasing case numbers and short-term quarantines impact our workforce availability. Risks relating to the lingering effects of global supply chain disruptions may even continue after COVID-19’s risk as a global pandemic has subsided.

•Our workforce. As some global economies have begun to emerge from the COVID-19 downturn, the expiration of COVID-19-related hiring freezes, increased opportunities for remote work, the Great Resignation and increasing compensation pressure have resulted in a war for talent and an unprecedented number of career changes. The resulting worker shortages and increased labor costs at all levels have impacted supply chains, distribution channels, and employers’ ability to adequately staff their operations. This has impacted not only our own ability to attract and retain employees, but also the ability of our customers who face increasing staffing pressures throughout their healthcare organizations.

•Our research and development projects. In 2020 and parts of 2021 we reduced spending on research and development projects, including clinical research projects. These reductions could adversely impact future revenue, and additional reductions in spending could be implemented, further impacting future revenue. In addition, our ability to conduct our ongoing research and development projects in markets that are affected by COVID-19 has been, and could continue to be, adversely impacted. Enrollment and timelines for our clinical trials have been, and might continue to be, impacted as healthcare providers re-prioritize resources, address staffing shortages, and limit access to healthcare facilities or as patients decline to participate or are hesitant to voluntarily visit healthcare facilities. In addition, staffing shortages and COVID-19-related impacts on government and regulatory agencies have slowed and might continue to slow timelines for regulatory actions, including approvals and re-certifications.

If COVID-19 or its variants continue to spread, if efforts to contain COVID-19 or its variants continue or are unsuccessful, if we experience new outbreaks of COVID-19 in areas previously successful in containing its spread, if staffing shortages continue to impact us, governmental or regulatory bodies, or our customers, or if COVID-19, its variants, or disruptions to the global supply chain impact our supply chain or employee productivity, it could materially, adversely affect our revenues, financial condition, profitability, and cash ~~flows:~~

●

~~BioGlue is a mature product, our U.S. Patent for BioGlue expired inmid-2012,~~ ~~and our patents in most of the rest of the world for BioGlue expired inmid-2013.~~ ~~Other companies may use the inventions disclosed in the expired patents to develop and make competing products;~~

●

Another company launched competitive products in 2016 and another is in the process of doing so. These companies have greater financial, technical, manufacturing, and marketing resources than we do and are well established in their markets. Companies other than these may also pursue regulatory approval for competitive products;

flows. The nature and extent of these developments are highly uncertain and unpredictable and may vary greatly by region. These adverse developments or a prolonged period of uncertainty could adversely affect our financial performance.

We are subject to a variety of risks due to our international operations and continued global expansion.

Our international operations subject us to a number of risks, which may vary significantly from the risks we face in our US operations, including:

•Greater difficulties and costs associated with staffing, establishing and maintaining internal controls, managing foreign operations and distributor relationships, and selling directly to customers;

•Broader exposure to corruption and expanded compliance obligations, including under the Foreign Corrupt Practices Act, the UK Bribery Law, local anti-corruption laws, Office of Foreign Asset Control administered sanction programs, the European Union’s General Data Protection Regulation, and other emerging corruption and data privacy regulations;

•Overlapping and potentially conflicting, or unexpected changes in, international legal and regulatory requirements or reimbursement policies and programs;

•Longer and more expensive collection cycles in certain countries, particularly those in which our primary customers are government-funded hospitals;

•Changes in currency exchange rates, particularly fluctuations in the Euro as compared to the US Dollar;

•Potential adverse financial impact and negative erosion of our operating profit margin over time due to increasing inflationary pressures, particularly through our supply chain; our exposure may be increased through our limited ability to raise prices and through global expansion where business occurs with, or pricing is set directly by, government entities, or we are party to long term pricing agreements with governments or local distributors, impacting our ability to pass on rising costs;

•Potential adverse tax consequences of overlapping tax structures or potential changes in domestic and international tax policy, laws, and treaties; and

•Potential adverse financial and regulatory consequences resulting from the exit of the UK from the European Union, or “Brexit.”

●

We may be unable to obtain regulatory approvals to commercialize BioGlue in certain countries other than the U.S. at the same rate as our competitors or at all. We also may not be able to capitalize on new regulatory approvals we obtain for BioGlue in countries other than the U.S., including approvals for new indications;

●

BioGlue contains a bovine blood protein. Animal-based products are increasingly subject to scrutiny from the public and regulators, who may have concerns about the use of animal-based products or concerns about the transmission of disease from animals to humans. These concerns could lead to additional regulations or product bans in certain countries; and

●

~~BioGlue is subject to potential adverse developments with regard to its safety, efficacy, or reimbursement practices.~~

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Our operations and performance may also be impacted by regional and global geopolitical conditions, domestic and foreign trade and monetary policies, and other factors beyond our control. As an example of these risks, Russia’s invasion and military attacks on Ukraine have triggered significant sanctions from the US and foreign governments and retaliatory actions from Russia, resulting in significant banking and trade disruptions. The war has also resulted in significant devastation to the people and infrastructure in the region, significantly impacting trade and transportation which may impact our global supply chain, increase prices, and limit our ability to continue to do business in affected regions.

To date, sanctions and other disruptions in the region have not materially impacted our business or ability to supply products to Russia, Belarus, Ukraine, and the region generally; however, continuation or escalation of the war or increased export controls or additional sanctions imposed on or by Russia, its allies, or related entities could adversely affect our financial performance. Although we do not have any direct operations in Russia or Ukraine, it is difficult to predict the ultimate course of the war and we may face business operations and supply chain disruptions as a result, including disruptions related to shortages of materials, higher costs of materials and freight, freight delays, increased energy costs or energy shortages, travel disruptions, currency fluctuation, and disruptions to banking systems or capital markets.

We operate in highly competitive market segments, face competition from large, well-established medical device companies and tissue service providers with greater resources and we may not be able to compete effectively.

The market for our products and services is competitive and affected by new product introductions and activities of other industry participants. We face intense competition in virtually all of our product lines. A significant percentage of market revenues from competitive products are generated by Baxter International, Inc.; Ethicon (a Johnson & Johnson Company); Medtronic, Inc.; Abbott Laboratories; Edwards Lifesciences Corp.; C.R. Bard, Inc., a subsidiary of Becton, Dickinson and Company; Integra Life Sciences Holdings; LifeNet; CORCYM; Anteris Technologies, Inc.; Aziyo Biologics; Cook Medical; Gore & Associates; Terumo Aortic Corp.; LeMaitre Vascular, Inc.; Maquet, Inc.; Pfizer, Inc.; and BioCer Entwicklungs-GmbH. Several of our competitors enjoy competitive advantages over us, including:

•Greater financial and other resources for research and development, commercialization, acquisitions, and litigation and to weather the impacts of COVID-19 and increased workforce competition;

•Greater name recognition as well as more recognizable trademarks for products similar to products that we sell;

•More established record of obtaining and maintaining regulatory product clearances or approvals;

•More established relationships with healthcare providers and payors;

•Lower cost of goods sold or preservation costs; and

•Larger direct sales forces and more established distribution networks.

We are significantly dependent on our revenues from tissue preservation services and are subject to a variety of risks affecting them.

Tissue preservation services are a significant source of our revenues, ~~representing 39%~~ and ~~38% of revenues in the three months ended September 30, 2017 and 2016, respectively. The following could materially, adversely affect our revenues, financial condition, profitability, and cash flows,~~as such, we face risks if we are unable to:

●

Source sufficient quantities of some tissue types from human donors or address potential excess supply of other tissue types. We rely primarily upon the efforts of third-party procurement organizations, tissue banks (most of which are~~not-for-profit),~~ and others to educate the public and foster a willingness to donate tissue. Factors beyond our control such as supply, regulatory changes, negative publicity concerning methods of tissue recovery or disease transmission from donated tissue, or public opinion of the donor process as well as our own reputation in the industry can negatively impact the supply of tissue;

●

~~Process donated tissue cost effectively or at all due to factors such as employee turnover, ineffective or inefficient operations, or an insufficiently skilled workforce;~~

●

~~Compete effectively in tissue preservation services, as our competitors may have advantages over us in terms of cost structure, pricing, back-office automation, marketing, and sourcing tissue; or~~

●

Mitigate sufficiently the risk that processed tissue cannot be sterilized and hence carries an inherent risk of infection or disease transmission; there is no assurance that our quality controls will be adequate to mitigate such risk.

•Source sufficient quantities of some human tissue or address potential excess supply of others. We rely primarily upon the efforts of third-parties to educate the public and foster a willingness to donate tissue. Factors beyond our control such as supply, regulatory changes, negative publicity concerning methods of tissue recovery or disease transmission from donated tissue, or public opinion of the donor process as well as our own reputation in the industry can negatively impact the supply of tissue;

•Compete effectively, as we may be unable to capitalize on our clinical advantages or our competitors may have advantages over us in terms of cost structure, pricing, back-office automation, marketing, and sourcing; or

•Mitigate sufficiently the risk that tissue can become contaminated during processing; that processed tissue cannot be end-sterilized and hence carries an inherent risk of infection or disease transmission or that our quality controls can eliminate that risk.

As an example of this risk, in the fourth quarter of 2020 we became aware that a supplier shipped to us a lot of saline solution that we use in our tissue processing that contained some contamination. The contamination was identified by our routine quality controls. While we were able to mitigate the impact of this contamination through our own efforts and additional testing that was reviewed with the FDA, the contaminated solution impacted a small percentage of the tissue processed with this lot of solution, requiring us to write-off approximately $826,000 in contaminated tissues in the fourth quarter of 2020. The written off and temporarily quarantined tissue impacted our ability to fully meet demand for certain tissues and sizes in the fourth quarter of 2020, the first quarter of 2021, and to a lesser extent the second quarter of 2021. Our inability to meet some demand for tissue in the third quarter resulted in part from a shortage of trained staff capable of

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meeting the increased demand for releasing this quarantined tissue. See also, Part I, Item 1A, “Risk Factors—Operational Risks— We are dependent on our specialized workforce.”

In addition, ~~U.S.~~US and foreign ~~governments and regulatory agencies~~governmental authorities have adopted ~~restrictive~~ laws and regulations ~~and rules~~ that ~~apply to our~~restrict tissue preservation services. ~~These include but are not limited to:~~

●

The National Organ Transplant Act of 1984 or “NOTA,” which prohibits the acquisition or transfer of human organs for valuable consideration for use in human transplantation, but allows for the payment of reasonable expenses associated with the removal, transportation, implantation, processing, preservation, quality control, and storage of human organs;

●

U.S. Department of Labor, Occupational Safety and Health Administration, and U.S. Environmental Protection Agency requirements for prevention of occupational exposure to infectious agents and hazardous chemicals and protection of the environment; and

●

~~European Union directives, called the “EUCTD,” which require that countries in the European Economic Area take responsibility for regulating tissues and cells through a Competent Authority.~~

Any of these laws ~~regulations, and rules~~ or ~~others~~regulations could change, including becoming more restrictive or our interpretation of them could be challenged by ~~U.S., state,~~governmental authorities.

We are significantly dependent on our revenues from BioGlue and are subject to a variety of related risks.

BioGlue Surgical Adhesive (“BioGlue”) is a significant source of our revenues, and as such, any risk adversely affecting our BioGlue products or ~~foreign governments~~business would likely be material to our financial results. We face the following risks related to BioGlue:

•Competing effectively with our major competitors, as they may have advantages over us in terms of cost structure, supply chain, pricing, sales force footprint, and brand recognition;

•We may be unable to obtain approval to commercialize BioGlue in certain non US countries as fast as our competitors do of their products or at all. We also may not be able to capitalize on new BioGlue approvals, including for new indications, in non US countries;

•BioGlue contains a bovine blood protein. Animal-based products are subject to increased scrutiny from the public and regulators, who may seek to impose additional regulations, regulatory hurdles or product bans in certain countries on such products; BioGlue is a mature product and other companies may use the inventions disclosed in expired BioGlue patents to develop and make competing products; and

•BioGlue faces potential adverse regulatory consequences resulting from the exit of the UK from the European Union, or “Brexit, as well as the impact of COVID-19 on regulatory authorities’ ability to timely re-certify the Conformité Européene Mark (“CE Mark”) for BioGlue” See Part I, Item 1A, “Risk Factors—Industry Risks— Our products and tissues are highly regulated and subject to significant quality and regulatory ~~agencies,~~risks.”

We are significantly dependent on our revenues from aortic stent grafts and are subject to a variety of related risks.

Aortic stent grafts are a significant source of our revenues, and as such, any risk adversely affecting aortic stent grafts would likely be material to our financial results. We face risks related to aortic stent grafts based on our ability to:

•Compete effectively with our major competitors, as they may have advantages over us in terms of cost structure, supply chain, pricing, sales force footprint, and brand recognition;

•Develop innovative, high quality, and in-demand aortic repair products;

•Respond adequately to enhanced regulatory requirements and enforcement activities, and particularly, our ability to obtain regulatory approvals and renewals globally;

•Meet demand for aortic stent grafts as we seek to expand our business globally; and

•Maintain a productive working relationship with our Works Council in Germany.

We are significantly dependent on our revenues from On-X products and are subject to a variety of related risks.

On-X products are a significant source of our revenues, and as such, any risk adversely affecting our On-X products or ~~these governments~~business would likely be material to our financial results. We face risks based on our ability to:

•Compete effectively with some of our major competitors, as they may have advantages over us in terms of cost structure, supply chain, pricing, sales force footprint, and ~~regulatory agencies could adopt more restrictive laws or regulations~~brand recognition;

•Take market share in the mechanical heart valve market based on the FDA’s approved lower International Normalized Ratio (“INR”) indication for the On-X aortic heart valve or complete the associated FDA mandated post-approval studies;

•Address clinical trial data or changes in technology that may reduce the demand for mechanical heart valves, such as data regarding transcatheter aortic valve replacement, or “TAVR” devices;

•Manage risks associated with less favorable contract terms for On-X products on consignment at hospitals;

•Respond adequately to enhanced international regulatory requirements or enforcement activities; and

•Receive timely renewal certifications in certain markets.

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Continued fluctuation of foreign currencies relative to the US Dollar could materially, adversely affect our business.

The majority of our foreign product revenues are denominated in Euros and, as such, are sensitive to changes in exchange rates. In addition, a portion of our dollar-denominated and euro-denominated product sales are made to customers in other countries who must convert local currencies into US Dollars or Euros in order to purchase these products. We also have balances, such as cash, accounts receivable, accounts payable, and accruals that are denominated in foreign currencies. These foreign currency transactions and balances are sensitive to changes in exchange rates. Additionally, as a result of global inflationary pressures, and in some cases, currency crises, it is possible that foreign currency controls, the development of parallel exchange rates, or highly inflationary economies could arise in certain countries. Fluctuations in exchange rates of Euros or other local currencies in relation to the US Dollar could materially reduce our future ~~regarding tissue preservation services that~~revenues as compared to the comparable prior periods. Should this occur, it could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows.

