UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~November 30, 2020~~August 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-50761

AngioDynamics, Inc.

(Exact name of registrant as specified in its charter)


Delaware						11-3146460
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

14 Plaza Drive, Latham, New York 12110

(Address of principal executive offices and zip code)

(518) 795-1400

Registrant’s telephone number, including area code

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

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock, par value $.01

ANGO

NASDAQ Global Select Market

Preferred Stock Purchase Rights

NASDAQ Global Select Market

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

None

(Title of Class)

Table of Contents

~~(Title of Class)~~

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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


Class						Outstanding as of ~~January 6,~~September 28, 2021
Common Stock, par value $.01						~~37,963,797~~38,650,434

Table of Contents

AngioDynamics, Inc. and Subsidiaries

TABLE OF CONTENTS


		Page
	Part I: Financial Information

Item 1.	Financial Statements

	Consolidated Statements of Operations (unaudited)	3

	Consolidated Statements of Comprehensive Loss (unaudited)	4

	Consolidated Balance Sheets (unaudited)	5

	Consolidated Statements of Cash Flows (unaudited)	6

	Consolidated Statements of Stockholders’ Equity (unaudited)	7

	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2321

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3327

Item 4.	Controls and Procedures	3428

	Part II: Other Information

Item 1.	Legal Proceedings	3529

Item 1A.	Risk Factors	3729

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3829

Item 3.	Defaults on Senior Securities	3829

Item 4.	Mine Safety Disclosures	3829

Item 5.	Other Information	3829

Item 6.	Exhibits	3930

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements.

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands of dollars, except per share data)

Three Months Ended Six Months Ended
Nov 30, 2020 Nov 30, 2019 Nov 30, 2020 Nov 30, 2019
Net sales $ 72,770 $ 70,003 $ 142,986 $ 136,045
Cost of sales (exclusive of intangible amortization) 32,596 28,459 67,048 56,284
Gross profit 40,174 41,544 75,938 79,761
Operating expenses:
Research and development 9,712 7,764 18,721 14,055
Sales and marketing 20,174 20,113 37,879 39,493
General and administrative 9,219 10,994 17,776 19,448
Amortization of intangibles 4,593 4,530 9,546 8,398
Change in fair value of contingent consideration 184 145 (473) (303)
Acquisition, restructuring and other items, net 1,128 1,421 2,447 2,921
Total operating expenses 45,010 44,967 85,896 84,012
Operating loss (4,836) (3,423) (9,958) (4,251)
Other income (expense):
Interest expense, net (235) (41) (450) (506)
Other income (expense), net (102) 162 422 64
Total other income (expense), net (337) 121 (28) (442)
Loss before income tax benefit (5,173) (3,302) (9,986) (4,693)
Income tax benefit (905) (566) (1,450) (682)
Net loss $ (4,268) $ (2,736) $ (8,536) $ (4,011)
Loss per share
Basic $ (0.11) $ (0.07) $ (0.22) $ (0.11)
Diluted $ (0.11) $ (0.07) $ (0.22) $ (0.11)
Weighted average shares outstanding
Basic 38,327 37,992 38,242 37,887
Diluted 38,327 37,992 38,242 37,887


	Three Months Ended
	Aug 31, 2021		Aug 31, 2020
Net sales	$	76,971	$	70,216
Cost of sales (exclusive of intangible amortization)	36,832		34,452
Gross profit	40,139		35,764
Operating expenses:
Research and development	7,394		9,009
Sales and marketing	24,446		17,705
General and administrative	8,943		8,557
Amortization of intangibles	4,821		4,953
Change in fair value of contingent consideration	195		(657)
Acquisition, restructuring and other items, net	2,440		1,319
Total operating expenses	48,239		40,886
Operating loss	(8,100)		(5,122)
Other income (expense):
Interest expense, net	(156)		(215)
Other income (expense), net	(352)		524
Total other income (expense), net	(508)		309
Loss before income tax benefit	(8,608)		(4,813)
Income tax benefit	(1,636)		(545)
Net loss	$	(6,972)	$	(4,268)


Loss per share
Basic	$	(0.18)	$	(0.11)
Diluted	$	(0.18)	$	(0.11)






Weighted average shares outstanding
Basic	38,734		38,157
Diluted	38,734		38,157

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

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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands of dollars)

Three Months Ended Six Months Ended
Nov 30, 2020 Nov 30, 2019 Nov 30, 2020 Nov 30, 2019
Net loss $ (4,268) $ (2,736) $ (8,536) $ (4,011)
Other comprehensive income (loss), before tax:
Foreign currency translation 1,180 231 3,275 80
Other comprehensive income, before tax 1,180 231 3,275 80
Income tax expense related to items of other comprehensive income (loss) 0 0 0 0
Other comprehensive income, net of tax 1,180 231 3,275 80
Total comprehensive loss, net of tax $ (3,088) $ (2,505) $ (5,261) $ (3,931)


	Three Months Ended
	Aug 31, 2021		Aug 31, 2020
Net loss	$	(6,972)	$	(4,268)
Other comprehensive income, before tax:

Foreign currency translation	590		2,095
Other comprehensive income, before tax	590		2,095
Income tax expense related to items of other comprehensive income (loss)	—		—
Other comprehensive income, net of tax	590		2,095
Total comprehensive loss, net of tax	$	(6,382)	$	(2,173)

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

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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands of dollars, except share data)

Nov 30, 2020 May 31, 2020
Assets
Current assets
Cash and cash equivalents $ 58,025 $ 54,435
Accounts receivable, net of allowances of $1,941 and $2,150 respectively 33,604 31,263
Inventories 49,582 59,905
Prepaid expenses and other 8,493 7,310
Total current assets 149,704 152,913
Property, plant and equipment, net 29,628 28,312
Other assets 17,513 15,338
Intangible assets, net 190,559 197,136
Goodwill 201,117 200,515
Total assets $ 588,521 $ 594,214
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 15,979 $ 19,096
Accrued liabilities 27,610 29,380
Current portion of contingent consideration 0 836
Other current liabilities 2,223 2,133
Total current liabilities 45,812 51,445
Long-term debt, net of current portion 40,000 40,000
Deferred income taxes 23,018 24,057
Contingent consideration, net of current portion 15,178 14,811
Other long-term liabilities 10,170 9,029
Total liabilities 134,178 139,342
Commitments and contingencies (Note 14) 0 0
Stockholders' equity
Preferred stock, par value $0.01 per share, 5,000,000 shares authorized; 0 shares issued and outstanding 0 0
Common stock, par value $0.01 per share, 75,000,000 shares authorized; 38,702,030 and 38,448,536 shares issued and 38,332,030 and 38,078,536 shares outstanding at November 30, 2020 and May 31, 2020, respectively 375 374
Additional paid-in capital 566,602 561,871
Accumulated deficit (108,854) (100,318)
Treasury stock, 370,000 shares at November 30, 2020 and May 31, 2020, respectively (5,714) (5,714)
Accumulated other comprehensive income (loss) 1,934 (1,341)
Total Stockholders’ Equity 454,343 454,872
Total Liabilities and Stockholders' Equity $ 588,521 $ 594,214


	Aug 31, 2021		May 31, 2021
Assets
Current assets
Cash and cash equivalents	$	35,472	$	48,161

Accounts receivable, net of allowances of $1,864 and $1,919 respectively	35,416		35,405
Inventories	49,305		48,614


Prepaid expenses and other	11,128		8,699
Total current assets	131,321		140,879
Property, plant and equipment, net	41,133		37,073
Intangible assets, net	168,893		168,977
Goodwill	201,491		201,316
Other assets	12,925		13,193