Our charges resulting from acquisitions, restructurings, and integrations may ~~not realize all of the anticipated benefits of theOn-X~~ ~~acquisition.~~

~~On January 20, 2016 we acquiredOn-X~~ at a price of $128.2 million, subject to certain adjustments, which is the largest acquisition we have ever made. Pursuant to the acquisition, we borrowed $75.0 million through a senior secured credit facility, subject to certain restrictions on our business, and we issued shares of common stock worth, at the time, approximately $34.6 million.

~~Our ability to realize the anticipated business opportunities, growth prospects, cost savings, synergies, and other benefits of theOn-X~~ ~~acquisition continues to depend on a number of factors including:~~

●

~~The success of our integration of the direct sales forces ofOn-X~~ ~~and CryoLife into a single sales force to sell, with limited exception, the entire suite of products of the combined businesses;~~

●

~~Our ability to successfully manage independent sales representatives and distributor relationships, particularly internationally;~~

●

~~The success of moving to a direct sales model with theOn-X~~ ~~products in certain international markets;~~

●

~~Our ability to resolve unanticipated or undisclosedpre-existingOn-X~~ ~~liabilities including any regulatory or quality issues;~~

●

~~Our ability to execute on existingOn-X~~ ~~clinical trials in a compliant, timely, and cost effective manner;~~

●

~~Our ability to retain existing customers and obtain new customers forOn-X~~ ~~products; and~~

●

~~Unforeseen negative economic or market conditions impacting theOn-X~~ ~~business.~~

~~Many of these factors are outside of our control and any one of them could result in increased costs, decreased revenues, and diversion of management’s time and energy, which could~~ materially, adversely ~~impact our business, financial condition, profitability, and cash flows. As a result of these or other factors, we may not realize~~affect the full benefits of the acquisition, including achieving anticipated sales, capitalizing on the FDA’s approved reduced international normalized ratio (“INR”) indication and other growth opportunities, capturing market share from major competitors, all of whom are substantially larger and better resourced than CryoLife, or realizing expected synergies and costs savings. These benefits may not be achieved within the anticipated time-frame or at all. Any of these factors could negatively impact our earnings per share, decrease or delay the expected accretive effect of the acquisition, and negatively impact the pricevalue of our common stock. ~~In addition, if we fail to realize~~

We account for the ~~anticipated benefits~~completion of acquisitions using the ~~acquisition, we~~purchase method of accounting. Our financial results could ~~experience an interruption or loss of momentum in our existing business activities, which could adversely affect our revenues, financial condition, profitability, and cash flows.~~

~~We are significantly dependent on our revenues fromOn-X~~ ~~and are subject to a variety of risks affecting them.~~

~~On-X~~ is a significant source of our revenues, representing 19% and 20% of revenues in the three months ended September 30, 2017 and 2016, respectively. The following could materially, adversely affect our revenues, financial condition, profitability, and cash flows:

●

~~Our ability to achieve anticipatedOn-X~~ ~~revenues;~~

●

~~Our ability to capitalize on the FDA’s approved reduced INR indication;~~

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~~Our ability to overcome high levels of inventory in certain markets;~~

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~~Our ability to compete effectively with our major competitors, as they may have advantages over us in terms of cost structure, pricing, sales force footprint, and brand recognition;~~

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~~Our ability to manage the risks associated with less favorable contract terms forOn-X~~ ~~products on consignment at hospitals with more bargaining power;~~

●

~~Changes in technology that may impact the market for mechanical heart valves, such as transcatheter aortic valve replacement, or “TAVR” devices; and~~

●

~~Enhanced regulatory enforcement activities that could cause interruption in our ability to sellOn-X~~ ~~products in certain markets.~~

~~Our revenues for theOn-X~~ ~~ascending aortic prosthesis (“AAP”) in Europe may continue to~~ be adversely affected by ~~regulatory enforcement activities regarding theOn-X~~ ~~AAP’s CE Mark.~~

~~On November 22, 2016, we received a letter fromLNE/G-Med(“G-Med”),~~ ~~which acts as our Notified Body for theOn-X~~ ~~product line, indicating that it was temporarily suspending the CE Mark for theOn-X~~ ~~AAP in the European Economic Area (“EEA”), due to an allegedly untimely and allegedly deficient plan by us to address certain technical documentation issues found byG-Med~~ ~~during a review and renewal of the design examination certificate for theOn-X~~ ~~AAP. On July 26, 2017, we received a letter fromG-Med~~ ~~indicating that it was continuing the suspension of the CE Mark for the AAP product for a period of up to 18 months pending further assessment. We have since withdrawn our application withG-Med~~ for certification of the AAP product and are currently pursuing another pathway to CE Mark for the AAP product with a goal of returning the product to the European market in the first quarter of 2018. Failure to obtain CE Mark for the~~On-X~~ ~~AAP in the EEA could have a material adverse effect on EEA revenues in 2018 and beyond.~~

~~We may not realize all of the anticipated benefits of the JOTEC acquisition.~~

On October 10, 2017 we entered a definitive agreement to acquire JOTEC at a price of $225 million, subject to certain adjustments, which would be the largest acquisition we have ever made. We anticipate financing the transaction and related expenses, as well as refinancing our existing approximately $69 million loan, with a new $255 million senior secured credit facility, consisting of a $225 million institutional term loan B and a $30 million undrawn revolving credit facility, $56.25 million in CryoLife common stock as determined on the date of signing of the agreement, and available cash on hand.

~~Our ability to realize the anticipated business opportunities, growth prospects, cost savings, synergies, and other benefits of the JOTEC acquisition depend on~~ a number of ~~factors including:~~

●

~~Our ability to consummate the acquisition;~~

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~~The continued growth of the global market for stent grafts used in endovascular and open repair of aortic disease;~~

●

Our ability to leverage our global infrastructure, including in the markets in which JOTEC is already direct; minimize difficulties and costs associated with transitioning away from distributors in key markets; and accelerate our ability to go direct in Europe in developed markets with the CryoLife and JOTEC product portfolios;

●

~~Our ability to foster cross-selling opportunities between the CryoLife and JOTEC product portfolios;~~

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~~Our ability to bring JOTEC products to the U.S. market;~~

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~~Our ability to harness the JOTEC new product pipeline and R&D capabilities to drive long-term growth, including our ability to obtain CE Mark for pipeline products;~~

●

~~Our ability to drive gross margin expansion;~~

●

~~Our ability to successfully integrate the JOTEC business with ours, including integrating the combined European sales force;~~

●

~~Our ability to compete effectively;~~

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~~Our ability to carry significantly more debt and repayment obligations after the acquisition closes; and~~

●

~~Our ability to manage the unforeseen risks and uncertainties related to JOTEC’s business.~~

~~Many~~financial adjustments required by purchase accounting such as:

•We may incur added amortization expense over the estimated useful lives of ~~these factors are outside~~some acquired intangible assets;

•We may incur additional depreciation expense as a result of ~~our control~~recording purchased tangible assets;

•We may be required to incur material charges relating to any impairment of goodwill and ~~any one~~intangible assets;

•Cost of ~~them could result in increased costs, decreased revenues, and diversion~~sales may increase temporarily if acquired inventory is recorded at fair market value;

•If acquisition consideration consists of management’s time and energy, which could materially, adversely impact our business, financial condition, profitability, and cash flows. These benefits may not be achieved within the anticipated time frame or at all. Any of these factors could negatively impactearn-outs, our earnings ~~per share, decrease~~may be affected by changes in estimates of future contingent consideration; or ~~delay the expected accretive effect~~

•Earnings may be affected by transaction and integration costs, which are expensed immediately.

As an example of the acquisition, and negatively impact the price of our common stock. In addition, if we fail to realize the anticipated benefits of the acquisition, we could experience an interruption or loss of momentum in our existing business activities, which could adversely affect our revenues, financial condition, profitability, and cash flows.

Our investment in PerClot is subject to significant risks, and our ability to fully realize our investment is dependent on our ability to obtain FDA approval and to successfully commercialize PerClot in the U.S. either directly or indirectly.

~~In 2010 and 2011, we entered into various agreements with Starch Medical, Inc. (“SMI”) pursuant to which, among other things, we (a) may distribute PerClot~~in certain international markets and are licensed to manufacture PerClot in the U.S.; (b) acquired some technology to assist in the production of a potentially key component in the manufacture of PerClot; and (c) obtained the exclusive right to pursue, obtain, and maintain FDA Premarket Approval (“PMA”) for PerClot. The initial consideration under those SMI agreements was approximately $8.0 million paid in cash and stock. We made additional payments of $1.75 million through 2016 and may pay contingent amounts of up to an additional $1.0 million if certain U.S. regulatory and other commercial milestones are achieved. We may also pay SMI, subject to certain offsets, royalties on our future sales of PerClot that we manufacture.

In March 2014, we received approval of our investigational device exemption (“IDE”) for PerClot from the FDA, pursuant to which we began, in the first half of 2015, our pivotal clinical trial for surgical indications in the U.S. We began enrollment in the trial in the second quarter of 2015 but later suspended enrollment pending consultation with the FDA regarding the trial protocol. These discussions resulted in two amendments to the trial protocol, the last of which was approved by the FDA in July 2016.

~~We are conducting our pivotal clinical trial to gain approval to commercialize PerClot for surgical indications in the U.S. We resumed enrollment into the PerClot U.S. clinical trial~~this risk, in the fourth quarter of ~~2016,~~2021, we fully impaired the value of the Endospan Option and ~~assuming enrollment proceeds as anticipated, we could receive PMA from~~fully wrote-down the ~~FDA~~value of the Endospan Loan, primarily driven by a decrease in ~~2019. On October 3, 2017 SMI provided notice to terminate our exclusive license to pursue, obtain,~~forecasted operating results. This impairment, and ~~maintain PMA approval (but not our exclusive licenses to manufacture and sell PerClot or to SMI’s technology), and~~other potential risks like those mentioned above, may adversely affect the ~~parties have begun contractually required, good faith negotiations to resolve this issue. Even though the FDA~~

~~has approved the revised protocol, we may not be able to continue, or may elect to discontinue, the pivotal clinical trial. Finally, we are subject to the terms~~market value of our resolution with Medafor, which resulted from an April 28, 2014 declaratory judgment lawsuit regarding our manufacture, use, offer for sale, and sale of PerClot in the U.S. and Medafor’s U.S. Patent No. 6,060,461. Under the terms of the resolution with Medafor, we are precluded from marketing, selling, or distributing PerClot in the U.S. until February 8, 2019, even if we obtain FDA PMA for PerClot before that date.

We cannot sell PerClot for surgical indications in the U.S. in future years unless, and until, we obtain FDA approval and only after the Medafor injunction has expired on February 8, 2019. Failure to obtain FDA approval could materially, adversely affect our financial condition, anticipated future revenues, and profitability. There is no guarantee that we will obtain FDA approval when anticipated, or at all. The estimated timing of regulatory approval for PerClot is based on factors beyond our control, including but not limited to, the pace of enrollment in the pivotal clinical trial and the approval process may be delayed because of unforeseen scheduling difficulties and unfavorable results at various stages in the pivotal clinical trial or the process. Management may also decide to delay or terminate our pursuit of U.S. regulatory approval for PerClot at any time due to changing conditions at CryoLife, in the marketplace, or in the economy in general.

Finally, even if we receive FDA PMA for PerClot, we may be unsuccessful in selling PerClot in the U.S. as competitors may have substantial market share or significant market protections due to contracts, among other things. We may also be unsuccessful in selling in countries other than the U.S. due, in part, to a proliferation in other countries of multiple generic competitors, SMI’s breach of its contractual obligations, or the lack of adequate intellectual property protection or enforcement. Any of these occurrences could materially, adversely affect our future revenues, financial condition, profitability, and cash flows.

~~Reclassification by the FDA of CryoValve~~^® ~~SGPV may make it commercially infeasible to continue processing the CryoValve SGPV.~~

~~In October 2014 the FDA convened an advisory committee meeting to consider the FDA’s recommendation tore-classify~~ more than minimally manipulated (“MMM”) allograft heart valves from an unclassified medical device to a Class III medical device. The class of MMM allograft heart valves includes our CryoValve SG pulmonary heart valve (“CryoValve SGPV”). At the meeting, a majority of the advisory committee panel recommended to the FDA that MMM allograft heart valves be~~re-classified~~ as a Class III product. We expect that the FDA will issue a proposal for reclassification of MMM allograft heart valves, which will be subject to a public comment period before finalization. After publication of the reclassification rule, we expect to have thirty months to submit for an FDA PMA, after which the FDA will determine if, and for how long, we may continue to provide these tissues to customers. To date, the FDA has not issued a proposed reclassification for MMM allograft heart valves.

We have continued to process and ship our CryoValve SGPV tissues. However, if the FDA ultimately classifies our CryoValve SGPV as a Class III medical device, we anticipate requesting a meeting with the FDA to determine the specific requirements to file for and obtain a PMA, and we will determine an appropriate course of action in light of those requirements. If there are delays in obtaining the PMA, if we are unsuccessful in obtaining the PMA, or if the costs associated with these activities are significant, this could materially, adversely affect our revenues, financial condition, profitability, and/or cash flows in future periods. In addition, we could decide that the requirements for obtaining a PMA make continued processing of the CryoValve SGPV infeasible, necessitating that we discontinue distribution of these tissues.

~~Our investment in PhotoFix is subject to a variety of risks.~~

In April 2016 we exercised our option and acquired the PhotoFix product line from Genesee Biomedical, Inc. (“GBI”). We began distribution of PhotoFix in the first quarter of 2015 and have continued to sell PhotoFix after the acquisition.

Simultaneously with our acquisition of the PhotoFix product line, we entered into a Transition Supply Agreement with GBI, pursuant to which GBI will continue to manufacture product for us until we have completed the transfer of manufacturing operations to us. During this transition period, we are reliant on GBI to produce quality products in the quantities we and our customers require. If GBI experiences quality, supply, or production challenges, its products could be subject to recall or other quality action; its business operations and/or its facilities that make the products could be shut down temporarily or permanently, whether by government order, natural disaster, or otherwise; and there may not be sufficient product to enable us to meet demand. Even though we have acquired PhotoFix, we may be unable to continue the manufacturing, marketing, or distribution of the product consistent with our current projections or within the time frame anticipated. Further, we may be unable to secure anticipated approvals from the FDA or international regulatory bodies to remove certain labelling restrictions or to be able to commercialize PhotoFix in key international markets, such as Europe. Any of these occurrences or actions could materially, adversely affect our revenues, financial condition, profitability, and cash flows.

common stock.

Operational Risks

We are heavily dependent on our suppliers and contract manufacturers to provide quality ~~materials and supplies~~.

products.

The materials and supplies used in our product manufacturing and ~~our~~ tissue processing are subject to ~~stringent quality standards and~~regulatory requirements and ~~many of these materials and supplies are subject to significant regulatory oversight and action.~~oversight. If materials or supplies used in our processes fail to meet these ~~standards and~~ requirements or are subject to ~~recall~~regulatory enforcement action, they may have to be scrapped, or ~~other quality action, an outcome could be the rejection or recall of~~ our products or tissues ~~and/~~could be rejected during or ~~the immediate~~after processing, recalled, or rejected by customers. In these cases, we may have to immediately scrap raw or in process materials or expense of the costs of ~~the~~ manufacturing or preservation.

As an example of this risk, in the fourth quarter of 2020 we became aware that a supplier shipped to us a lot of saline solution that we use in our tissue processing that contained some contamination. The contamination was identified by our routine quality controls. While we were able to mitigate the impact of this contamination through our own efforts and additional testing that was reviewed with the FDA, the contaminated solution impacted a small percentage of the tissue processed with this lot of solution, requiring us to write-off those contaminated tissues in the fourth quarter of 2020 and impacting our ability to fully meet demand for certain tissues and sizes in the fourth quarter of 2020, the first quarter of 2021, and to a lesser extent the second quarter of 2021.

In addition, if these materials ~~and~~or supplies or changes to them do not receive regulatory approval or are recalled, orif the related suppliers and/or their facilities are shut down temporarily or permanently, ~~whether by government order, natural disaster,~~for any reason, or if the related suppliers are otherwise ~~there~~unable or unwilling to supply us, we may not behave sufficient materials or supplies ~~available for purchase to allow us~~ to manufacture our products or process tissues. ~~Any~~In addition, we rely on contract manufacturers to manufacture some of our products or to provide additional manufacturing capacity for some products. If these ~~occurrences~~contract manufacturers fail to meet our quality standards or ~~actions could materially, adversely affect~~other requirements or if they are unable or unwilling to supply the products, we may not be able to meet demand for these products. Our ability to fully recover all possible losses from these suppliers and contract manufacturers may have practical limitations imposed by factors like industry standard contractual terms or the financial resources of the

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adverse party. As a further example of this risk, our ~~revenues, financial condition, profitability,~~supplier of TMR handpieces was informed in the fourth quarter of 2021 that the sole-source manufacturer of tubing used in the handpiece assembly had gone out of business, requiring us to work with our supplier to identify and ~~cash flows.~~

qualify a new supplier before a disruption in handpiece availability occurs.

Finally, the COVID-19 pandemic has continued to impact the global supply chain; the pandemic’s impact on workforces, global mobility, material availability, demand, and shipping and reorder time and reliability has reportedly continued or worsened in many cases. The ongoing war in Ukraine may add to or exacerbate challenges faced by the global supply chain. See Part I, Item 1A, “Risk Factors – Business and Economic Risks - We are subject to a variety of risks due to our international operations and continued global expansion.” Although we have yet to experience any material effects of this impact on our supply chain or operations, we face an increasing risk that upstream disruptions may occur. Risks relating to the lingering effects of global supply chain disruptions may even continue after COVID-19’s risk as a global pandemic and the war in Ukraine have subsided.

We are dependent on ~~sole source~~single and sole-source suppliers and single ~~facilities~~.

~~Certain~~facilities.

Some of the materials, supplies, and services ~~that are key components of~~used in our product manufacturing orand tissue processing, as well as some of our ~~tissue processing~~products, are sourced from ~~single vendors.~~single- or sole-source suppliers. As a result, our ability to negotiate favorable terms with those ~~vendors~~suppliers may be limited, and if those ~~vendors~~suppliers experience operational, financial, quality, or regulatory difficulties, or if those ~~vendors~~suppliers and/or their facilities refuse to supply us or cease operations temporarily or permanently, or if those suppliers take unreasonable business positions, we could be forced to cease product manufacturing or tissue processing until the ~~vendors~~suppliers resume operations, until alternative suppliers could be identified and qualified, or permanently if the suppliers do not resume operations and no alternative ~~vendors~~suppliers could be identified and qualified. We could also be forced to purchase alternative materials, supplies, or services with unfavorable terms due to diminished bargaining power.

As an example of these risks, in 2019 we lost our supply of handpieces for cardiac laser therapy resulting from a manufacturing location change at our supplier that ultimately required a Premarket Approval (“PMA”) supplement and FDA approval before handpiece manufacturing and distribution could resume. Even though the FDA approved the PMA-S, our supplier was unable to fully resume production due to factors outside of our control. Due to these and other supplier issues, we had virtually no supply of handpieces during the first three quarters of 2021. Although handpiece supply resumed on a limited basis during the last quarter of 2021, we remain dependent on a sole-source manufacturer for these handpieces.

By way of additional non-limiting examples, our BioGlue product has three main product components: bovine protein, a cross linker, and a molded plastic resin delivery device. The bovine protein and cross linker are obtained from a small number of qualified suppliers. The delivery devices are manufactured by a single supplier, using resin supplied by a single supplier. We purchase grafts for our On-X AAP from a single supplier and various other components for our On-X valves come from single source suppliers.

Our preservation services business and our ability to supply needed tissues is dependent upon donation of tissues from human donors by donor families. Donated human tissue is procured from deceased human donors by OPOs and tissue banks. We must rely on the OPOs and tissue banks that we work with to educate the public on the need for donation, to foster a willingness to donate tissue, to follow our donor screening and procurement procedures, and to send donated tissue to us. We have active relationships with 59 OPOs and tissue banks throughout the US. As with any vendor, we believe these relationships with our OPOs are critical in the preservation services industry and that the breadth of these existing relationships provides us with a significant advantage over potential new entrants to this market. We also use various raw materials, including medicines and solutions, in our tissue processing. Some of these raw materials are manufactured by single suppliers or by a small group of suppliers.

Our aortic stent graft systems consist of two main product components: the stent graft and the delivery system. The stent graft is manufactured from several different raw materials that are manufactured internally or at various external suppliers, including single suppliers. The delivery systems we manufacture are comprised of several different raw materials and subassemblies. Our internal manufacturing processes include injection molding and machining of plastic parts, suturing of stent grafts, processing of Nitinol, and weaving of textiles. Our conventional polyester grafts consist of two main product components: polyester fabric and collagen coating. The polyester fabric is woven from a few different yarns that are supplied by an external supplier. The collagen suspension we manufacture is comprised of a collagenous tissue that is supplied by a single supplier. The conventional ePTFE grafts we manufacture are comprised of various raw materials supplied by several suppliers. For some products the ePTFE grafts are heparin coated. For these products, the heparin suspension we manufacture is comprised of a heparin solution that is also supplied by an external supplier.

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We also conduct ~~substantially~~ all of our own manufacturing operations at ~~two~~three facilities: Austin, Texas for ~~our~~On-X ~~product line,~~ products, Hechingen, Germany for internally manufactured aortic stent grafts, and Kennesaw, Georgia for ~~all our other products.~~BioGlue, PerClot, PhotoFix, and tissue preservation services. The AMDS product is solely manufactured by a supplier in Charlotte, North Carolina, the CardioGensis handpieces are solely manufactured by a supplier in Merrilville, Indiana, and the NEXUS product is solely manufactured by Endospan in Herzlia, Israel. If one of these facilities ceases operations temporarily or permanently, ~~due to natural disaster~~for any reason including a pandemic or ~~other reason,~~climate change related event, our business could be substantially disrupted.

~~Our products and tissues are highly regulated and subject to significant quality and regulatory risks.~~

The manufacture and sale of medical devices and processing, preservation, and distribution of human tissues are highly complex and subject to significant quality and regulatory risks. Any of the following could materially, adversely affect our revenues, financial condition, profitability, and cash flows:

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~~Our products and tissues may be recalled or placed on hold by us, the FDA, or other regulatory bodies;~~

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Our products and tissues allegedly have caused, and may in the future cause, injury to patients, which has exposed, and could in the future expose, us to product and tissue processing liability claims, and such claims could lead to additional regulatory scrutiny and inspections;

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Our manufacturing and tissue processing operations are subject to regulatory scrutiny and inspections, including by the FDA and foreign regulatory agencies, and these agencies could require us to change or modify our manufacturing operations, processes, and procedures;

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~~Regulatory agencies could reclassify, reevaluate, or suspend our clearances and approvals to sell our products and distribute tissues;~~

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European Notified Bodies have recently engaged in more rigorous regulatory enforcement activities and may continue to do so, and the European Union has adopted a new Medical Device Regulation (MDR 2017/745), which could result in product reclassifications that adversely impact our clearances and approvals; and

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Adverse publicity associated with our products or processed tissues or our industry could lead to a decreased use of our products or tissues, additional regulatory scrutiny, and/or product or tissue processing liability lawsuits.

As an example of these risks, in January 2013 we received a warning letter from the FDA related to the manufacture of our products and our processing, preservation, and distribution of human tissue, as well as a subsequent 2014 Form 483, after a~~re-inspection~~ by the FDA related to the warning letter that included observations concerning design and process validations, environmental monitoring, product controls and handling, corrective and preventive actions, and employee training. Despite an FDA~~re-inspection~~ in the first quarter of 2015, after which the FDA closed out the warning letter issued in 2013, we remain subject to further inspections and oversight by the FDA and, if the FDA is not satisfied with our quality and regulatory compliance, it could institute a wide variety of enforcement actions, ranging from issuing additional Form 483s or warning letters, to more severe sanctions such as fines; injunctions; civil penalties; recalls of our products and/or tissues; operating restrictions; suspension of production;~~non-approval~~ or withdrawal of approvals or clearances for new products or existing products; and criminal prosecution. Any further Form 483s, warning letters, recalls, holds, or other adverse action from the FDA may decrease demand for our products or tissues or cause us to write down our inventories or deferred preservation costs and could materially, adversely affect our revenues, financial condition, profitability, and cash flows.

~~We operate in highly competitive market segments, face competition from large, well-established medical device companies with significant resources, and may not be able to compete effectively.~~

The market for our products and services is intensely competitive and significantly affected by new product introductions and activities of other industry participants. We face intense competition from other companies engaged in the following lines of business:

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~~The sale of mechanical, synthetic, and animal-based tissue valves for implantation;~~

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~~The sale of synthetic and animal-based patches for implantation;~~

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~~The sale of surgical adhesives, surgical sealants, and hemostatic agents; and~~

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~~The processing and preservation of human tissue.~~

A significant percentage of market revenues from these products was generated by Baxter International Inc., Ethicon (a Johnson & Johnson Company), Medtronic, Inc., Abbott Laboratories, LivaNova PLC, Edwards Life Sciences Corp., C.R. Bard, Inc., Integra Life Sciences Holdings, or LifeNet. Several of our competitors enjoy competitive advantages over us, including:

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~~Greater financial and other resources for product research and development, sales and marketing, acquisitions, and patent litigation;~~

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~~Enhanced experience in, and resources for, launching, marketing, distributing, and selling products;~~

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~~Greater name recognition as well as more recognizable trademarks for products similar to the products that we sell;~~

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~~More established record of obtaining and maintaining FDA and other regulatory clearances or approvals for products and product enhancements;~~

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~~More established relationships with healthcare providers and payors;~~

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~~Lower cost of goods sold or preservation costs;~~

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~~Advanced systems for back office automation, product development, and manufacturing, which may provide certain cost advantages; and~~

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~~Larger direct sales forces and more established distribution networks.~~

Our competitors may develop services, products, or processes with significant advantages over the products, services and processes that we offer or are seeking to develop, and our products and tissues may not be able to compete successfully. If we are unable to successfully market and sell innovative and~~in-demand~~ products and services, our competitors may gain competitive advantages that may be difficult to overcome. In addition, consolidation among our competitors may make it more difficult for us to compete effectively. If we fail to compete effectively, this could materially, adversely affect our revenues, financial condition, profitability, and cash flows.

~~We are subject to a variety of risks as we seek to expand our business globally.~~

~~The expansion of our international operations is subject to a number of risks, which may vary significantly from the risks we face in our U.S. operations, including:~~

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~~Difficulties and costs associated with staffing and managing foreign operations, including foreign distributor relationships and developing direct sales operations in key foreign countries;~~

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Expanded compliance obligations, including obligations associated with the Foreign Corrupt Practices Act, the U.K. Bribery Law, local anti-corruption laws, and Office of Foreign Asset Control administered sanction programs;

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~~Broader exposure to corruption;~~

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Overlapping and potentially conflicting international legal and regulatory requirements, as well as unexpected changes in international legal and regulatory requirements or reimbursement policies and programs;

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~~Longer accounts receivable collection cycles in certain foreign countries and additional cost of collection of those receivables;~~

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~~Diminished protection for intellectual property and the presence of a growing number of generic or smaller competitors in some countries;~~

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Changes in currency exchange rates, particularly fluctuations in the British Pound and Euro as compared to the U.S. Dollar, including any fluctuations in exchange rates due to the exit of the U.K. from the European Union;

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~~Differing local product preferences and product requirements;~~

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~~Adverse economic or political changes or political instability;~~

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~~Potential trade restrictions, exchange controls, and import and export licensing requirements including tariffs; and~~

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~~Potential adverse tax consequences of overlapping tax structures.~~

~~Our failure to address adequately these risks could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows.~~

The outcome of the 2016 U.S. Presidential and Congressional elections might result in material changes to governmental regulation of various aspects of our business and operations or cause disruptions to our business.

The outcome of the 2016 U.S. Presidential and Congressional election might result in material changes to governmental regulation of various aspects of our business and operations. We devote significant operational and managerial resources to comply with existing laws and regulations. Different interpretations and enforcement policies of existing laws and regulations, the possible repeal of existing laws and regulations, as well as the enactment of new laws and regulations, could require additional operational and managerial resources and could subject our current practices to allegations of impropriety or illegality or could require us to make significant changes to our products and operations.

~~We may be subject to fines, penalties, injunctions and other sanctions if we are deemed to be promoting the use of our products for unapproved, oroff-label,~~ ~~uses.~~

Our business and future growth depend on the continued use of our products for specific approved uses. Generally, unless the products are approved or cleared by the FDA for the alternative uses, the FDA contends that we may not make claims about the safety or effectiveness of our products, or promote them, for such uses. Such limitations present a risk that the FDA or other federal or state law enforcement authorities could determine that the nature and scope of our sales, marketing, and/or support activities, though designed to comply with all FDA requirements, constitute the promotion of our products for an unapproved use in violation of the Federal Food, Drug, and Cosmetic Act. We also face the risk that the FDA or other governmental authorities might pursue enforcement based on past activities that we have discontinued or changed, including sales activities, arrangements with institutions and doctors, educational and training programs, and other activities. Investigations concerning the promotion of unapproved uses and related issues are typically expensive, disruptive, and burdensome and generate negative publicity. If our promotional activities are found to be in violation of the law, we may face significant fines and penalties and may be required to change substantially our sales, promotion, grant, and educational activities. There is also a possibility that we could be enjoined from selling some or all of our products for any unapproved use. In addition, as a result of an enforcement action against us or our executive officers, we could be excluded from participation in government healthcare programs such as Medicare and Medicaid.