Total assets	$	555,763	$	561,438
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	22,687	$	19,630
Accrued liabilities	26,892		35,459



Other current liabilities	2,518		2,495
Total current liabilities	52,097		57,584
Long-term debt, net of current portion	25,000		20,000
Deferred income taxes	18,397		19,955
Contingent consideration, net of current portion	15,936		15,741
Other long-term liabilities	8,383		8,701
Total liabilities	119,813		121,981
Commitments and contingencies (Note 14)	0		0
Stockholders' equity
Preferred stock, par value $0.01 per share, 5,000,000 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $0.01 per share, 75,000,000 shares authorized; 39,390,241 and 38,920,951 shares issued and 39,020,241 and 38,550,951 shares outstanding at August 31, 2021 and May 31, 2021, respectively	379		377
Additional paid-in capital	576,380		573,507
Accumulated deficit	(138,838)		(131,866)
Treasury stock, 370,000 shares at August 31, 2021 and May 31, 2021, respectively	(5,714)		(5,714)
Accumulated other comprehensive income	3,743		3,153
Total Stockholders’ Equity	435,950		439,457
Total Liabilities and Stockholders' Equity	$	555,763	$	561,438

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

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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands of dollars)

Six Months Ended
Nov 30, 2020 Nov 30, 2019
Cash flows from operating activities:
Net loss $ (8,536) $ (4,011)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 13,013 11,110
Non-cash lease expense 1,265 904
Stock based compensation 4,251 4,226
Change in fair value of contingent consideration (473) (303)
Deferred income taxes (1,553) (734)
Change in accounts receivable allowances 29 199
Fixed and intangible asset impairments and disposals 180 369
Write-off of other assets 0 593
Other (230) (27)
Changes in operating assets and liabilities:
Accounts receivable (2,281) 9,464
Inventories 10,528 (10,009)
Prepaid expenses and other (6,323) (3,544)
Accounts payable, accrued and other liabilities (3,847) (8,834)
Net cash provided by (used in) operating activities 6,023 (597)
Cash flows from investing activities:
Additions to property, plant and equipment (3,185) (4,014)
Acquisition of intangibles 0 (350)
Cash paid for acquisitions 0 (45,760)
Net cash used in investing activities (3,185) (50,124)
Cash flows from financing activities:
Repayment of long-term debt 0 (132,500)
Deferred financing costs on long-term debt 0 (741)
Payment of acquisition related contingent consideration 0 (1,208)
Proceeds (outlays) from exercise of stock options and employee stock purchase plan 481 (1,300)
Net cash provided by (used in) financing activities 481 (135,749)
Effect of exchange rate changes on cash and cash equivalents 271 76
Increase (decrease) in cash and cash equivalents 3,590 (186,394)
Cash and cash equivalents at beginning of period 54,435 227,641
Cash and cash equivalents at end of period $ 58,025 $ 41,247
Supplemental disclosure of non-cash investing and financing activities:
Accrual for capital expenditures incurred during the period $ 23 $ 444
Fair value of contingent consideration for acquisitions 0 14,900


	Three Months Ended
	Aug 31, 2021		Aug 31, 2020
Cash flows from operating activities:
Net loss	$	(6,972)	$	(4,268)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	6,997		6,577
Non-cash lease expense	602		666
Stock based compensation	2,429		1,864
Change in fair value of contingent consideration	195		(657)


Deferred income taxes	(1,690)		(620)
Change in accounts receivable allowances	(44)		460
Fixed and intangible asset impairments and disposals	30		90


Other	(46)		(432)
Changes in operating assets and liabilities:
Accounts receivable	(36)		(2,706)
Inventories	(670)		7,247
Prepaid expenses and other	(3,354)		(3,559)
Accounts payable, accrued and other liabilities	(6,345)		(10,087)
Net cash used in operating activities	(8,904)		(5,425)
Cash flows from investing activities:
Additions to property, plant and equipment	(1,021)		(1,824)

Additions to placement and evaluation units	(4,471)		—
Cash paid for acquisitions	(3,600)		—


Net cash used in investing activities	(9,092)		(1,824)
Cash flows from financing activities:
Proceeds from borrowings on long-term debt	5,000		—




Proceeds from exercise of stock options and employee stock purchase plan	446		491
Net cash provided by financing activities	5,446		491
Effect of exchange rate changes on cash and cash equivalents	(139)		252
Decrease in cash and cash equivalents	(12,689)		(6,506)
Cash and cash equivalents at beginning of period	48,161		54,435
Cash and cash equivalents at end of period	$	35,472	$	47,929

Supplemental disclosure of non-cash investing and financing activities:

Accrual for capital expenditures incurred during the period	$	162	$	197

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

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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands of dollars, except share data)

Common Stock Additional
paid in
capital Accumulated deficit Accumulated
other
comprehensive
income (loss) Treasury Stock
Shares Amount Shares Amount Total
Balance at May 31, 2020 38,448,536 $ 374 $ 561,871 $ (100,318) $ (1,341) (370,000) $ (5,714) $ 454,872
Net loss (4,268) (4,268)
Issuance/Cancellation of restricted stock units 164,946 (143) (143)
Purchases of common stock under ESPP 79,596 1 633 634
Stock-based compensation 1,864 1,864
Other comprehensive income, net of tax 2,095 2,095
Balance at August 31, 2020 38,693,078 $ 375 $ 564,225 $ (104,586) $ 754 (370,000) $ (5,714) $ 455,054
Net loss (4,268) (4,268)
Issuance/Cancellation of restricted stock units 8,952 (10) (10)
Stock-based compensation 2,387 2,387
Other comprehensive income, net of tax 1,180 1,180
Balance at November 30, 2020 38,702,030 $ 375 $ 566,602 $ (108,854) $ 1,934 (370,000) $ (5,714) $ 454,343


	Common Stock			Additional paid in capital		Accumulated deficit		Accumulated other comprehensive income		Treasury Stock
	Shares	Amount								Shares	Amount		Total
Balance at May 31, 2021	38,920,951	$	377	$	573,507	$	(131,866)	$	3,153	(370,000)	$	(5,714)	$	439,457
Net loss						(6,972)							(6,972)
Exercise of stock options	80,635	1		1,279									1,280
Issuance/Cancellation of restricted stock units	279,495			(1,734)									(1,734)
Issuance/Cancellation of performance share units	59,371												—
Purchases of common stock under ESPP	49,789	1		899									900
Stock-based compensation				2,429									2,429


Other comprehensive income, net of tax								590					590
Balance at August 31, 2021	39,390,241	$	379	$	576,380	$	(138,838)	$	3,743	(370,000)	$	(5,714)	$	435,950

Common Stock Additional
paid in
capital Retained earnings Accumulated
other
comprehensive
loss Treasury Stock
Shares Amount Shares Amount Total
Balance at May 31, 2019 37,984,382 $ 372 $ 555,040 $ 66,469 $ (1,352) (370,000) $ (5,714) $ 614,815
Net loss (1,275) (1,275)
Exercise of stock options 48,136 1 530 531
Issuance/Cancellation of restricted stock units 287,087 (2,459) (2,459)
Purchases of common stock under ESPP 40,270 628 628
Stock-based compensation 1,984 1,984
Other comprehensive loss, net of tax (151) (151)
Balance at August 31, 2019 38,359,875 $ 373 $ 555,723 $ 65,194 $ (1,503) (370,000) $ (5,714) $ 614,073
Net loss (2,736) (2,736)
Issuance/Cancellation of restricted stock units 4,051 0
Stock-based compensation 2,242 2,242
Other comprehensive income, net of tax 231 231
Balance at November 30, 2019 38,363,926 $ 373 $ 557,965 $ 62,458 $ (1,272) (370,000) $ (5,714) $ 613,810