~~Our existing insurance coverage may be insufficient, and we may be unable to obtain insurance in the future.~~

Our products and tissues allegedly have caused, and may in the future cause, injury to patients using our products or tissues, and we have been, and may be, exposed to product and tissue processing liability claims. We maintain claims-made insurance policies to mitigate our financial exposure to product and tissue processing liability claims. Claims-made insurance policies generally cover only those asserted claims and incidents that are reported to the insurance carrier while the policy is in effect. In addition, our product and tissue processing liability insurance policies do not include coverage for any punitive damages.

Although we ~~have insurance for product and tissue processing liabilities, securities, property, and general liabilities, it is possible that:~~

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~~We could be exposed to product and tissue processing liability claims and security claims greater than the amount that we have insured;~~

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~~We may be unable to obtain future insurance policies in an amount sufficient to cover our anticipated claims at a reasonable cost or at all; or~~

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~~Because we are not insured against all potential losses, uninsured losses due to natural disasters or other catastrophes could adversely impact our business.~~

Any product liability claim, with or without merit, could result in an increase in our product insurance rates or our inability to secure coverage on reasonable terms, if at all. Even in the absence of a claim, our insurance rates may rise in the future due to market, industry, or other factors. Any product liability claim, even a meritless or unsuccessful one, would be time-consuming and expensive to defend and could result in the diversion of our management’s attention from our business and result in adverse publicity, withdrawal of clinical trial participants, injury to our reputation, and loss of revenue.

If we are unsuccessful in arranging acceptable settlements of future product or tissue processing liability claims or future securities class action or derivative claims, we may not have sufficient insurance coverage and liquid assets to meet these obligations. If we are unable to obtain satisfactory insurance coverage in the future, we may be subject to additional future exposure from product or tissue processing liability or securities claims. Additionally, if one or more claims with respect to which we may become, in the future, a defendant should result in a substantial verdict rendered in favor of the plaintiff(s), such verdict(s) could exceed our available insurance coverage and liquid assets. If we are unable to meet required future cash payments to resolve any outstanding or any future claims, this will materially, adversely affect our financial condition, profitability, and cash flows.

Further, although we have an estimated reserve for our unreported product and tissue processing liability claims for which we do expect that we will obtain recovery under our insurance policies, these costs could exceed our current estimates. Finally, our facilities could be materially damaged by tornadoes, flooding, other natural disasters, or catastrophic circumstances, for which we are not fully covered by business interruption and disaster insurance, and, even with such coverage, we could suffer substantial losses in our inventory and operational capacity, along with a potential adverse impact on our customers and opportunity costs for which our insurance would not compensate us.

~~Any of these events could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows.~~

~~If we experience decreasing prices for our goods and services and we are unable to reduce our expenses, our results of operations will suffer.~~

We may experience decreasing prices for our goods and services due to pricing pressure experienced by our customers from managed care organizations and other third-party payors, increased market power of our customers as the medical device industry consolidates, and increased competition among medical engineering and manufacturing services providers. If the prices for our goods and services decrease and we are unable to reduce our expenses, our results of operations will be adversely affected.

~~Certain of our products and technologies are subject to significant intellectual property risks and uncertainty.~~

We own patents, patent applications, and licenses relating to our technologies, which we believe provide us with important competitive advantages. In addition, we have certain proprietary technologies and methods that we believe provide us with important competitive advantages. We cannot be certain that our pending patent applications will issue as patents or that no one will challenge the validity or enforceability of any patent that we own or license.

We have obtained licenses from third parties for certain patents and patent application rights, including rights related to our PerClot technologies. These licenses allow us to use intellectual property rights owned by or licensed to these third parties. We do not control the maintenance, prosecution, enforcement, or strategy for many of these patents or patent application rights and as such are dependent in part on the owners of the intellectual property rightswork diligently to maintain ~~their viability. Their failure to do so could significantly impair our ability to exploit those technologies.~~

~~Furthermore, competitors may independently develop similar technologies or duplicate our technologies or design around the patented aspects~~adequate inventories of such technologies. In addition, our technologies or products or services could infringe patents or other rights owned by others, or others could infringe our patents. If we become involved in a patent dispute, the costs of the dispute could be expensive,raw materials, components, supplies, subassemblies, and if we were to lose or decide to settle the dispute, the amounts or effects of the settlement or award by a tribunal could be costly. For example, in 2015 we resolved a patent infringement case with Medafor related to technology we licensed from SMI. The settlement of that patent infringement case resulted in the continuation of an injunction prohibiting us from marketing, selling, or distributing PerClot in the U.S. until February 8, 2019. We incurred substantial attorneys’ fees and costs in pursuing and defending that case, and only a portion of those fees and costs are subject to recovery through indemnification. Should we be forced to sue a potential infringer, if we are unsuccessful in prohibiting infringements of our patents, should the validity of our patents be successfully challenged by others, or if we are sued by another party for alleged infringement (whether we ultimately prevail or not), our revenues, financial condition, profitability, and cash flows could be materially, adversely affected.

~~We may be subject to damages resulting from claims that we, our employees, or our independent contractors have wrongfully used or disclosed alleged trade secrets of others.~~

Some of our employees were previously employed at other medical device or tissue companies. We may also hire additional employees who are currently employed at other medical device or tissue companies, including our competitors. Additionally, consultants or other independent agents with which we may contract may be or have been in a contractual arrangement with one or more of our competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or independent contractors have used or disclosed any party’s trade secrets or other proprietary information. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail to defend such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to market existing or new products, which could severely harm our business.

~~Our key growth vectors may not generate anticipated benefits.~~

Our strategic plan is focused on four growth vectors, primarily in the cardiac and vascular surgery segment, which are expected to drive our business in the near term. These growth vectors and their key elements are described below:

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~~New Products~~ ~~– Drive growth through new products including theOn-X~~ ~~heart valve and, as anticipated, the JOTEC family of products;~~

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~~New Indications –~~ ~~Broaden the reach of certain of our products, including theOn-X~~ ~~heart valve and BioGlue, with new or expanded approvals and indications in the U.S. or in international markets;~~

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~~Global Expansion~~ ~~– Expand our current products and services into new markets, including emerging markets, and accelerate growth by developing new direct sales territories overseas; and~~

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~~Business Development~~ – Selectively pursue potential acquisition, licensing, or distribution rights of companies or technologies that complement CryoLife’s existing products, services, and infrastructure, and expand our footprint in the cardiac and vascular surgery space, such as the 2016 acquisition of~~On-X~~ ~~and the anticipated acquisition of JOTEC, as well as divestitures of certain of ournon-core~~ ~~product lines, such as the HeRO Graft in 2016, and strategic licensing of certain products developed internally. To the extent we identify newnon-core~~ products or additional applications for our core products, we may attempt to license these products to corporate partners for further development or seek funding from outside sources to continue commercial development.

~~Although management continues to implement these strategies, we cannot be certain that they will ultimately drive business expansion and enhance shareholder value.~~

~~We continue to evaluate expansion through acquisitions of, or licenses with, investments in, and distribution arrangements with, other companies or technologies, which may carry significant risks.~~

One of our growth strategies is to selectively pursue potential acquisition, licensing, or distribution rights of companies or technologies that complement CryoLife’s existing products, services, and infrastructure. In connection with one or more of the acquisition transactions, we may:

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~~Issue additional equity securities that would dilute our stockholders’ ownership interest in us;~~

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~~Use cash that we may need in the future to operate our business;~~

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~~Incur debt, including on terms that could be unfavorable to us or debt that we might be unable to repay;~~

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~~Structure the transaction in a manner that has unfavorable tax consequences, such as a stock purchase that does not permit astep-up~~ ~~in the tax basis for the assets acquired;~~

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~~Be unable to realize the anticipated benefits, such as increased revenues, cost savings, or synergies from additional sales;~~

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~~Be unable to integrate, upgrade, or replace the purchasing, accounting, financial, sales, billing, employee benefits, payroll, and regulatory compliance functions of an acquisition target;~~

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~~Be unable to secure or retain the services of key employees related to the acquisition;~~

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~~Be unable to succeed in the marketplace with the acquisition; or~~

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~~Assume material unknown liabilities associated with the acquired business.~~

As an example of these risks, we recently entered a definitive agreement to acquire JOTEC, which we anticipate financing by incurring further debt, using cash on hand, and issuing additional equity securities. This anticipated acquisition poses many of the same risks as set forth above.

Any of the above risks, should they occur, could materially, adversely affect our revenues, financial condition, profitability, and cash flows, including the inability to recover our investment or cause a write-down or~~write-off~~ ~~of such investment, associated goodwill, or assets.~~

~~Our charges to earnings resulting from acquisition, restructuring, and integration costs may materially adversely affect the market value of our common stock.~~

We account for the completion of our acquisitions using the purchase method of accounting. We allocate the total estimated purchase prices to net tangible assets, amortizable intangible assets and indefinite-lived intangible assets, and based on their fair values as of the date of completion of the acquisitions, record the excess of the purchase price over those fair values as goodwill. Our financial results, including earnings per share, could be adversely affected by a number of financial adjustments required in purchase accounting including the following:

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~~We will incur additional amortization expense over the estimated useful lives of certain of the intangible assets acquired in connection with acquisitions during such estimated useful lives;~~

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~~We will incur additional depreciation expense as a result of recording purchased tangible assets;~~

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~~To the extent the value of goodwill or intangible assets becomes impaired, we may be required to incur material charges relating to the impairment of those assets;~~

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~~Cost of sales may increase temporarily following an acquisition as a result of acquired inventory being recorded at its fair market value;~~

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~~Earnings may be affected by changes in estimates of future contingent consideration to be paid when anearn-out~~ ~~is part of the consideration; or~~

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~~Earnings may be affected by transaction and implementation costs, which are expensed immediately.~~

~~Our indebtedness could adversely affect our ability to raise additional capital to fund our operations and limit our ability to react to changes in the economy or our industry.~~

~~Our current and future levels of indebtedness could:~~

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~~Limit our ability to borrow money for our working capital, capital expenditures, development projects, strategic initiatives, or other purposes;~~

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~~Require us to dedicate a substantial portion of our cash flow from operations to the repayment of our indebtedness, thereby reducing funds available to us for other purposes;~~

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~~Limit our flexibility in planning for, or reacting to, changes in our operations or business;~~

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~~Make us more vulnerable to downturns in our business, the economy, or the industry in which we operate;~~

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~~Restrict us from making strategic acquisitions, introducing new technologies, or exploiting business opportunities; and~~

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~~Expose us to the risk of increased interest rates as most of our borrowings are at a variable rate of interest.~~

~~The agreements governing our indebtedness contain restrictions that limit our flexibility in operating our business.~~

The agreements governing our indebtedness contain, and any instruments governing future indebtedness of ours may contain, covenants that impose significant operating and financial restrictions on us, including restrictions or prohibitions on our ability to, among other things:

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~~Incur or guarantee additional debt;~~

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~~Pay dividends on or make distributions in respect of our share capital or make other restricted payments;~~

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~~Repurchase or redeem capital stock or subordinated indebtedness;~~

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~~Transfer or sell certain assets;~~

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~~Create liens on certain assets;~~

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~~Consolidate or merge with, or sell or otherwise dispose of all, or substantially all, of our assets to other companies;~~

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~~Enter into certain transactions with our affiliates;~~

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~~Pledge the capital stock of any of our subsidiaries;~~

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~~Enter into agreements which restrict our ability to pay dividends or incur liens;~~

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~~Make material changes in our equity capital structure;~~

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~~Engage in any line of business substantially different than that in which we are currently engaged; and~~

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~~Make certain investments, including strategic acquisitions.~~

As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.

We have pledged substantially all of our assets as collateral under our existing debt agreement. If we default on the terms of such debt agreements and the holders of our indebtedness accelerate the repayment of such indebtedness,finished goods, there can be no assurance that we will ~~have sufficient assets~~be able to ~~repay~~avoid all disruptions to our ~~indebtedness.~~

~~Under~~global supply chain, or disruptions to our existing credit agreement, we are required to satisfy and maintain specified financial ratios including a maximum consolidated leverage ratio and a minimum interest coverage ratio. Our ability to meet those financial ratios can be affected by events beyond our control, and there can be no assurance that we will meet those ratios. A failure to comply with the covenants contained in our existing debt agreement could result in an eventsterilization or distribution networks. Any of ~~default under such agreements, which, if not cured or waived,~~these disruptions could have a material, adverse effect on our ~~business, financial condition, and~~revenues, reputation, or profitability. ~~In the event of any default under our existing debt agreement, the holders of our indebtedness thereunder:~~

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~~Will not be required to lend any additional amounts to us;~~

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~~Could elect to declare all indebtedness outstanding, together with accrued and unpaid interest and fees, to be due and payable and terminate all commitments to extend further credit, if applicable; or~~

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~~Could require us to apply all of our available cash to repay such indebtedness.~~

If we are unable to repay those amounts, the holders of our secured indebtedness could proceed against the collateral granted to them to secure that indebtedness. If the indebtedness under our existing debt agreements were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full.

We are dependent on our ~~key personnel.~~

specialized workforce.

Our business and future operating results depend in significant part upon the continued contributions of our specialized workforce, including key personnel, ~~including~~ qualified personnel with medical device and tissue processing experience, and senior management with experience in the medical device or tissue processing space, ~~many~~some of whom would be difficult to replace. Our business and future operating results, including production at our manufacturing and tissue processing facilities, also depend in significant part on our ability to attract and retain qualified management, operations, processing, marketing, sales, and support ~~personnel for our operations.~~personnel. Our ~~main~~primary facilities are in Kennesaw, ~~Georgia~~Georgia; Austin, Texas; and ~~Austin, Texas,~~Hechingen, Germany, where the ~~local~~ supply of qualified ~~personnel in the~~ medical device and tissue processing ~~industries~~and other personnel is ~~limited. Competition~~limited, competition for such personnel is ~~intense,~~significant, and we cannot ensure that we will be successful in attracting ~~and~~or retaining ~~such personnel. If~~them. We face risks if we lose any key employees to other employers or due to severe illness, death, or retirement, if any of our key employees fail to perform adequately, or if we are unable to attract and retain skilled ~~employees~~employees. This risk was exacerbated during 2021, and is expected to continue, as ~~needed,~~the competition for talent in the medical device industry and in the workforce generally has intensified substantially. As some global economies have begun to emerge from the COVID-19 downturn, the expiration of COVID-19 related hiring freezes, the Great Resignation, increased opportunities for remote work, and increasing compensation pressure have resulted in a war for talent and an unprecedented number of career changes. The resulting competition and worker shortages at all levels have impacted supply chains and distribution channels and our ability to attract and retain the specialized workforce necessary for our business and operations.

We continue to evaluate expansion through acquisitions of, or licenses with, investments in, and distribution arrangements with, other companies or technologies, which may carry significant risks.