	Common Stock			Additional paid in capital		Accumulated deficit		Accumulated other comprehensive income (loss)		Treasury Stock
	Shares	Amount								Shares	Amount		Total
Balance at May 31, 2020	38,448,536	$	374	$	561,871	$	(100,318)	$	(1,341)	(370,000)	$	(5,714)	$	454,872
Net loss						(4,268)							(4,268)

Issuance/Cancellation of restricted stock units	164,946			(143)									(143)

Purchases of common stock under ESPP	79,596	1		633									634
Stock-based compensation				1,864									1,864


Other comprehensive income, net of tax								2,095					2,095
Balance at August 31, 2020	38,693,078	$	375	$	564,225	$	(104,586)	$	754	(370,000)	$	(5,714)	$	455,054

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

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AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Balance Sheet as of ~~November 30, 2020,~~August 31, 2021, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Loss for the three ~~and six~~ months ended ~~November 30,~~August 31, 2021 and 2020, ~~and 2019,~~ the Consolidated Statements of Stockholders’ Equity for the three months ended ~~November 30,~~August 31, 2021 and 2020 ~~and 2019~~ and the Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~November 30,~~August 31, 2021 and 2020 ~~and 2019~~ have been prepared by the Company and are unaudited. The Consolidated Balance Sheet as of May 31, ~~2020~~2021 was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to state fairly the financial position, changes in stockholders’ equity and comprehensive income, results of operations and cash flows as of and for the period ended ~~November 30, 2020~~August 31, 2021 (and for all periods presented) have been made.

The unaudited interim consolidated financial statements for the three ~~and six~~ months ended ~~November 30,~~August 31, 2021 and 2020 ~~and 2019~~ include the accounts of AngioDynamics, Inc. and its wholly owned subsidiaries, collectively, "us", "we" or the “Company”. All intercompany balances and transactions have been eliminated.

2. ACQUISITIONS

~~C3 Wave Tip Location~~Camaro Support Catheter Asset Acquisition

On ~~December 17, 2019,~~July 27, 2021, the Company acquired the ~~C3 Wave tip location~~Camaro support catheter asset from QX Medical, ~~Components Inc.~~LLC for an aggregate purchase price of ~~$10.0~~$4.0 million, which included an upfront payment of $3.6 million and $0.4 million in purchase price holdbacks, along with ~~$5.0~~$1.0 million of potential future contingent consideration related to ~~technical~~revenue milestones. This acquisition ~~fills a gap in~~supports the ~~Vascular Access portfolio~~Auryon product family and ~~supports~~ the Company's strategic plan. The Company accounted for this acquisition as an asset purchase. The Company recorded the amount paid at closing as inventory and fixed assets of ~~$0.6~~$0.1 million and an intangible ~~assets of a trademark of $0.9 million and~~asset product technology of ~~$8.5~~$3.9 million. The intangible ~~assets~~asset will be amortized over 15 years. The contingent consideration is comprised of ~~technical~~revenue milestones and will be accounted for when the contingency is resolved or becomes probable and reasonably estimable.

~~Eximo Acquisition~~

On October 2, 2019, the Company entered into a share purchase agreement to acquire Eximo Medical, Ltd., a pre-commercial stage medical device company and its proprietary 355nm B Laser Atherectomy technology. The aggregate purchase price of $60.7 million included an upfront payment of $45.8 million and contingent consideration with an estimated fair value of $14.9 million. This acquisition expands and complements the Company’s Vascular Interventions and Therapies product portfolio by adding the 355nm B Laser Atherectomy technology which treats Peripheral Artery Disease.

The Company accounted for the Eximo acquisition under the acquisition method of accounting for business combinations. Accordingly, the cost to acquire the assets was allocated to the underlying net assets in proportion to estimates of their respective fair values. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. Goodwill is non-deductible for income tax purposes.

The Company has not disclosed the amount of revenue and earnings for sales of Eximo products since acquisition, nor proforma information, because these amounts are not significant to the Company's financial statements. Acquisition-related costs associated with the Eximo acquisition, which are included in "acquisition, restructuring and other items, net" in the accompanying Consolidated Statements of Operations, were approximately $0.6 million in fiscal year 2020. The following table summarizes the final aggregate purchase price allocated to the net assets acquired:

~~Table of Contents~~

~~(in thousands)~~

~~Final allocation~~

~~Accounts receivable~~

~~Inventory~~

~~150~~

~~Prepaid and other current assets~~

~~Long-term deposits~~

~~Property, plant and equipment~~

~~397~~

~~Intangible assets:~~

~~Product technology~~

~~60,300~~

~~Goodwill~~

~~11,427~~

~~Total assets acquired~~

~~72,429~~

~~Liabilities assumed~~

~~Accounts payable~~

~~Other current liabilities~~

~~615~~

~~Deferred tax liabilities~~

~~11,070~~

~~Total liabilities assumed~~

~~11,769~~

~~Net assets acquired~~

~~60,660~~

~~The Company finalized the allocation of the purchase price to the assets acquired and liabilities assumed in the fourth quarter of fiscal year 2020.~~

The value assigned to the product technology was derived using the multi-period excess earnings method under the income approach. This approach estimates the excess earnings generated over the lives of the customers that existed as of the acquisition date and discounts such earnings to present value. The product technology is deemed to have a useful life of fifteen years and will be amortized on a straight-line basis over the useful life.

~~The goodwill arising from the acquisition consists largely of synergies and economies of scale the Company hopes to achieve from combining the acquired assets with the Company's current operations.~~

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition

Under ASC 606,Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

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

Disaggregation of Revenue

The following ~~tables summarize~~table summarizes net ~~product revenue~~sales by Global Business Unit ("GBU") and geography:


	Three Months Ended Aug 31, 2021						Three Months Ended Aug 31, 2020
(in thousands)	United States		International		Total		United States		International		Total
Net sales
Endovascular Therapies	$	34,753	$	3,305	$	38,058	$	26,981	$	2,876	$	29,857
Vascular Access	20,476		4,481		24,957		19,222		8,883		28,105
Oncology	9,235		4,721		13,956		7,905		4,349		12,254
Total	$	64,464	$	12,507	$	76,971	$	54,108	$	16,108	$	70,216

Three Months Ended Nov 30, 2020 Three Months Ended Nov 30, 2019
(in thousands) United States International Total United States International Total
Net sales
Vascular Interventions & Therapies $ 30,689 $ 3,211 $ 33,900 $ 27,601 $ 3,549 $ 31,150
Vascular Access 20,161 3,769 23,930 18,563 4,221 $ 22,784
Oncology 9,834 5,106 14,940 9,391 6,678 $ 16,069
Total $ 60,684 $ 12,086 $ 72,770 $ 55,555 $ 14,448 $ 70,003

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

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Six Months Ended Nov 30, 2020 Six Months Ended Nov 30, 2019
(in thousands) United States International Total United States International Total
Net sales
Vascular Interventions & Therapies $ 57,669 $ 6,088 $ 63,757 $ 53,277 $ 6,786 $ 60,063
Vascular Access 39,383 12,652 52,035 37,847 8,096 $ 45,943
Oncology 17,740 9,454 27,194 17,368 12,671 $ 30,039
Total $ 114,792 $ 28,194 $ 142,986 $ 108,492 $ 27,553 $ 136,045
innovative health care solutions. The Company believes that this transformation will enable the Company to shift the portfolio from the mature, lower-growth markets where we have competed in the past by investing in technology and products that provide access to larger and faster growing markets. As such, we believe the growth in the near to mid-term will be driven by our high technology products including Auryon, Mechanical Thrombectomy (which includes AngioVac and thrombolytics) and NanoKnife. We will refer to these high technology product lines as our Med Tech business and we will refer to the remainder of the portfolio as our Med Device business.

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


	Three Months Ended
(in thousands)	Aug 31, 2021		Aug 31, 2020
Net Sales
Med Tech	$	17,619	$	10,486
Med Device	59,352		59,730
Total	$	76,971	$	70,216

Net Product Revenue

The Company's products consist of a wide range of medical, surgical and diagnostic devices used by professional healthcare providers for vascular access, for the treatment of peripheral vascular disease and for use in oncology and surgical settings. The Company's devices are generally used in minimally invasive, image-guided procedures. Most of the Company's products are intended to be used once and then discarded, or they may be implanted for short or long term use. The Company sells its products to its ~~distribution partners~~distributors and to end users, such as interventional radiologists, interventional cardiologists, vascular surgeons, urologists, interventional and surgical oncologists and critical care nurses.

Contracts and Performance Obligations

The Company contracts with its customers based on customer purchase orders, which in many cases are governed by master purchasing agreements. The Company’s contracts with customers are generally for product only, and do not include other performance obligations such as services or other material rights. As part of its assessment of each contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations.

Transaction Price and Allocation to Performance Obligations

Transaction prices of products are typically based on contracted rates. Product revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a ~~customer. To the extent the transaction price includes~~customer, net of any variable consideration the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method. As such, revenue is recorded net of rebates, returns and other deductions.as described below.

If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products underlying each performance obligation. The Company has standard pricing for its products and determines standalone selling prices based on the price at which the performance obligation is sold separately.

Revenue Recognition

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

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

The Company typically invoices customers upon satisfaction of identified performance obligations. As the Company’s standard payment terms are 30 to 90 days from invoicing, the Company does not provide any significant financing to its customers.

The Company enters into agreements to place placement and evaluation units (“units”) at customer sites, but the Company retains title to the units. The duration of these agreements are typically a year and the customer has the right to use the unit at no upfront charge in connection with the customer’s ongoing purchase of disposables. These types of agreements include an

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

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

Variable Consideration

~~Revenues~~Reserves: Revenue from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established for discounts, returns, rebates and allowances that are offered within contracts between the Company and its customers. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as a contra asset.

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Rebates and Allowances:The Company provides certain customers with rebates and allowances that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. The Company establishes ~~a liability~~reserves for such amounts, which is included in accrued expenses in the accompanying ~~Consolidated Balance Sheets.~~consolidated balance sheets. These rebates and allowances result from performance-based offers that are primarily based on attaining contractually specified sales volumes and administrative fees the Company is required to pay to group purchasing organizations.

Product Returns: The Company generally offers customers a limited right of return. Product returns after 30 days must be pre-approved by the Company and customers may be subject to a 20% restocking charge. To be accepted, a returned product must be unadulterated, undamaged and have at least twelve months remaining prior to its expiration date. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using its historical product return information and considers other factors that it believes could significantly impact its expected returns, including product recalls. During the ~~six~~three months ended ~~November 30, 2020,~~August 31, 2021, such product returns were not material.

Contract Balances with Customers

A receivable is generally recognized in the period the Company ships the product. Payment terms on invoiced amounts are based on contractual terms with each customer and generally coincide with revenue recognition. Accordingly, the Company does not have any contract assets associated with the future right to invoice its customers. In some cases, if control of the product has not yet transferred to the customer or the timing of the payments made by the customer precedes the Company’s fulfillment of the performance obligation, the Company recognizes a contract liability that is included in deferred revenue in the accompanying ~~Consolidated Balance Sheets.~~consolidated balance sheets.

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

(in thousands) Nov 30, 2020 May 31, 2020
Receivables $ 33,604 $ 31,263
Contract assets $ 0 $ 0
Contract liabilities $ 406 $ 545


(in thousands)	Aug 31, 2021		May 31, 2021
Receivables	$	35,416	$	35,405
Contract assets	$	—	$	—
Contract liabilities	$	462	$	426

During the ~~six~~three months ended ~~November 30, 2020,~~August 31, 2021, the Company had additions to contract liabilities of ~~$0.6~~$0.4 million. This was offset by ~~$0.7~~$0.4 million in revenue that was recognized during the ~~six~~three months ended ~~November 30, 2020.~~August 31, 2021.

Costs to Obtain or Fulfill a Customer Contract

Under ASC 606, the Company recognizes an asset for incremental costs of obtaining a contract with a customer if it expects to recover those costs. The Company’s sales incentive compensation plans qualify for capitalization since these plans are directly related to sales achieved during a period of time. However, the Company has elected the practical expedient under ASC 340-40-25-4 to expense the costs as they are incurred within selling and marketing expenses since the amortization period is less than one year.

The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and handling costs, associated with the distribution of finished products to customers, are recorded in costs of goods sold and are recognized when the related finished product is shipped to the customer. Amounts charged to customers for shipping are recorded in net sales.

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4. INVENTORIES

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

(in thousands) Nov 30, 2020 May 31, 2020
Raw materials $ 21,301 $ 23,308
Work in process 7,957 8,318
Finished goods 20,324 28,279
Inventories $ 49,582 $ 59,905


(in thousands)	Aug 31, 2021		May 31, 2021
Raw materials	$	25,367	$	22,925
Work in process	7,297		8,022
Finished goods	16,641		17,667
Inventories	$	49,305	$	48,614

The Company periodically reviews inventory for both obsolescence and loss of value. The Company makes assumptions about the future demand for and market value of the inventory. Based on these assumptions, the Company estimates the amount of

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obsolete, expiring and ~~slow moving~~slow-moving inventory. The total inventory reserve at ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020~~2021 was ~~$4.2~~$3.9 million and ~~$4.7~~$3.8 million, respectively.

5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill is not amortized, but rather, is tested for impairment annually or more frequently if impairment indicators arise. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination.

The Company's annual testing for impairment of goodwill was completed as of December 31, 2020. The Company operates as a single operating segment with 1 reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. The Company determines the fair value of the reporting unit based on the market valuation approach and concluded that it was not more-likely-than-not that the fair value of the Company's reporting unit was less than its carrying value.

Even though the Company determined that there was no goodwill impairment as of December 31, 2020, the future occurrence of a potential indicator of impairment, such as a significant adverse change in legal, regulatory, business or economic conditions or a more-likely-than-not expectation that the reporting unit or a significant portion of the reporting unit will be sold or disposed of, would require an interim assessment for the reporting unit prior to the next required annual assessment as of December 31, 2021.

There were no adjustments to goodwill for the three months ended August 31, 2021 other than foreign currency translation adjustments.

Definite Lived Intangible Assets

Intangible assets other than goodwill are amortized over their estimated useful lives on ~~either~~ a straight-line ~~basis or proportionately to the benefit being realized.~~basis. Useful lives range from two to eighteen years. The Company periodically reviews, and adjusts, if necessary, the estimated useful lives of its intangible assets and reviews such assets or asset groups for impairment whenever events or changes in circumstances indicate that the carrying value of the assets or asset groups may not be recoverable. If an intangible asset or asset group is considered to be impaired, the amount of the impairment will equal the excess of the carrying value over the fair value of the asset.