One of our growth strategies is to pursue select acquisitions, licensing, or distribution rights with companies or technologies that complement our existing products, services, and infrastructure. In connection with one or more of these transactions, we may:

•Issue additional equity securities that would dilute our stockholders’ ownership interest;

•Use cash we may need in the future to operate our business;

•Incur debt, including on terms that could be unfavorable to us or debt we might be unable to repay;

•Structure the transaction resulting in unfavorable tax consequences, such as a stock purchase that does not permit a step-up in basis for the assets acquired;

•Be unable to realize the anticipated benefits of the transaction; or

•Assume material unknown liabilities associated with the acquired business.

We may not realize all the anticipated benefits of our business development activities.

As part of our efforts to drive growth by pursuing select acquisition, license, and distribution opportunities that are aligned to our objectives and complement our existing products, services, and infrastructure or to divest non-core product lines, we have completed several transactions in recent years and may pursue similar additional transactions in the future. Examples of these activities include the following:

•On December 1, 2017 we acquired JOTEC AG, a Swiss entity that we converted to JOTEC GmbH and subsequently merged with our Swiss acquisition entity, Jolly Buyer Acquisition GmbH and its subsidiaries;

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•On September 11, 2019 we entered into various agreements with Endospan, Ltd. (“Endospan”), an Israeli medical device manufacturer (the “Endospan Transaction”). The Endospan Transaction included an exclusive distribution agreement for the NEXUS stent graft system (“NEXUS”) in Europe; an agreement (“Endospan Loan”) for a secured loan from Artivion to Endospan; and a security purchase option agreement for Artivion to purchase all the then outstanding Endospan securities from Endospan’s existing security holders upon FDA approval of NEXUS;

•On September 2, 2020 we acquired 100% of the outstanding shares of Ascyrus Medical LLC (“Ascyrus”), the developer of the Ascyrus Medical Dissection Stent (“AMDS”); and

•On July 28, 2021 we entered into various agreements with Baxter International, Inc. (“Baxter”) and Starch Medical, Inc. (“SMI”) related to the sale of our PerClot assets to Baxter and the termination of our existing material agreements with SMI (collectively the “Baxter Transaction”).

Our ability to realize the anticipated business opportunities, growth prospects, cost savings, synergies, and other benefits of these transactions depends on a number of factors including our ability to:

•Leverage our global infrastructure to sell and cross-market the acquired products;

•Drive adoption of NEXUS and AMDS in the European and other markets, including our ability to manage the substantial requirements for NEXUS procedures for product training, implant support, and proctoring;

•Bring acquired products to the US market, including our acquired aortic stent grafts;

•Harness the aortic stent graft product pipeline and our research and development capabilities;

•Obtain regulatory approvals in relevant markets, including our ability to timely obtain FDA PMA for PerClot under the terms of the Baxter Transaction and to obtain or maintain Conformité Européene Mark (“CE Mark”) product certifications for pipeline and current products;

•Execute on development and clinical trial timelines for acquired products;

•Manage global inventories, including our ability to manage inventories for product lines with large numbers of product configurations and manage manufacturing and demand cycles to avoid excess inventory obsolescence due to shelf life expiration, particularly for processed tissues and aortic stent grafts;

•Carry, service, and manage significant debt and repayment obligations; and

•Manage the unforeseen risks and uncertainties related to these transactions, including any related to intellectual property rights.

Additionally, our ability to realize the anticipated business opportunities, growth prospects, synergies, and other benefits of the Endospan Transaction depends on a number of additional factors including Endospan’s ability to: (a) comply with the Endospan Loan and other debt obligations, and avoid an event of default; (b) successfully commercialize NEXUS, raise capital and drive adoption in markets in and outside of Europe; (c) meet demand for NEXUS; (d) meet quality and regulatory requirements; (e) manage any intellectual property risks and uncertainties associated with NEXUS; (f) obtain FDA approval of NEXUS; and (g) develop NEXUS product improvements to meet competitive threats and physician demand. As an example of this risk, the forecasted operating results related to NEXUS decreased in the fourth quarter of 2021, resulting in an impairment in the value of the Endospan Option, and a full write-down of the value of the Endospan Loan, reflecting decreased expectations with respect to the anticipated benefits of the Endospan Transaction.

Many of these factors are outside of our control and any one of them could ~~have~~result in increased costs, decreased revenues, and diversion of management’s time and energy. The benefits of these transactions may not be achieved within the anticipated time frame or at all. Any of these factors could negatively impact our earnings per share, decrease or delay the expected accretive effect of the transaction, and negatively impact the price of our common stock. In addition, if we fail to realize the anticipated benefits of a ~~material, adverse~~transaction, we could experience an interruption or loss of momentum in our existing business activities.

We may not realize all the anticipated benefits of our corporate rebranding and it may result in unanticipated disruptions to our on-going business.

In order to reflect our evolution to focus on providing innovative technologies to surgeons who treat patients with aortic disease, we changed our name to Artivion, Inc., effective January 18, 2022 (the “Corporate Rebrand”). The Corporate Rebrand also involved the adoption of a new ticker symbol on the New York Stock Exchange, “AORT.” We may face unanticipated disruptions to our business arising from the Corporate Rebrand, and it may expose us to additional risks, including:

•Disruptions to our day-to-day business operations including disruptions to our ability to receive or our customers’ ability to make timely payments;

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•Disruptions to access to certain markets or segments due to delays or other issues with regulatory approvals or updates arising from the Corporate Rebrand;

•Unanticipated delays or other impact on our pending regulatory applications or clinical trials arising from the Corporate Rebrand;

•Confusion within the marketplace, particularly with multiple points of contact in our downstream product flow involving purchasing and accounts payable departments and end users;

•Intellectual property risks associated with the adoption of a new corporate identity and trade dress; and

•Loss of brand equity associated with our legacy brands, including our CryoLife and JOTEC brands that will become less prominent over time.

The Corporate Rebrand involved significant financial and resource investment and will continue to do so as we complete our global brand transitions over the coming years. The anticipated benefits of the Corporate Rebrand may not be achieved within the anticipated timeframe, without additional near or long-term investment, or at all. Any of these factors could negatively impact our revenues, ~~financial condition, profitability,~~earnings per share, decrease or delay the expected accretive effect of the Corporate Rebrand, and ~~cash flows.~~

~~Continued fluctuation of foreign currencies relative to~~negatively impact the ~~U.S. Dollar could materially, adversely affect our business.~~

~~The majority~~price of our foreign product and tissue processing revenues are denominated in British Pounds and Euros and, as such, are sensitive to changes in exchange rates. In addition, a portion of our dollar-denominated product sales are made to customers in other countries who must convert local currencies into U.S. Dollars in order to purchase these products. We also have balances, such as cash, accounts receivable, accounts payable, and accruals that are denominated in foreign currencies. These foreign currency transactions and balances are sensitive to changes in exchange rates. Fluctuations in exchange rates of British Pounds and Euros or other local currencies in relation to the U.S. Dollar could materially reduce our future revenues as compared to the comparable prior periods. Should this occur, it could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows.

common stock.

Significant disruptions of information technology systems or breaches of information security systems could adversely affect our business.

We rely upon a combination of sophisticated information technology systems ~~and~~as well as traditional recordkeeping to operate our business. In the ordinary course of business, we collect, store, and transmit ~~large amounts of~~ confidential information (including, but not limited to, information about our business, financial information, personal ~~information,~~data, intellectual property, and, in some instances, patient data). We have also outsourced elements of our operations to third parties, including elements of our information technology infrastructure and, as a result, we manage a number of independent vendor relationships with third parties who may or could have access to our confidential information. Our information technology and information security systems and records are potentially vulnerable to security breaches, service interruptions, data loss, or ~~to security breaches~~malicious attacks resulting from inadvertent or intentional actions by our employees, vendors, or ~~vendors.~~other third parties. In addition, due to the COVID-19 pandemic, we have implemented remote work arrangements for some employees, and those employees may use outside technology and systems that are vulnerable to security breaches, service interruptions, data loss or malicious attacks, including by third parties.

As an example of these risks, on November 1, 2019 we were notified that we had become a victim of a business e-mail compromise. During the fourth quarter of 2019, a company email account was compromised by a third-party impersonator and a payment intended for one of our US vendors in the amount of $2.6 million was fraudulently re-directed into an individual bank account controlled by this third-party impersonator. Our cyber-insurance covered all but $25,000 of the unrecovered losses from this compromise.

While we have invested, and continue to invest, in our information technology and information security systems ~~are also potentially vulnerable to malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication~~ and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While we have invested significantly in the protection of data andemployee information ~~technology,~~security training, there can be no assurance that our efforts will prevent all security breaches, service interruptions, or ~~security breaches. For example, although we have taken security precautions and are assessing additional precautions to provide greater~~ data ~~security, certain data may be vulnerable to loss in a catastrophic event.~~losses. We have ~~only~~ limited cyber-insurance coverage that ~~will~~may not cover ~~a number of the~~all possible events, ~~described above~~ and this insurance is subject to deductibles and coverage limitations, and we may not be able to maintain this insurance. We thus have no insurance for most of the claims that could be raised and, for those where we have coverage, those claims could exceed the limits of our coverage.limitations. Any ~~interruption~~security breaches, service interruptions, or ~~breach in our systems~~data losses could adversely affect our business operations ~~and/~~or result in the loss of critical or sensitive confidential information or intellectual property, ~~and could result~~or in financial, legal, business, and reputational harm to us or allow third parties to gain material, inside information that they may use to trade in our securities.

Industry Risks

Our products and tissues are highly regulated and subject to significant quality and regulatory risks.

The commercialization of medical devices and processing and distribution of human tissues are highly complex and subject to significant global quality and regulatory risks and as such, we face the following risks:

•Our products and tissues allegedly have caused, and may in the future cause, patient injury, which has exposed, and could in the future expose, us to liability claims that could lead to additional regulatory scrutiny;

•Our manufacturing and tissue processing operations are subject to regulatory scrutiny, inspections and enforcement actions, and regulatory agencies could require us to change or modify our operations or take other action, such as issuing product recalls or holds;

•Regulatory agencies could reclassify, re-evaluate, or suspend our clearances or approvals, or fail, or decline to, issue or reissue our clearances or approvals that are necessary to sell our products and distribute tissues;

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•Regulatory and quality requirements are subject to change, which could adversely affect our ability to sell our products or distribute tissues; and
•Adverse publicity associated with our products, processed tissues, or our industry could lead to a decreased use of our products or tissues, increased regulatory scrutiny, or product or tissue processing liability claims.
Further, on May 25, 2017 the European Union adopted a new Medical Device Regulation (MDR 2017/745) (“MDR”), which was fully implemented on May 26, 2021. The MDR places stricter requirements on manufacturers and European Notified Bodies regarding, among other things, product classifications and pre- and post-market clinical studies for product clearances and approvals which could result in product reclassifications or the imposition of other regulatory requirements that could delay, impede, or prevent our ability to commercialize existing, improved, or new products in the European Economic Area and other markets that require CE Marking. Additionally, to the extent the MDR places stricter requirements on manufacturers of custom-made devices, those new requirements could delay, impede, or otherwise impact the availability of our E-xtra Design Engineering products. Finally, COVID-19 has impacted the predictability and timelines associated with the MDR transition.
Since the implementation of the MDR, Notified Bodies must review any proposed changes to determine if they require evaluation under the MDR or if they can still be evaluated under currently held MDD certifications. Our inability to obtain certifications for changes under the transitional provisions of the MDR’s Article 120 or successfully submit proposed changes requiring MDR evaluation will delay implementation of those changes which could adversely impact our ability to obtain or renew certifications, clearances, or approvals for our products.
Finally, we anticipate additional regulatory impact as a result of the United Kingdom’s exit from the European Union (“Brexit”). The UK Medicines and Healthcare ~~policy changes, including U.S. healthcare reform legislation signed~~Products Regulatory Agency has announced that CE Marking will continue to be recognized in ~~2010,~~the UK and certificates issued by EU-recognized Notified Bodies will continue to be valid in the UK market until June 30, 2023. Going forward, all devices marketed in the UK will require UK Conformity Assessed Marks certified by a UK Approved Body (the re-designation of the UK Notified Body).

In 2019 our notified body in the UK, Lloyd’s Register Quality Assurance Limited (“LRQA”), informed us that it would no longer provide Notified Body services for medical devices effective September 2019. The governing German competent authority, the Regierungspraesidium-Tubingen, granted us an extended grace period until December 31, 2021 to transfer LRQA-issued certifications for BioGlue and PhotoFix to a new Notified Body. We are currently in the process of transferring BioGlue and PhotoFix to our new Notified Body, DEKRA. While positive progress has been made, DEKRA has been unable to complete the registration and the renewal of our BioGlue CE Mark because it significantly delayed its last audit in that process, a Phase 2 onsite audit, due to COVID-19 restrictions on travel, staffing shortages, and workload related to the transition to the MDR. With the Phase 2 audit complete, we currently anticipate completing the registration and renewal process during the fourth quarter of 2022. In the interim, we have requested and received from the majority of relevant territories, derogations from certain individual European countries to allow us to continue to commercialize BioGlue in those countries until we can complete the certification process with DEKRA. For derogations expiring before we anticipate receiving the renewal of the BioGlue CE Mark, we have requested and anticipate receiving, extensions of the previously granted derogations. That said, failure to maintain key derogations in certain countries, or any other delays in the MDR transition, may have a material adverse effect on ~~us.~~

~~In response~~our ability to ~~perceived increases~~supply demand in healthcare costs in recent years, there have been and continue to be proposals by the federal government, state governments, regulators, and third-party payors to control these costs and, more generally, to reform the U.S. healthcare system. Certain of these proposals could limit the prices we are able to charge for our products or the amounts of reimbursement available for our products and could limit the acceptance and availability of our products. The adoption of some or all of these proposals couldaffected jurisdictions, have a material, adverse ~~effect~~impact on ~~our financial condition and profitability.~~

The Patient Protection and Affordable Care Act (“ACA”) and the Health Care and Education Affordability Reconciliation Act of 2010 imposed significant new taxes on medical device makers in the form of a 2.3 percent excise tax on all U.S. medical device sales that commenced in January 2013. While this tax has been suspended for 2016 and 2017, there is no guarantee that the excise tax will not be reinstated and the underlying legislation might not be repealed or replaced despite the outcome of the 2016 U.S.

Presidential and Congressional election. On January 20, 2017, President Trump issued an executive order titled “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.” Congressional efforts to repeal and replace the ACA have been ongoing since the election, but it is unclear whether Congress will be successful in its~~repeal-and-replace~~ efforts. The impact of the executive order and the future of the ACA remain unclear. There are many programs and requirements for which the details have not yet been fully established or the consequences are not fully understood. These proposals may affect aspects of our business. We cannot predict what further reform proposals, if any, will be adopted, when they will be adopted, or what impact they may have on us. However, any changes that lower reimbursement for our products or reduce medical procedure volumes could adversely affect our business, and ~~profitability.~~

~~Our sales are affected~~may also impact our Medical Device Single Audit Program (“MDSAP”) certifications. Failure to timely obtain new MDSAP certifications following their expiration may impact our ability to distribute covered products in Australia, Brazil, Canada, and Japan.