The Company's annual testing for impairment of goodwill was completed as of December 31, 2019. The Company operates as a single operating segment with 1 reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. The Company determines the fair value of the reporting unit based on the market valuation approach and concluded that it was not more-likely-than-not that the fair value of the Company's reporting unit was less than its carrying value as of December 31, 2019. In the fourth quarter of fiscal year 2020, the Company concluded that the sustained decline in its market capitalization represented an impairment indicator that required the Company to perform an interim test for goodwill impairment as of May 31, 2020 and the Company recorded a goodwill impairment charge of $158.6 million as of May 31, 2020 to write down the carrying value of the reporting unit to fair value.

The future occurrence of another potential indicator of impairment, such as a significant adverse change in legal, regulatory, business or economic conditions or a more-likely-than-not expectation that the reporting unit or a significant portion of the reporting unit will be sold or disposed of, would require another interim assessment for the reporting unit prior to the next required annual assessment as of December 31, 2020.

~~There were no adjustments to goodwill for the six months ended November 30, 2020 other than foreign currency translation adjustments.~~

Intangible assets consisted of the following:

Nov 30, 2020
(in thousands) Gross carrying value Accumulated amortization Net carrying value
Product technologies $ 254,750 $ (95,897) $ 158,853
Customer relationships 60,255 (32,121) 28,134
Trademarks 10,150 (6,851) 3,299
Licenses 6,087 (5,814) 273
$ 331,242 $ (140,683) $ 190,559

May 31, 2020
(in thousands) Gross carrying value Accumulated amortization Net carrying value
Product technologies $ 251,569 $ (88,547) $ 163,022
Customer relationships 60,160 (30,018) 30,142
Trademarks 10,150 (6,691) 3,459
Licenses 6,087 (5,574) 513
$ 327,966 $ (130,830) $ 197,136

Amortization expense for the three months ended November 30, 2020 and 2019 was $4.6 million and $4.5 million, respectively. Amortization expense for the six months ended November 30, 2020 and 2019 was $9.5 million and $8.4 million, respectively.


	Aug 31, 2021
(in thousands)	Gross carrying value		Accumulated amortization		Net carrying value
Product technologies	$	241,758	$	(101,188)	$	140,570
Customer relationships	60,242		(35,119)		25,123
Trademarks	9,950		(6,975)		2,975
Licenses	6,087		(5,862)		225


	$	318,037	$	(149,144)	$	168,893

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	May 31, 2021
(in thousands)	Gross carrying value		Accumulated amortization		Net carrying value
Product technologies	$	236,907	$	(97,343)	$	139,564
Customer relationships	60,291		(34,164)		26,127
Trademarks	9,950		(6,905)		3,045
Licenses	6,087		(5,846)		241


	$	313,235	$	(144,258)	$	168,977

Amortization expense for the three months ended August 31, 2021 and 2020 was $4.8 million and $5.0 million, respectively.

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

(in thousands)
Remainder of 2021 $ 8,488
2022 17,038
2023 17,488
2024 15,986
2025 17,006
2026 and thereafter 114,553
$ 190,559


(in thousands)
Remainder of 2022	$	14,636
2023	19,034
2024	16,826
2025	16,807
2026	16,626
2027 and thereafter	84,964
	$	168,893

6. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:


(in thousands)	Aug 31, 2021		May 31, 2021
Payroll and related expenses	$	11,214	$	20,408
Royalties	1,616		2,663
Accrued severance	537		548
Sales and franchise taxes	819		631

Outside services	6,129		4,256
Litigation Matters	—		975
Rebates	694		503
Other	5,883		5,475

	$	26,892	$	35,459

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(in thousands) Nov 30, 2020 May 31, 2020
Payroll and related expenses $ 11,347 $ 13,059
Royalties 1,814 2,392
Accrued severance 533 794
Sales and franchise taxes 834 634
Outside services 3,393 2,222
Indemnification holdback 4,625 5,000
Other 5,064 5,279
$ 27,610 $ 29,380

7. ~~LONG TERM~~LONG-TERM DEBT

On June 3, 2019 ~~and in connection with the completion of the Fluid Management divestiture,~~ the Company repaid all amounts outstanding under its existing Credit Agreement and entered into a new Credit Agreement with the ~~lenders~~lender's party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Bank of America, N.A. and KeyBank National Association, as co-syndication agents.

The Credit Agreement provides for a $125.0 million secured revolving credit facility (the “Revolving Facility”), which includes an uncommitted expansion feature that allows the Company to increase the total revolving commitments and/or add new tranches of term loans in an aggregate amount not to exceed $75.0 million. The proceeds may be used to refinance certain existing indebtedness of the Company and its subsidiaries, to finance the working capital needs, and for general corporate purposes (including permitted acquisitions), of the Company and its subsidiaries.

The Credit Agreement has a five year maturity. Interest on the facility ~~will be~~is based, at the Company’s option, on either a base rate of LIBOR or alternate base rate, plus an applicable margin tied to the Company’s total leverage ratio and having ranges between 0.25% and 0.75% for base rate loans and between 1.25% and 1.75% for LIBOR loans. After default, the interest rate may be increased by 2.0%. The facility ~~will~~ also ~~carry~~carries a commitment fee of 0.20% to 0.25% per annum on the unused portion.

The Company's obligations under the Revolving Facility are unconditionally guaranteed, jointly and severally, by the Company's material direct and indirect domestic subsidiaries (the “Guarantors”). All obligations of the Company and the Guarantors under the Revolving Facility are secured by first priority security interests in substantially all of the assets of the Company and the Guarantors.

The Credit Agreement includes customary representations, warranties and covenants, and acceleration, indemnity and events of default provisions, including, among other things, 2 quarterly financial covenants as follows:

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

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

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

As of ~~November 30, 2020,~~August 31, 2021, there was ~~$40.0~~$25.0 million outstanding ~~balance~~ on the Revolving Facility. As of ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020,~~2021, the carrying value of long-term debt approximated its fair market value.

The interest rate on the Revolving Facility at ~~November 30, 2020~~August 31, 2021 was ~~1.65%~~1.34%.

~~The Company was in compliance with the Credit Agreement covenants as of November 30, 2020.~~

8. INCOME TAXES

The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full fiscal year adjusted for any discrete events, which are recorded in the period that they occur. The estimated annual effective tax rate prior to discrete items was ~~16.1%~~10.6% as of the ~~second~~first quarter of fiscal year ~~2021,~~2022, as compared to ~~13.2%~~14.2% for the same period in fiscal year ~~2020.~~2021. In fiscal year ~~2021,~~2022, the Company’s effective tax rate differs from the U.S. statutory rate primarily due to the impact of the valuation allowance, foreign taxes, and other non-deductible permanent items (such as non-deductible meals and entertainment, Section 162(m) excess compensation and non-deductible ~~share based~~share-based compensation).

The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluated all available positive and negative evidence, and weighted the evidence based on its objectivity.

Based on the review of all available evidence, the Company determined that it has not yet attained a sustained level of profitability and the objectively verifiable negative evidence outweighed the positive evidence. Therefore, the Company has provided a valuation allowance on its federal and state net operating loss carryforwards, federal and state R&D credit carryforwards and other net deferred tax assets that have a limited life and are not supportable by the naked credit deferred tax liability sourced income as of ~~November 30, 2020.~~August 31, 2021. The Company will continue to assess the level of the valuation allowance required. If sufficient positive evidence exists in future periods to support a release of some or all of the valuation allowance, such a release would likely have a material impact on the Company’s results of operations.

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9. SHARE-BASED COMPENSATION

~~The Company has 3 stock-based compensation plans that provide for~~On October 13, 2020, the ~~issuance of up to approximately 14.2 million shares of common stock. The 2004 Stock and Incentive Award Plan (the "2004 Plan") and~~Company's shareholders approved the 2020 Stock and Incentive Award Plan (the ~~"2020 Plan"~~“2020 Plan”) ~~provide for the grant of up to 7.8 million and 2.4 million shares of common stock, respectively. These plans provide~~. The 2020 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance share units, performance shares and other incentive awards to the Company's employees, directors and other service providers. As of August 31, 2021, there was a maximum of 1.7 million shares of common stock available for future grant under the 2020 Plan.

Prior to the adoption of the 2020 Plan, equity awards were issued under the 2004 Stock and Incentive Award Plan (the “2004 Plan”). The adoption of the 2020 Plan did not impact the administration of equity awards issued under the 2004 Plan but following the adoption of the 2020 Plan, equity award grants are no longer made under the 2004 Plan.

The Company also has an employee stock purchase ~~plan which provides for the issuance~~plan. As of ~~up to 4.0~~August 31, 2021, there was a maximum of 2.4 million shares of common ~~stock.~~stock available for future grant under the employee stock purchase plan.

For the three months ended ~~November 30,~~August 31, 2021 and 2020, ~~and 2019,~~ share-based compensation expense was $2.4 million and ~~$2.2~~$1.9 million, respectively. ~~For the six months ended November 30, 2020 and 2019, share-based compensation expense was $4.3 million and $4.2 million, respectively~~

During the ~~six~~three months ended ~~November 30,~~August 31, 2021 and 2020, ~~and 2019,~~ the Company granted stock options and restricted stock units under the ~~2004~~2020 and ~~2020~~2004 Plan to certain employees and members of the Board of Directors. Stock option awards are valued using the Black-Scholes option-pricing model and then amortized on a straight-line basis over the requisite service period of the award. Restricted stock unit awards are valued based on the closing trading value of the ~~Company's shares~~Company’s common stock on the date of grant and then amortized on a straight-line basis over the requisite service period of the award.

During the ~~six~~three months ended ~~November 30,~~August 31, 2021 and 2020, ~~and 2019,~~ the Company granted performance share units under the 2020 and 2004 Plan to certain employees. The awards may be earned by achieving ~~relative~~ performance levels over the ~~year~~ requisite service period. The performance criteria are based on achieving certain performance targets and the total shareholder return ~~("TSR"~~(“TSR”) of the ~~Company's~~Company’s common stock relative to the TSR of the common stock of a pre-defined industry peer-group. The fair value of these awards are based on the closing trading value of the ~~Company's shares~~Company’s common stock on the date of grant and use a Monte Carlo simulation model.

As of ~~November 30, 2020,~~August 31, 2021, there was ~~$16.0~~$22.4 million of unrecognized compensation expense related to share-based payment arrangements. These costs are expected to be recognized over a weighted-average period of approximately four years. The Company has sufficient shares to satisfy expected share-based payment arrangements.

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10. EARNINGS PER SHARE

Basic earnings per share is based on the weighted average number of common shares outstanding without consideration of potential common stock. Diluted earnings per share includes the dilutive effect of potential common stock consisting of stock options, restricted stock units and performance stock units, provided that the inclusion of such securities is not anti-dilutive. In periods with a net loss, stock options and restricted stock units are not included in the computation of diluted loss per share as the impact would be anti-dilutive.

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

Three Months Ended Six Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019 Nov 30, 2020 Nov 30, 2019
Basic 38,327 37,992 38,242 37,887
Effect of dilutive securities 0 0 0 0
Diluted 38,327 37,992 38,242 37,887
Securities excluded as their inclusion would be anti-dilutive 3,133 2,694 3,159 2,689


	Three Months Ended
(in thousands)	Aug 31, 2021	Aug 31, 2020
Basic	38,734	38,157
Effect of dilutive securities	—	—
Diluted	38,734	38,157

Securities excluded as their inclusion would be anti-dilutive	3,443	3,180

11. SEGMENT AND GEOGRAPHIC INFORMATION

The Company considers the business to be a single operating segment engaged in the development, manufacture and sale of medical devices for vascular access, peripheral vascular disease and oncology on a global basis. The Company's chief operating decision maker, the President and Chief Executive Officer (CEO), evaluates the various global product portfolios on a net sales ~~basis.~~basis utilizing various breakouts of the data including Global Business Unit, Med Tech versus Med Device and geography. Executives reporting to the CEO include those responsible for commercial operations, manufacturing operations,

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regulatory and quality and certain corporate functions. The CEO evaluates profitability, investment and cash flow metrics on a consolidated worldwide basis due to shared infrastructure and resources.

The table below summarizes net sales by Global Business Unit:


		Three Months Ended				Six Months Ended					Three Months Ended
(in thousands)	(in thousands)	Nov 30, 2020		Nov 30, 2019		Nov 30, 2020		Nov 30, 2019		(in thousands)	Aug 31, 2021		Aug 31, 2020
Net sales
Vascular Interventions & Therapies		$	33,900	$	31,150	$	63,757	$	60,063
Net Sales										Net Sales
Endovascular Therapies										Endovascular Therapies	$	38,058	$	29,857
Vascular Access	Vascular Access	23,930		22,784		52,035		45,943		Vascular Access	24,957		28,105
Oncology	Oncology	14,940		16,069		27,194		30,039		Oncology	13,956		12,254
Total	Total	$	72,770	$	70,003	$	142,986	$	136,045	Total	$	76,971	$	70,216

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


	Three Months Ended
(in thousands)	Aug 31, 2021		Aug 31, 2020
Net Sales
Med Tech	$	17,619	$	10,486
Med Device	59,352		59,730
Total	$	76,971	$	70,216

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

Three Months Ended Six Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019 Nov 30, 2020 Nov 30, 2019
Net sales
United States $ 60,684 $ 55,555 $ 114,792 $ 108,492
International 12,086 14,448 28,194 27,553
Total $ 72,770 $ 70,003 $ 142,986 $ 136,045

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	Three Months Ended
(in thousands)	Aug 31, 2021		Aug 31, 2020
Net Sales
United States	$	64,464	$	54,108
International	12,507		16,108

Total	$	76,971	$	70,216

12. FAIR VALUE

On a recurring basis, the Company measures certain financial assets and financial liabilities at fair value based upon quoted market prices, where available. Where quoted market prices or other observable inputs are not available, the Company applies valuation techniques to estimate fair value. FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:

•Level 1 - Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.

•Level 2 - Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.

•Level 3 - Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk.

The Company's financial instruments include cash and cash equivalents, accounts receivable, accounts payable and contingent consideration. The carrying amount of cash and cash equivalents, accounts receivable, and accounts payable approximates fair value due to ~~the~~their immediate or short-term maturities. The ~~Company's~~ recurring fair value measurements using significant unobservable inputs (Level 3) relate to contingent consideration liabilities.

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

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Fair Value Measurements using inputs considered as: Fair Value at Nov 30, 2020
(in thousands) Level 1 Level 2 Level 3
Financial Liabilities
Contingent consideration for acquisition earn outs $ 0 $ 0 $ 15,178 $ 15,178
Total Financial Liabilities $ 0 $ 0 $ 15,178 $ 15,178
Fair Value Measurements using inputs considered as: Fair Value at May 31, 2020
(in thousands) Level 1 Level 2 Level 3
Financial Liabilities
Contingent consideration for acquisition earn outs $ 0 $ 0 $ 15,647 $ 15,647
Total Financial Liabilities $ 0 $ 0 $ 15,647 $ 15,647


	Fair Value Measurements using inputs considered as:						Fair Value at Aug 31, 2021
(in thousands)	Level 1		Level 2		Level 3








Financial Liabilities

Contingent consideration for acquisition earn outs	$	—	$	—	$	15,936	$	15,936
Total Financial Liabilities	$	—	$	—	$	15,936	$	15,936

	Fair Value Measurements using inputs considered as:						Fair Value at May 31, 2021
(in thousands)	Level 1		Level 2		Level 3






Financial Liabilities

Contingent consideration for acquisition earn outs	$	—	$	—	$	15,741	$	15,741
Total Financial Liabilities	$	—	$	—	$	15,741	$	15,741

There were no transfers between Level 1, 2 and 3 for the three ~~and six~~ months ended ~~November 30,~~August 31, 2021 and 2020.