Reclassification by ~~challenging domestic and international economic and geopolitical conditions and their constraining effect on hospital budgets, and demand~~the FDA of CryoValve SG pulmonary heart valve (“CryoValve SGPV”) may make it commercially infeasible to continue processing the CryoValve SGPV.

In December 2019 we learned that the FDA is preparing to issue a proposed rule for ~~our products and tissue preservation services could decrease in the future,~~reclassification of more than minimally manipulated (“MMM”) allograft heart valves to Class III medical devices, which could ~~materially, adversely affect~~include our ~~business.~~

~~The demand~~CryoValve SGPV. Following a comment period and subsequent publication of any final rule, should the CryoValve SGPV be determined to be MMM, we expect to have approximately thirty months to submit an FDA PMA application, after which the FDA will determine if, and for our products and tissue preservation services can fluctuate from time to time. In challenging economic environments, hospitals attempt to control costs by reducing spending on consumable and capital items, which can result in reduced demand for some of our products and services. If demand for our products or tissue preservation services decreases significantly in the future, our revenues, profitability, and cash flows would likely decrease, possibly materially. In addition, the manufacturing throughput of our products and the processing throughput of our preservation services would necessarily decrease, which would likely adversely impact our margins and, therefore, our profitability, possibly materially. Further, if demand for our products and/or tissue preservation services materially decreases in the future,how long, we may continue to provide these tissues to customers during review of the PMA application. To date, the FDA has not ~~be able to ship~~issued such a proposed final rule.

If the FDA ultimately classifies our ~~products and/~~CryoValve SGPV as a Class III medical device, and if there are delays in obtaining the PMA, if we are unsuccessful in obtaining the PMA, or ~~tissues before they expire, which would cause~~if the costs associated with these activities are significant, we could decide that the requirements for continued processing of the CryoValve SGPV are too onerous, leading us to ~~write down our inventories and/or deferred preservation costs.~~

Our sales may also be affected by challenging economic and geopolitical conditions in countries around the world, in addition to the U.S., particularly in countries where we have significant BioGlue or~~On-X~~ ~~heart valve sales or where BioGlue or theOn-X~~ ~~heart valve is still in a growth phase. These factors could materially, adversely affect our revenues, financial condition, and profitability.~~

discontinue distribution of these tissues.

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We may not be successful in obtaining ~~necessary~~ clinical results ~~and~~or regulatory clearances/approvals for new and existing products and services, ~~in development,~~ and our ~~new~~approved products and services may not achieve market acceptance.

Our growth and profitability ~~will depend,~~depends in part upon our ability to ~~complete development of,~~develop, and successfully introduce, new products and services, or expand upon existing indications, ~~which requires~~clearances, and approvals, requiring that we invest significant time and resources to obtain ~~required~~new regulatory clearances/approvals, including ~~significant~~ investment ~~of time~~into pre- and ~~resources into~~post-market clinical ~~trials.~~studies. Although we ~~have conducted clinical studies on~~believe certain products and services in our portfolio or under development ~~which indicate that such products and services~~ may be effective in a particular application, we cannot be certain ~~that~~until we ~~will be able to~~ successfully execute on ~~these~~relevant clinical trials, ~~or that~~and the results we obtain from pre- and post-market clinical studies ~~will~~may be ~~sufficient~~insufficient for us to obtain or maintain any required regulatory approvals or clearances.

~~As noted above, we~~

We are currently ~~engaged in a PMA clinical trial~~seeking regulatory approval for ~~PerClot, as well as clinical trials~~BioGlue in China, where the Chinese regulatory body has made additional requests, and expressed several concerns, related to the application. We have obtained an extension of time until February 2024 in which to secure approval for BioGlue ~~and~~ in China. If we cannot obtain approval by then or the ~~U.S. for theOn-X~~ ~~valve.~~ costs to do so are prohibitive, we ultimately may be unable to see BioGlue in China.

Each of ~~these~~our trials, studies, and approvals is subject to the risks outlined herein.

We cannot give assurance that ~~the relevant~~ regulatory agencies will clear or approve these products and services or indications, or any new products and services or new indications, on a timely basis, if ever, or that the ~~new~~ products and services or new indications will adequately meet the requirements of the ~~applicable~~ market or achieve market acceptance. ~~We may encounter delays or rejections during any stage of the regulatory approval process if~~Pre- and post-market clinical or other data fails to demonstrate satisfactorily compliance with, or if the service or product fails to meet, the regulatory agency’s requirements for safety, efficacy, and quality, or the regulatory agency otherwise has concerns about our quality or regulatory compliance. Regulatory requirements for safety, efficacy, and quality may become more stringent due to changes in applicable laws, regulatory agency policies, or the adoption of new regulations. Clinical trialsstudies may also be delayed or halted due to ~~the following, among other factors:~~

●

~~Unanticipated side effects;~~

●

~~Lack of funding;~~

●

~~Inability to locate or recruit clinical investigators;~~

●

~~Inability to locate, recruit, and qualify sufficient numbers of patients;~~

●

~~Redesign of clinical trial programs;~~

●

~~Inability to manufacture or acquire sufficient quantities of the products, tissues, or any other components required for clinical trials;~~

●

~~Changes in development focus; or~~

●

~~Disclosure of trial results by competitors.~~

~~Our ability to complete the development of any of~~many factors beyond our products and services is subject to all of the risks associated with the commercialization of new products and services based on innovative technologies. Such risks include unanticipated technical or other problems, manufacturing, or processing difficulties, and the possibility that we have allocated insufficient funds to complete such development. Consequently, we may not be able to successfully introduce and market our products or services, or we may not be able to do so on a timely basis. These products and services may not meet price or performance objectives and may not prove to be as effective as competing products and services.

control.

If we are unable to successfully complete the development of a product, service, or application, or if we determine for ~~financial, technical, competitive, or other reasons~~any reason not to complete development or obtain regulatory approval or clearance of any product, service, or application, particularly in instances when we have expended significant capital, this could materially, adversely affect our ~~revenues,~~ financial ~~condition, profitability, and cash flows.~~performance. Research and development efforts are time consuming and expensive, and we cannot be certain that these efforts will lead to commercially successful products or services. Even the successful commercialization of a new product or service in the medical industry can be characterized by slow growth and high costs associated with marketing, under-utilized production capacity, and continuing research and development and education ~~costs.~~costs, among other things. The introduction of new products or services may require significant physician training ~~and~~or years of clinical evidence ~~derived fromfollow-up~~ ~~studies on human patients~~ in order to gain acceptance in the medical community.

~~All~~

Regulatory enforcement activities regarding Ethylene Oxide, which is used to sterilize some of ~~these~~our products and components, could have a material, adverse impact on ~~our revenues, financial condition, profitability, and cash flows.~~

~~The success of certain~~us.

Some of our products, including our On-X products, are sterilized using Ethylene Oxide (“EtO”). Although we have a small-scale EtO facility in Austin, Texas, we rely primarily on large-scale EtO facilities to sterilize our products. In addition, some of our suppliers use, or rely upon third parties to use, EtO to sterilize some of our product components. Concerns about the release of EtO into the environment at unsafe levels have led to increased activism and ~~preservation services depends upon relationships with healthcare professionals.~~

Iflobbying as well as various regulatory enforcement activities against EtO facilities, including closures and temporary closures, as well as proposals increasing regulations related to EtO. The number of EtO facilities in the US is limited, and any permanent or temporary closures or disruption to their operations could delay, impede, or prevent our ability to commercialize our products. In addition, any regulatory enforcement activities against us for our use of EtO could result in financial, legal, business, and reputational harm to us.

We may be subject to fines, penalties, and other sanctions if we ~~fail~~are deemed to ~~maintain our working relationships with healthcare professionals, many~~be promoting the use of our products for unapproved, or off-label, uses.

Our business and ~~preservation services may not be developed and marketed to appropriately meet~~future growth depend on the ~~needs and expectations of the professionals who~~continued use and support our products and preservation services. The research, development, marketing, and sales of many of our new and improved products and preservation services are dependent upon our maintaining working relationships with healthcare professionals. We rely on these professionals to provide us with considerable knowledge and experience regarding our products and preservation services. Healthcare professionals assist us as researchers, marketing and training consultants, product consultants, and speakers. If we are unable to maintain our relationships with these professionals and do not continue to receive their advice and input, the development and commercialization of our products for approved uses. Generally, regulators contend that, unless our products are approved or cleared by a regulatory body for alternative uses, we may not make claims about the safety or effectiveness of our products or promote them for such uses. Such limitations present a risk that law enforcement could allege that the nature and ~~preservation services~~scope of our sales, marketing, or support activities, though designed to comply with all regulatory requirements, constitute unlawful promotion of our products for an unapproved use. We also face the risk that such authorities might pursue enforcement based on past activities that we discontinued or changed. Investigations concerning the promotion of unapproved uses and related issues are typically expensive, disruptive, and burdensome and generate negative publicity. If our promotional activities are found to be in violation of the law, we may face significant fines and penalties and may be required to substantially change our sales, promotion, grant, and educational

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activities. In addition, we or our officers could ~~suffer, which could~~be excluded from participation in government healthcare programs such as Medicare and Medicaid.

Healthcare policy changes may have a material, adverse effect on us.

In response to perceived increases in healthcare costs in recent years, there have been, and continue to be, proposals by the governmental authorities, third-party payors, and elected office holders and candidates to impact public health, control healthcare costs and, more generally, to reform the healthcare systems. Additional uncertainty is anticipated as debates about healthcare, vaccines, and public health continue in light of the COVID-19 pandemic which may have an impact on US law relating to the healthcare industry. Many US healthcare laws, such as the Affordable Care Act, are complex, subject to change, and dependent on interpretation and enforcement decisions from government agencies with broad discretion. The application of these laws to us, our ~~revenues,~~customers, or the specific services and relationships we have with our customers is not always clear. Our failure to anticipate accurately any changes to, or the repeal or invalidation of all or part of the Affordable Care Act and similar or future laws and regulations, or our failure to comply with them, could create liability for us, result in adverse publicity and negatively affect our business, results of operations, and financial condition.

Further, the growth of our business, results of operations and financial condition ~~profitability,~~rely, in part, on customers in the healthcare industry that receive substantial revenues from governmental and ~~cash flows.~~

~~If healthcare providers are not adequately reimbursed~~other third-party payer programs. A reduction or less than expected increase in government funding for ~~procedures conducted with~~these programs or a change in reimbursement or allocation methodologies, or a change in reimbursement related to products designated as “breakthrough devices” by the FDA, could negatively affect our customers’ businesses and, in turn, negatively impact our business, results of operations and financial condition. Any changes that lower reimbursement for our products or ~~if reimbursement policies change~~reduce medical procedure volumes, could adversely affect our business and profitability.

Legal, Quality, and Regulatory Risks

As a medical device manufacturer and tissue services provider we are exposed to risk of product liability claims and our existing insurance coverage may be insufficient, or we may ~~not~~ be ~~successful in marketing and selling our products or preservation services.~~

Most of our customers, and the healthcare providers to whom our customers supply medical devices, rely on third-party payors, including government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which medical devices that incorporate components we manufacture or assemble are used. Healthcare providers, facilities, and government agencies are unlikely to purchase our products or implant our tissues if they are not adequately reimbursed for these procedures. Unless a sufficient amount of peer-reviewed clinical data about our products and preservation services has been published, third-party payors, including insurance companies and government agencies, may refuse to provide reimbursement. The continuing efforts of governmental authorities, insurance companies, and other payors of healthcare costs to contain or reduce these costs could lead to patients being unable to obtain ~~approval~~insurance in the future, to cover any resulting liability.

Our products and processed tissues allegedly have caused, and may in the future cause, injury or result in other serious complications that may result in product or other liability claims from our customers or their patients. If our products are defectively designed, manufactured, or labeled, or contain inadequate warnings, defective components, or are misused, or are used contrary to our warnings, instructions, and approved indications, we may become subject to costly litigation that can have unpredictable and sometimes extreme outcomes.

We maintain claims-made insurance policies to mitigate our financial exposure to product and tissue processing liability and securities, claims, among others, that are reported to the insurance carrier while the policy is in effect. These policies do not include coverage for ~~payment from these third-party payors. Furthermore, even~~punitive damages. Although we have insurance for product and tissue processing liabilities, securities, property, and general liabilities, if ~~reimbursement~~we are unsuccessful in arranging cost-effective acceptable resolutions of claims, it is ~~provided, it~~possible that our insurance program may not be adequate to ~~fully compensate the clinicians~~cover any or ~~hospitals. Some third-party payors may impose restrictions~~all possible claims or losses, including losses arising out of natural disasters or catastrophic circumstances. Any significant claim could result in an increase in our insurance rates or jeopardize our ability to secure coverage on ~~the procedures for which they will provide reimbursement. If healthcare providers cannot obtain sufficient reimbursement from third-party payors for our products~~reasonable terms, if at all.

Any securities or ~~preservation services~~product liability/tissue processing claim, even a meritless or ~~the screenings conducted with our products, we may not achieve significant market acceptance. Acceptance~~unsuccessful one, could be costly to defend, and result in diversion of our ~~products in international markets will depend upon the availability~~management’s attention from our business, adverse publicity, withdrawal of ~~adequate reimbursement~~clinical trial participants, injury to our reputation, or funding within prevailing healthcare payment systems. Reimbursement, funding, and healthcare payment systems vary significantly by country. We may not obtain approvals for reimbursement in a timely manner or at all.

loss of revenue.

We are subject to various ~~federal~~US and ~~state~~international bribery, anti-kickback, ~~self-referral,~~ false claims, privacy, ~~and~~ transparency, ~~laws,~~ and similar laws, any breach of which could cause a material, adverse effect on our business, financial condition, and profitability.

Our relationships with physicians, hospitals, and other healthcare providers are subject to scrutiny under various ~~federal~~US and international bribery, anti-kickback, ~~self-referral,~~ false claims, privacy, ~~and~~ transparency, ~~laws,~~ and similar laws, often referred to collectively as ~~healthcare~~“healthcare compliance laws.” Healthcare compliance laws are broad, ~~can be~~sometimes ambiguous, ~~and are~~ complex, and ~~even minor inadvertent violations can give rise~~subject to ~~claims that~~change and changing interpretations. The ongoing war in Ukraine and the ~~relevant law has been violated.~~current and future sanctions imposed on Russia and others as a result may exacerbate these risks. See also Part I, Item 1A, “Risk Factors – Business and Economic Risks - We are subject to a variety of risks due to our international operations and continued global expansion.” Possible sanctions

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for violation of these healthcare compliance laws include ~~monetary~~ fines, civil and criminal penalties, exclusion from ~~federal and state~~government healthcare programs, ~~including Medicare, Medicaid, Veterans Administration health programs, workers’ compensation programs,~~ and ~~TRICARE (the healthcare system administered by or on behalf~~despite our compliance efforts, we face the risk of the U.S. Department of Defense for uniformed services beneficiaries, including active duty and their dependents and retirees and their dependents), and forfeiture of amounts collected in violation of such prohibitions. Any government investigationan enforcement activity or a finding of a violation of these ~~laws could result in a material, adverse effect on our business, financial condition, and profitability.~~

Anti-kickback laws and regulations prohibit any knowing and willful offer, payment, solicitation, or receipt of any form of remuneration in return for the referral of an individual or the ordering or recommending of the use of a product or service for which payment may be made by Medicare, Medicaid, or other government-sponsored healthcare programs. laws.