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


	~~Three Months Ended Nov 30, 2020~~

~~(in thousands)~~	~~Fair Value Measurements Using Significant Unobservable Inputs (Level 3)~~
~~Balance, August 31, 2020~~	$	~~14,994~~
~~Total gains or losses (realized/unrealized):~~

~~Change in present value of contingent consideration~~ ~~(1)~~	~~184~~




~~Balance, November 30, 2020~~	$	~~15,178~~


			~~Six~~Three Months Ended ~~Nov 30, 2020~~
			Aug 31, 2021
(in thousands)			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance, May 31, ~~2020~~	2021		$	~~15,647~~15,741
Total gains or losses (realized/unrealized):

Change in present value of contingent consideration (1)		~~(473)~~
~~Currency gain from remeasurement~~			4195



Balance, ~~November 30, 2020~~	August 31, 2021		$	~~15,178~~15,936

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

Contingent ~~Consideration~~Liability for Acquisition Earn Outs

Some of the Company's business combinations involve the potential for the payment of future contingent consideration upon the achievement of certain product development milestones or various other performance conditions. Payment of the additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified revenue levels or product development targets. Contingent consideration is recorded at the estimated fair value of the contingent payments on the acquisition date. The fair value of the contingent consideration is remeasured at the estimated fair value at each reporting period with the change in fair value recognized as income or expense within change in fair value of contingent consideration in the Consolidated Statements of Operations.

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The Company measures the initial liability and remeasures the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value ~~measurements. The fair value~~measurements, which is determined using a discounted cash flow model applied to projected net sales, using probabilities of achieving projected net sales and projected payment dates. Projected net sales are based on ~~the Company's~~ internal projections and extensive analysis of the target market and the sales potential. Increases or decreases in any valuation inputs in isolation may result in a significantly lower or higher fair value measurement in the future.

The recurring Level 3 fair value measurements of the contingent consideration liabilities include the following significant unobservable inputs as of ~~November 30, 2020:~~August 31, 2021:

(in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

Revenue based payments

15,936

Discounted cash flow

Discount rate

Probability of payment

66% - 100%

Projected fiscal year of payment

2024 - 2025

(in thousands) Fair Value Valuation Technique Unobservable Input Range
Revenue based payments $ 15,178 Discounted cash flow Discount rate 5%
Probability of payment 66% - 100%
Projected fiscal year of payment 2024 - 2025

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At ~~November 30, 2020,~~August 31, 2021, the ~~range~~amount of ~~estimated potential~~ undiscounted future contingent consideration that the Company expects to pay as a result of all completed acquisitions is approximately $20.0 million. The milestones, including revenue projections and technical milestones associated with the contingent consideration must be reached in future periods ranging from fiscal years ~~2021~~2022 to 2029 in order for the associated consideration to be paid.

13. LEASES

The Company determines if an arrangement is a lease at inception of the contract. The Company has operating leases for buildings, primarily for office space, R&D, manufacturing and warehousing.

Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Many of the lease agreements contain renewal or termination clauses that are factored into the determination of the lease term if it is reasonably certain that these options would be exercised. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

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

(in thousands) Balance Sheet Location Nov 30, 2020 May 31, 2020
Assets
Operating lease ROU asset Other assets $ 9,421 $ 10,146
Liabilities
Current operating lease liabilities Other current liabilities 2,145 2,077
Non-current operating lease liabilities Other long-term liabilities 7,636 8,345
Total lease liabilities $ 9,781 $ 10,422


(in thousands)	Balance Sheet Location	Aug 31, 2021		May 31, 2021
Assets
Operating lease ROU asset	Other assets	$	8,773	$	9,382
Liabilities
Current operating lease liabilities	Other current liabilities	2,444		2,415
Non-current operating lease liabilities	Other long-term liabilities	6,668		7,319
Total lease liabilities		$	9,112	$	9,734

The interest rate implicit in lease agreements is typically not readily determinable, and as such the Company used the incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The incremental borrowing rate is defined as the interest the Company would pay to borrow on a collateralized basis, considering factors such as length of lease term. The following table presents the weighted average remaining lease term and discount rate:


	~~Nov 30, 2020~~Aug 31, 2021
Weighted average remaining term (in years)	~~4.53~~3.90
Weighted average discount rate	~~4.1~~3.8	%

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


(in thousands)	Aug 31, 2021
Remainder of 2022	$	2,048
2023	2,780
2024	2,202
2025	1,447
2026	1,144
2027 and thereafter	171
Total lease payments	$	9,792
Less: Imputed Interest	680
Total lease obligations	$	9,112
Less: Current portion of lease obligations	2,444
Long-term lease obligations	$	6,668

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~~The following table presents the maturities of the lease liabilities:~~

(in thousands) Nov 30, 2020
Remainder of 2021 $ 1,254
2022 2,484
2023 2,532
2024 1,984
2025 1,259
2026 and thereafter 1,188
Total lease payments $ 10,701
Less: Imputed Interest 920
Total lease obligations $ 9,781
Less: Current portion of lease obligations 2,145
Long-term lease obligations $ 7,636

During the three months ended ~~November 30,~~August 31, 2021 and 2020, ~~and 2019,~~ the Company recognized $0.7 million and $0.9 ~~million of operating lease expense, respectively, which includes immaterial short-term leases. During the six months ended November 30, 2020 and 2019, the Company recognized $1.6 million and $1.5~~ million of operating lease expense, respectively, which includes immaterial short-term leases. The expenses on the Consolidated Statement of Operations were classified as follows:

Three Months Ended Six Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019 Nov 30, 2020 Nov 30, 2019
Cost of sales $ 192 $ 289 $ 393 $ 559
Research and development 197 203 485 196
Sales and marketing 92 100 193 198
General and administrative 256 312 551 591
$ 737 $ 904 $ 1,622 $ 1,544


	Three Months Ended
(in thousands)	Aug 31, 2021		Aug 31, 2020
Cost of sales	$	219	$	201
Research and development	98		288
Sales and marketing	40		100
General and administrative	330		295
	$	687	$	884

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

(in thousands) Nov 30, 2020 Nov 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 1,360 $ 563
ROU assets obtained in exchange for lease liabilities
Operating leases $ 487 $ 0


(in thousands)	Aug 31, 2021		Aug 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	682	$	672
ROU assets obtained in exchange for lease liabilities
Operating leases	$	—	$	487

14. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is involved in various legal proceedings, including commercial, intellectual property, product liability, and regulatory matters of a nature considered normal for its business. The Company accrues for amounts related to these matters if it is probable that a liability has been incurred, and an amount can be reasonably estimated. The Company discloses such matters when there is at least a reasonable possibility that a material loss may have been incurred. However, the Company cannot predict the outcome of any litigation or the potential for future litigation.

C.R. Bard, Inc. v. AngioDynamics, Inc.