We have entered into consulting ~~agreements, speaker agreements, research agreements,~~ and product development agreements with healthcare professionals and healthcare organizations, including some who may order our products or make decisions to use them. We have also adopted the AdvaMed Code of Conduct, the MedTech Europe Code of Ethical Business Practice, and the APACMed Code of Ethical Conduct which govern our relationships with healthcare professionals to bolster our compliance with healthcare compliance laws. While ~~these transactions were~~our relationships with healthcare professionals and organizations are structured to comply with ~~the intention of complying with all applicable laws, including state anti-referral~~such laws and ~~other applicable anti-kickback~~we conduct training sessions on these laws and Codes, it is possible that ~~regulatory or~~ enforcement ~~agencies or courts~~authorities may ~~in the future~~ view ~~these transactions~~our relationships as prohibited arrangements that must be restructured or for which we would be subject to other significant civil or criminal penalties. We have also adopted the AdvaMed Code of Conduct into our Code of Business Conduct, which governs our relationships with healthcare professionals, including our payment of travel and lodging expenses, research and educational grant procedures, and sponsorship of third-party conferences.penalties or debarment. In addition, we have conducted training sessions on these principles. However, there can be no assurance that regulatory or enforcement authorities will view these arrangements as being in compliance with applicable laws or that one or more of our employees or agents will not disregard the rules we have established. Because our strategy relies on the involvement of healthcare professionals who consult with us on the design of our products, perform clinical research on our behalf, or educate the market about the efficacy and uses of our products, we could be materially impacted if regulatory or enforcement agencies or courts interpret our financial relationships with healthcare professionals, who refer or order our products, to be in violation of applicable laws and determine that we would be unable to achieve compliance with such applicable laws. This could harm our reputation and the reputations of the healthcare professionals we engage to provide services on our behalf. In addition, the cost of noncompliance with these laws could be substantial since we could be subject to monetary fines and civil or criminal penalties, and we could also be excluded from federally funded healthcare programs, including Medicare and Medicaid, for noncompliance.

~~The Federal False Claims Act (“FCA”) imposes civil liability on~~ any person or entity that submits, or causes the submission of, a false or fraudulent claim to the U.S. Government. Damages under the FCA can be significant and consist of the imposition of fines and penalties. The FCA also allows a private individual or entity with knowledge of past or present fraud against the federal government to sue on behalf of the government to recover the civil penalties and treble damages. The U.S. Department of Justice (“DOJ”) on behalf of the government has previously alleged that the marketing and promotional practices of pharmaceutical and medical device manufacturers, including the~~off-label~~ promotion of products or the payment of prohibited kickbacks to doctors, violated the FCA, resulting in the submission of improper claims to federal and state healthcare entitlement programs such as Medicaid. In certain cases, manufacturers have entered into criminal and civil settlements with the federal government under which they entered into plea agreements, paid substantial monetary amounts, and entered into corporate integrity agreements that require, among other things, substantial reporting and remedial actions going forward.

The Physician Payments Sunshine Act and similar state laws require us to annually report in detail certain payments and “transfer of value” from us to healthcare professionals, such as reimbursement for travel and meal expenses or compensation for services provided such as training, consulting, and research and development. This information is then posted on the website of the Center of Medicare and Medicaid Services (“CMS”). Certain states also prohibit some forms of these payments, require adoption of marketing codes of conduct, and regulate our relationships with physicians and other referral sources.

The scope and enforcement of all of these laws is uncertain and subject to rapid change, especially in light of the scarcity of applicable precedent and regulations. There can be no assurance that federal or state regulatory or enforcement authorities will not investigate or challenge our current or future activities under these laws. Any investigation or challenge could have a material, adverse effect on our business, financial condition, and profitability. Any state or federal regulatory orevent, any enforcement review of or action against us as a result of such review, regardless of ~~the~~ outcome, ~~would~~could be costly and time consuming. Additionally, we cannot predict the impact of any changes in or interpretations of these laws, whether these changes will be retroactive or will have effect on a going-forward basis only.

~~Consolidation~~

The proliferation of new and expanded data privacy laws, including the General Data Protection Regulation in the ~~healthcare industry~~European Union, could adversely affect our business.

An increasing number of federal, state, and foreign data privacy laws and regulations, which can be enforced by private parties or governmental entities, have been or are being promulgated and are constantly evolving. These laws and regulations may include new requirements for companies that receive or process an individual’s personal data (including employees), which increases our operating costs and requires significant management time and energy. Many of these laws and regulations, including the European Union’s General Data Protection Regulation (“GDPR”) also include significant penalties for noncompliance. Although our personal data practices, policies, and procedures are intended to comply with GDPR and other data privacy laws and regulations, there can be no assurance that regulatory or enforcement authorities will view our arrangements as being in compliance with applicable laws, or that one or more of our employees or agents will not disregard the rules we have established. Any privacy related government enforcement activities may be costly, result in negative publicity, or subject us to significant penalties.

Some of our products and technologies are subject to significant intellectual property risks and uncertainty.

We own trade secrets, patents, patent applications, and licenses relating to our technologies and trademarks and goodwill related to our products and services, which we believe provide us with important competitive advantages. We cannot be certain that we will be able to maintain our trade secrets, that our pending patent applications will issue as patents, or that no one will challenge the validity or enforceability of any intellectual property that we adopt, own, or license. Competitors may independently develop our proprietary technologies or design non-infringing alternatives to patented inventions. We do not control the maintenance, prosecution, enforcement, or strategy for in-licensed intellectual property and as such are dependent in part on the owners of these rights to maintain their viability. Their failure to do so could significantly impair our ability to exploit those technologies. Additionally, our technologies, products, or services could infringe intellectual property rights owned by others, or others could infringe our intellectual property rights.

If we become involved in intellectual property disputes, the costs could be expensive, and if we were to lose or decide to settle, the amounts or effects of the settlement or award by a tribunal could be costly.

Risks Relating to Our Indebtedness

The agreements governing our indebtedness contain restrictions that limit our flexibility in operating our business.

The agreements governing our indebtedness contain, and any instruments governing future indebtedness of ours may contain, covenants that impose significant operating and financial restrictions on us and certain of our subsidiaries, including (subject in each case to certain exceptions) restrictions or prohibitions on our and certain of our subsidiaries’ ability to, among other things:

•Incur or guarantee additional debt or create liens on certain assets;

•Pay dividends on or make distributions of our share capital, including repurchasing or redeeming capital stock, or make other restricted payments, including restricted junior payments;

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•Enter into agreements that restrict our subsidiaries’ ability to pay dividends to us, repay debt owed to us or our subsidiaries, or make loans or advances to us or our other subsidiaries;
•Enter into certain transactions with our affiliates including any transaction or merger or consolidation, liquidation, winding-up, or dissolution; convey, sell, lease, exchange, transfer or otherwise dispose of all or any part of our business, assets or property; or sell, assign, or otherwise dispose of any capital stock of any subsidiary;
•Enter into certain rate swap transactions, basis swaps, credit derivative transactions, and other similar transactions, whether relating to interest rates, commodities, investments, securities, currencies, or any other relevant measure, or transactions of any kind subject to any form of master purchase agreement governed by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement;
•Amend, supplement, waive, or otherwise modify our or our subsidiaries' organizational documents in a manner that would be materially adverse to the interests of the lenders, or change or amend the terms of documentation regarding junior financing in a manner that would be materially adverse to the interests of the lenders;
•Make changes to our and our subsidiaries’ fiscal year without notice to the administrative agent;
•Enter into agreements which restrict our ability to incur liens;
•Engage in any line of business substantially different from that in which we are currently engaged; and
•Make certain investments, including strategic acquisitions or joint ventures.
Our indebtedness could adversely affect our ability to raise additional capital to fund operations and limit our ability to react to changes in the economy or our industry.
Our current and future levels of indebtedness could adversely affect our ability to raise additional capital, limit our operational flexibility, and hinder our ability to react to changes in the economy or our industry. It may also limit our ability to borrow money, require us to dedicate substantial portions of our cash flow to repayment, and restrict our ability to invest in business opportunities. Because most of our borrowings are at a variable rate of interest, we are exposed to interest rate fluctuations.
We have pledged substantially all of our US assets as collateral under our existing Credit Agreement. If we default on the terms of such credit agreements and the holders of our indebtedness accelerate the repayment of such indebtedness, there can be no assurance that we will have sufficient assets to repay our indebtedness.

A failure to comply with the covenants in our existing Credit Agreement could result in an event of default, which, if not cured or waived, could have ana material, adverse effect on our ~~revenues~~business, financial condition, and ~~results~~profitability. In the event of ~~operations.~~

~~Many healthcare industry companies, including health care systems, are consolidating~~any such default, the holders of our indebtedness:

•Will not be required to ~~create new companies~~lend any additional amounts to us; and

•Could elect to declare all indebtedness outstanding, together with ~~greater market power. As the healthcare industry consolidates, competition~~accrued and unpaid interest and fees, to ~~provide goods~~be due and ~~services~~payable and terminate all commitments to industry participants will become more intense. These industry participants may try to use their market power to negotiate price concessions or reductions for medical devices that incorporate components produced by us. extend further credit, if applicable.

If we are ~~forced~~unable to ~~reduce~~repay those amounts, the holders of our ~~prices because~~secured indebtedness could proceed against their secured collateral to seek repayment out of ~~consolidation~~proceeds from the sale or liquidation of our assets. If our indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in ~~the healthcare industry,~~full.

Risks Related to Ownership of our ~~revenues would decrease and our financial condition, profitability, and/or cash flows would suffer.~~

Common Stock

Our business could be negatively impacted as a result of shareholder activism.

In recent years, shareholder activists have become involved in numerous public companies. Shareholder activists ~~frequently~~from time to time propose to involve themselves in the governance, strategic direction, and operations of ~~the~~a company. ~~We may in the future~~

~~become subject to such shareholder activity and demands.~~ Such ~~demands~~involvement may disrupt our business and divert the attention of our management, and ~~employees, and~~ any perceived uncertainties as to our future direction resulting from such ~~a situation~~involvement could result in the loss of ~~potential~~ business opportunities, be exploited by our competitors, cause concern tofor our current or potential customers, ~~and~~cause significant fluctuations in stock price, or make it more difficult to attract and retain qualified personnel and business ~~partners, all~~partners.

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Our business could ~~adversely affect~~be impacted by increased shareholder emphasis on environmental, social, and governance matters.

Investors and other key stakeholders are increasingly focusing on areas of corporate responsibility, and particularly matters related to environmental, social, and governance (“ESG”) factors. Institutional investors have expressed expectations with respect to ESG matters that they use to guide their investment strategies and may, in some cases, choose not to invest in us if they believe our ~~business. In addition, actions~~ESG policies are lagging or inadequate. Other stakeholders also have expectations regarding ESG factors, such as employees or potential employees who desire to work for a company that reflects their personal values. These areas of ~~activist shareholders~~focus are continuing to evolve, as are the criteria that investors assess companies’ performance in these areas. Investors are increasingly looking to companies that demonstrate strong ESG and sustainability practices as an indicator of long-term resilience, especially in light of events such as the COVID-19 pandemic. Keeping up with and meeting these expectations may ~~cause significant fluctuations in~~disrupt our ~~stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect~~business and divert the ~~underlying fundamentals and prospects~~attention of our ~~business.~~

~~Our acquired federal tax net operating loss~~management, and ~~general business credit carryforwards will be limited or may expire, which could result in greater future income tax expense and adversely impact future cash flows.~~

Our federal tax net operating loss and general business credit carryforwards include acquired net operating loss carryforwards. Such acquired net operating loss carryforwards will be limited in future periods due to a change in control of our former subsidiaries Hemosphere, Inc. (“Hemosphere”) and Cardiogenesis Corporation, as mandated by Section 382 of the Internal Revenue Code of 1986, as amended. We believe that our acquisitions of these companies each constituted a change in control, and that prior to our acquisition, Hemosphere had experienced other equity ownership changes that should be considered a change in control. We also acquired net operating loss carryforwards in the acquisition of~~On-X~~ ~~Life Technologies that are limited under Section 382. However,~~ we ~~believe that such net operating loss carryforwards fromOn-X~~ will be fully realizable prior to expiration. The deferred tax assets recorded on our Consolidated Balance Sheets exclude amounts that it expects will not be realizable due to these changes in control. A portion of the acquired net operating loss carryforwards is related to state income taxes for which management believes it is more likely than not that these deferred tax assets will not be realized. Therefore, we recorded a valuation allowance against these state net operating loss carryforwards. Limitations on our federal tax net operating loss and general business credit carryforwards could result in greater future income tax expense and adversely impact future cash flows.

~~Our operating results may fluctuate significantly on a quarterly or annual basis as a result of a variety of factors, many of which are outside our control.~~

~~Fluctuations in our quarterly and annual financial results have resulted and will continue to result from numerous factors, including:~~

●

~~Changes in demand for the products we sell;~~

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~~Increased product and price competition, due to the announcement or introduction of new products by our competitors, market conditions, the regulatory landscape, or other factors;~~

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~~Changes in the mix of products we sell;~~

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~~Availability of materials and supplies, including donated tissue used in preservation services;~~

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~~Our pricing strategy with respect to different product lines;~~

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~~Strategic actions by us, such as acquisitions of businesses, products, or technologies;~~

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~~Effects of domestic and foreign economic conditions and exchange rates on our industry and/or customers;~~

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~~The divestiture or discontinuation of a product line or other revenue generating activity;~~

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~~The relocation and integration of manufacturing operations and other strategic restructuring;~~

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~~Regulatory actions that may necessitate recalls of our products or warning letters that negatively affect the markets for our products;~~

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~~Failure of government and private health plans to adequately and timely reimburse the users of our products;~~

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~~Costs incurred by us in connection with the termination of contractual and other relationships, including distributorships;~~

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~~Our ability to collect outstanding accounts receivable in selected countries outside of the U.S.;~~

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~~The expiration or utilization of deferred tax assets such as net operating loss carryforwards;~~

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~~Market reception of our new or improved product offerings; and~~

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~~The loss of any significant customer, especially in regard to any product that has a limited customer base.~~

~~We have based our current and future expense levels largely on our investment plans and estimates of future events, although certain of our expense levels are, to a large extent, fixed. We~~ may be unable to ~~adjust spending~~make the investments in ~~a timely manner~~ESG that our competitors with greater financial resources are able to ~~compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenue relative~~make. Failure to our planned expenditures would have an immediate adverse effect on our business, results of operations, and financial condition. Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service, or marketing decisions that could have a material and adverse effect on our business, results of operations, and financial condition. Due to the foregoing factors,

~~some of which are not within our control, the price of our common stock may fluctuate substantially. If our quarterly operating results fail to~~ meet ~~or exceed~~ the expectations of ~~securities analysts~~investors and other stakeholders in these areas may damage our reputation, impact employee retention, impact the willingness of our customers to do business with us, or ~~investors, our stock price could drop suddenly and significantly. We believe the quarterly comparisons of~~otherwise impact our financial results ~~are not always meaningful~~ and ~~should not be relied upon as an indication of our future performance.~~

~~Risks Related to Ownership of our Common Stock~~

stock price.

We do not anticipate paying any dividends on our common stock for the foreseeable future.

In December 2015 our Board of Directors discontinued dividend payments on our common stock for the foreseeable future. If we do not pay cash dividends, our shareholders may receive a return on their investment in our common stock only ~~if the market price~~through appreciation of ~~our common stock has increased when they sell~~ shares of our common stock that they own. Future dividends, if any, will be authorized by our Board of Directors and declared by us based upon a variety of factors deemed relevant by our directors, including, among other things, our financial condition, liquidity, earnings projections, and business prospects. In addition, restrictions in our credit facility limit our ability to pay future dividends. ~~We can provide no assurance of our ability to pay cash dividends in the future.~~

Provisions of ~~Florida~~Delaware law and anti-takeover provisions in our organizational documents may discourage or prevent a change of control, even if an acquisition would be beneficial to shareholders, which could affect our share price adversely and prevent attempts by shareholders to remove current management.

We are subject to the Florida affiliated transactions statute, which generally requires approval by the disinterested directors or supermajority approval by shareholders for “affiliated transactions” between

Effective January 1, 2022 we reincorporated in Delaware. Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an ~~“interested stockholder.” Additionally~~interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, the organizational documents adopted in connection with our reincorporation contain provisions ~~restricting~~that restrict persons who may call shareholder meetings, allow the issuance of blank-check preferred stock without the vote of shareholders, and ~~allowing~~allow the Board of Directors to fill vacancies and fix the number of directors. These provisions of ~~Florida~~Delaware law and our articles of incorporation and bylaws could prevent attempts by shareholders to remove current management, prohibit or delay mergers or other changes of control transactions, and discourage attempts by other companies to acquire us, even if such a transaction would be beneficial to our shareholders.

The effects of reincorporation in Delaware are detailed in our 2021 Special Proxy Statement and Notice of Special Meeting filed with the SEC on October 7, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~(c)~~

The following table provides information about purchases by us during the quarter ended September 30, 2017 of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934:

Period
   Total Number of
Common Shares
and Common Stock
Units Purchased    Average Price
Paid per
      Common Share          Total Number
  of Common Shares
Purchased as
Part of Publicly
Announced
Plans or Programs    Dollar Value
of Common Shares
That May Yet Be
  Purchased Under the
Plans or Programs
07/01/17 - 07/31/17
   654      $ 18.90      --      $ --
08/01/17 - 08/31/17
   762    18.79      --    --
09/01/17 - 09/30/17
   954    21.75      --    --





Total
   2,370    20.01      --

(c) The following table provides information about purchases by us during the three months ended June 30, 2022 of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934:


Period	Total Number of Common Shares and Common Stock Units Purchased	Average Price Paid per Common Share		Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs	Dollar Value of Common Shares That May Yet Be Purchased Under the Plans or Programs
04/01/22 - 04/30/22	—	$	—	—	$	—
05/01/22 - 05/31/22	451	20.35		—	—
06/01/22 - 06/30/22	—	—		—	—
Total	451	$	20.35	—	$	—

The common shares purchased during the ~~quarter~~three months ended ~~September~~June 30, ~~2017~~2022 were tendered to us in payment of taxes on stock compensation and were not part of a publicly announced plan or program.

Table of Contents

Under our ~~Amended Debt~~Credit Agreement, we are prohibited from repurchasing our common stock, except for the repurchase of stock from our employees or directors when tendered in payment of taxes or the exercise price of stock options, upon the satisfaction of certain requirements.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Table of Contents

Item 6. Exhibits.

The exhibit index can be found below.


Exhibit Number			Description
3.1

2.4**	~~Securities Purchase Agreement, dated as~~Delaware Certificate of October 10, 2017, by and among CryoLife, Inc., CryoLife Germany HoldCo GmbH, Jolly Buyer Acquisition GmbH, JOTEC AG, each of the security holders identified therein, and Lars Sunnanväder as the representative of such security holders.Incorporation, effective January 1, 2022. (Incorporated herein by reference to Exhibit ~~2.1~~3.2 to the Registrant’s Current Report on Form 8-K filed ~~October 11, 2017.)~~January 4, 2022).
3.2
~~3.1~~		~~Amended and Restated Articles~~Delaware Certificate of Amendment of Certificate of Incorporation, ~~of CryoLife, Inc.~~effective January 18, 2022. (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form8-K filed ~~November 23, 2015.)~~January 20, 2022).
3.3
~~3.2~~		Amended and Restated~~By-Laws~~ Bylaws of ~~CryoLife,~~Artivion, Inc., a Delaware Corporation (Incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form8-K filed ~~March 1, 2016.)~~January 20, 2022).
31.1*
~~4.1~~		~~Form of Certificate for our Common Stock. (Incorporated herein by reference to Exhibit 4.2 to the Registrant’s Annual Report onForm 10-K~~ ~~for the fiscal year ended December 31, 1997.)~~

31.1*	Certification by J. Patrick Mackin pursuant to section 302 of theSarbanes-Oxley Act of 2002.
31.2*
31.2*		Certification by D. Ashley Lee pursuant to section 302 of theSarbanes-Oxley Act of 2002.
32**			Certification Pursuant To 18 USC. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.
32*101.INS		~~Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of theSarbanes-Oxley~~ ~~Act of 2002.~~

101.INS*	XBRL Instance Document
101.SCH*
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File – formatted as Inline XBRL and contained in Exhibit 101

*	~~Filed herewith.~~

**	~~Furnished herewith.~~

______________________

*Filed herewith.

**Furnished herewith.

†Indicates management contract or compensatory plan or arrangement

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ARTIVION, INC.

(Registrant)

~~CRYOLIFE, INC.~~

/s/ J. PATRICK MACKIN

/s/ D. ASHLEY LEE

~~(Registrant)~~

J. PATRICK MACKIN

D. ASHLEY LEE

Chairman, President, and
Chief Executive Officer
(Principal Executive Officer)

Executive Vice President, and
Chief Financial Officer
(Principal Financial and
Accounting Officer)

~~/s/ J. PATRICK MACKIN~~

~~/s/ D. ASHLEY LEE~~

~~J. PATRICK MACKIN~~

~~D. ASHLEY LEE~~

~~Chairman, President, and~~

~~Executive Vice President,~~

~~Chief Executive Officer~~

~~Chief Operating Officer, and~~

~~(Principal Executive Officer)~~

~~Chief Financial Officer~~

August 5, 2022

~~(Principal Financial and~~

~~Accounting Officer)~~


~~October 31, 2017~~			DATE

~~DATE~~


	Three Months Ended September 30,					Nine Months Ended September 30,

	2017			2016		2017			2016

	(Unaudited)					(Unaudited)
Revenues:
Products	$	27,029		$	28,004	$	84,519		$	85,067
Preservation services		16,970			17,248		52,357			50,284

Total revenues		43,999			45,252		136,876			135,351


Cost of products and preservation services:
Products		6,220			6,598		21,196			21,299
Preservation services		7,917			8,872		23,401			26,348

Total cost of products and preservation services		14,137			15,470		44,597			47,647


Gross margin		29,862			29,782		92,279			87,704


Operating expenses:
General, administrative, and marketing		24,756			20,592		71,016			69,302
Research and development		4,277			3,714		13,098			9,602

Total operating expenses		29,033			24,306		84,114			78,904

Gain from sale of business components		--			--		--			(7,915)

Operating income		829			5,476		8,165			16,715


Interest expense		851			742		2,486			2,256
Interest income		(64	)		(18)		(159	)		(48)
Other expense (income), net		21			21		(70	)		(146)


Income before income taxes		21			4,731		5,908			14,653
Income tax (benefit) expense		(1,304	)		1,738		(803	)		6,772


Net income	$	1,325		$	2,993	$	6,711		$	7,881


Income per common share:
Basic	$	0.04		$	0.09	$	0.20		$	0.24

Diluted	$	0.04		$	0.09	$	0.19		$	0.24


Weighted-average common shares outstanding:
Basic		32,887			32,151		32,665			31,731
Diluted		34,057			33,165		33,851			32,568

Net income	$	1,325		$	2,993	$	6,711		$	7,881
Other comprehensive income (loss)		217			(31)		582			(459)

Comprehensive income	$	1,542		$	2,962	$	7,293		$	7,422


	September 30, 2017			December 31, 2016

	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	54,242		$	56,642
Restricted securities		771			699
Receivables, net		33,659			30,096
Inventories		27,763			26,293
Deferred preservation costs		35,008			30,688
Prepaid expenses and other		4,142			2,815

Total current assets		155,585			147,233


Property and equipment, net		20,607			18,502
Goodwill		78,294			78,294
Patents, net		827			1,008
Trademarks and other intangibles, net		62,454			65,633
Deferred income taxes		1,190			--
Investment in company owned life insurance		4,360			2,991
Other		2,823			2,479

Total assets	$	326,140		$	316,140


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,066		$	5,744
Accrued expenses and other		17,813			19,796
Current portion of long-term debt		3,234			4,562

Total current liabilities		26,113			30,102


Long-term debt		64,835			67,012
Deferred compensation liability		3,753			2,600
Deferred rent obligations		2,982			2,355
Other		5,101			5,088

Total liabilities		102,784			107,157


Commitments and contingencies

Shareholders’ equity:
Preferred stock		--			--
Common stock (issued shares of 34,844 in 2017 and 34,230 in 2016)		348			342
Additionalpaid-in capital		194,958			187,061
Retained earnings		40,616			34,143
Accumulated other comprehensive income (loss)		153			(429)
Treasury stock at cost (shares of 1,387 in 2017 and 1,356 in 2016)		(12,719	)		(12,134)

Total shareholders’ equity		223,356			208,983


Total liabilities and shareholders’ equity	$	326,140		$	316,140


September 30, 2017	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	371	$	--	$	--	$	371
Restricted securities:
Money market funds		771		--		--		771

Total assets	$	1,142	$	--	$	--	$	1,142


December 31, 2016	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	3,466	$	--	$	--	$	3,466
Restricted securities:
Money market funds		699		--		--		699

Total assets	$	4,165	$	--	$	--	$	4,165


	Twelve Months Ended December 31,

	2016		2015

Total revenues	$	182,007	$	179,266
Net income (loss)		17,692		(4,787)

Pro forma income (loss) per common share - basic	$	0.54	$	(0.15)
Pro forma income (loss) per common share - diluted	$	0.53	$	(0.15)


	September 30, 2017		December 31, 2016

Cardiac tissues	$	17,195	$	15,768
Vascular tissues		17,813		14,920

Total deferred preservation costs	$	35,008	$	30,688


September 30, 2017	Gross Carrying Value		Accumulated Amortization		Amortization Period
Acquired technology	$	38,478	$	7,615		11 – 22 Years
Patents		3,593		2,766		17 Years
Distribution and manufacturing rights andknow-how		4,059		1,748		11 – 15 Years
Customer lists and relationships		29,140		3,190		13 – 22 Years
Other		1,418		942		3 Years

December 31, 2016	Gross Carrying Value		Accumulated Amortization		Amortization Period
Acquired technology	$	38,478	$	5,956		11 – 22 Years
Patents		3,710		2,702		17 Years
Distribution and manufacturing rights andknow-how		4,059		1,532		11 – 15 Years
Customer lists and relationships		29,140		2,141		13 – 22 Years
Non-compete agreement		381		381		10 Years
Other		1,262		531		3 Years


	Remainder of 2017		2018		2019		2020		2021		2022
Amortization expense	$	1,140	$	4,444	$	4,102	$	3,939	$	3,918	$	3,390


	September 30, 2017		December 31, 2016

Term loan balance	$	69,678	$	73,594
Less unamortized loan origination costs		(1,609)		(2,020)

Net borrowings		68,069		71,574
Less short-term loan balance		(3,234)		(4,562)

Long-term loan balance	$	64,835	$	67,012


	Three Months Ended September 30,				Nine Months Ended September 30,
Basic income per common share		2017		2016		2017		2016

Net income	$	1,325	$	2,993	$	6,711	$	7,881
Net income allocated to participating securities		(22)		(58)		(126)		(152)

Net income allocated to common shareholders	$	1,303	$	2,935	$	6,585	$	7,729


Basic weighted-average common shares outstanding		32,887		32,151		32,665		31,731

Basic income per common share	$	0.04	$	0.09	$	0.20	$	0.24


	Three Months Ended September 30,				Nine Months Ended September 30,
Diluted income per common share		2017		2016		2017		2016

Net income	$	1,325	$	2,993	$	6,711	$	7,881
Net income allocated to participating securities		(22)		(56)		(122)		(148)

Net income allocated to common shareholders	$	1,303	$	2,937	$	6,589	$	7,733


Basic weighted-average common shares outstanding		32,887		32,151		32,665		31,731
Effect of dilutive stock options and awards^a		1,170		1,014		1,186		837

Diluted weighted-average common shares outstanding		34,057		33,165		33,851		32,568

Diluted income per common share	$	0.04	$	0.09	$	0.19	$	0.24


	Remainder of
	Total		2017		2018		2019		2020		2021		Thereafter
Long-term debt obligations	$	68,741	$	--	$	3,750	$	3,750	$	5,157	$	56,084	$	--
Operating leases		23,002		909		5,093		5,024		4,381		3,807		3,788
Interest payments		8,336		686		2,649		2,499		2,321		181		--
Research obligations		6,037		1,522		3,817		328		235		135		--
Purchase commitments		3,582		1,709		1,696		177		--		--		--
Contingent payments		1,000	��	--		--		1,000		--		--		--
Other long-term liabilities		475		465		10		--		--		--		--

Total contractual obligations	$	111,173	$	5,291	$	17,015	$	12,778	$	12,094	$	60,207	$	3,788


Period	Total Number of Common Shares and Common Stock Units Purchased		Average Price Paid per Common Share		Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs		Dollar Value of Common Shares That May Yet Be Purchased Under the Plans or Programs
07/01/17 - 07/31/17		654	$	18.90		--	$	--
08/01/17 - 08/31/17		762		18.79		--		--
09/01/17 - 09/30/17		954		21.75		--		--

Total		2,370		20.01		--