On January 11, 2012, C.R. Bard, Inc. ~~(“Bard”~~("Bard") filed a suit in the United States District Court of Utah claiming certain of the Company's implantable port products infringe on 3 U.S. patents held by Bard ~~(the "Utah Action"~~(US Patent Nos. 7,785,302 (“’302 Patent”), 7,959,615 (“’615 Patent”) and 7,947,022(“’022 Patent”)). ~~Bard’s complaint sought unspecified damages and other relief.~~ The ~~Company filed petitions for~~case was stayed pending reexamination in the US Patent and Trademark Office ("USPTO") ~~seeking to invalidate all 3 patents asserted by Bard in~~. Following the ~~litigation. The Company's petitions were~~

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~~granted and 40 of Bard's 41 patent claims were rejected and, following further~~reexamination proceedings, the Patent Office issued a Final Rejection of all 40 claims subject to reexamination. Thereafter, Bard filed appeals to the USPTO Board of Appeals and Interferences for all 3 reexaminations which were decided as follows: For US Patent No. 7,785,302, the rejections of 6 of the 10 claims under reexamination were affirmed, but were reversed on 4 of the ten claims. For U.S. Patent No. 7,959,615 the rejections of 8 of the 10 claims under reexamination were affirmed but the rejections of the other 2 of the 10 claims were reversed. In the third, for U.S. Patent No. 7,947,022 the rejections of all 20 claims under reexamination were affirmed. Thereafter, Bard sought Rehearing in all 3 appeals and the ~~Company sought Rehearing in the ‘302 and ‘615 appeals. The USPTO denied all 3 Rehearing Requests, but modified its characterization of one prior art reference for the ‘302 and ‘022 decisions.~~

~~Bard filed~~parties’ related appeals to the Federal Circuit ~~Court of Appeals~~which resulted in ~~all three reexams and~~further proceedings at the Company Cross-Appealed for the ‘302 and the ‘615 reexams. MedComp also filed an Amicus Brief in support of the Company on November 22, 2017. Meanwhile, on July 12, 2017 Bard assigned the asserted patents to Bard Peripheral Vascular, Inc. (“BPV”) which was added as co-Appellant before the Federal Circuit and as a co-Plaintiff in the Utah action. An oral hearing was held on September 5, 2018 and the Court rendered its decision on September 28, 2018, affirming thatUSPTO, certain claims ~~1-5 and 10~~ of the ‘615 ~~patent~~Patent were held invalid, ~~but that~~while the remaining claims ~~6-7~~ of the ~~615 patent~~‘615 Patent and ~~claims 1-4 of~~ the ~~302 patent~~other 2 patents were ~~valid~~upheld over the prior art references considered in the ~~Reexamination~~reexamination proceedings. ~~The Federal Circuit also reversed~~Thereafter, the ~~PTAB’s claim construction ruling and remanded for consideration~~case was transferred from the District of ~~obviousness~~Utah to the United States District Court for the ~~remaining claims under the new claim construction ruling and for further findings with respect to whether one~~District of ~~the asserted references qualified as a printed publication. On January 28, 2019,~~Delaware ("District of Delaware"). A scheduling order was entered on ~~remand, the USPTO reversed the rejections of the ‘302 claims 1-10, ‘022 claims 1-20 and ‘615 claims 8-9.~~March 23, 2021. The ~~USPTO has since issued Inter Partes Reexamination Certificates for the ‘302 Patent for the ‘022 patent and for the ‘615 patent. The~~ Company ~~thereafter~~ filed a Motion to ~~Unstay~~Amend its Answer and Counterclaims on April 14, 2021. This motion seeks to add counterclaims for infringement of U.S. Patent Nos. 9,168,365; 9,895,523; and 10,632,295, as well as a counterclaim of inequitable conduct, and remains pending. On July 22, 2021, in another case against a different defendant the District of Utah invalidated multiple claims of the ‘302, ‘022, and ‘615 Patents under 35 USC §101, including claims asserted against the Company. Following the Utah ~~Case and that motion was granted. On November 4, 2019~~court’s decision, the Court held a joint Status Conference among the Company’s Utah Action and 2 other cases filed by Bard on the same patents against MedComp and Smiths. The Court set a schedule for defendant's Motions to Dismiss or Transfer. The Company filed its motion on November 25, 2019; and Bard filed a responsive brief and a motion for venue discovery on December 9, 2019. The Company filed a ~~responsive brief~~Motion for Judgment on ~~December 16, 2019 and~~the Pleadings (which remains pending) based on collateral estoppel on August 9, 2021. Bard filed a reply on December 23, 2019. On February 27, 2020, the Court referred all non-dispositive motions to the presiding Magistrate and on March 3, 2020 the Court granted Bard’s Motion for Venue Discovery and denied the Company’s transfer motion without prejudice to re-filing after completion of the venue discovery, but no later than June 30, 2020. Following venue discovery, AngioDynamics re-filed its ~~Motion to Dismiss or Transfer on June 30, 2020. Bard filed an~~ opposition brief on ~~July 28, 2020,~~September 2, 2021 and the Company filed a ~~subsequent reply.~~reply on September 9, 2021. The parties also filed a stipulation to stay all deadlines pending resolution of the Company’s Motion for Judgment on the Pleadings, which the Court ~~granted AngioDynamics’s Motion to Transfer~~entered on ~~November~~August 16, ~~2020.~~2021. The ~~case is currently pending in the District of Delaware and a scheduling conference has been set for January 21, 2021.The~~ Company believes these claims are without merit and intends to defend them vigorously. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

On March 10, 2015, Bard and ~~BPV~~Bard Peripheral Vascular filed suit in the ~~United States District Court for the~~ District of Delaware ~~(the “Delaware Action")~~ claiming certain of the Company's implantable port products infringe on 3 ~~other~~ U.S. patents held by Bard which are different from those asserted in the Utah action. Bard's complaint seeks unspecified damages and other relief. On June 1, 2015, the Company filed 2 motions in response to Bard’s Complaint - one sought transfer to the District of Utah where the Utah Action is currently pending, and the other sought dismissal of the entire complaint on grounds that none of the claims in the asserted patents is directed to patent eligible subject matter under Section 101 of the(US Patent ~~Statute and in light of recent authority from the U. S. Supreme Court.~~

On January 12, 2016, the Court issued a decision denying both motions. A Markman hearing was held on March 10, 2017 and the Court issued its Claim Construction Order on May 19, 2017. On May 19, 2017, Bard served its Final Infringement Contentions and on June 2, 2017, the Company served its Final Invalidity Contentions.

~~On October 20, 2017, the scheduling order for the~~Nos. 8,475,417, 8,545,460, 8,805,478). The case ~~was amended to, among other things, set a~~proceeded through trial date commencing July 23, 2018. The parties completed Expert Discovery in January 2018 and completed briefing on their respective case dispositive motions on April 27, 2018. On June 26, 2018, the Court denied all case dispositive motions, ruling that issues of material fact remained in dispute. On July 9, 2018, the Court continued the trial until March 2019. On January 9, 2019 the Court held a further claim construction hearing to resolve 2 outstanding claim construction issues prior to trial. A Report and Recommendation (by Magistrate-Judge Fallon) was issued on February 11, 2019 and entered by the Court on February 28, 2019. Jury selection was held on Friday March 1, 2019 and trialwhich began on March 4, 2019. ~~On day four of the jury trial, at~~At the close of ~~C.R.~~ Bard’s case, the Court granted the Company's oral motion for judgment as a matter of law ~~under rule 50(a)~~ as well as its motions for summary ~~judgement~~judgment on the grounds that the asserted patents are invalid, ineligible, not infringed and not willfully infringed. On April 5, 2019, Bard filed a precautionary Notice of Appeal to the Federal Circuit. On April 26, 2019, the District Court issued a Memorandum and Order confirming the grant of judgment in the Company’s favor of patent ineligibility, non-infringement, patent invalidity and no willful infringement. Meanwhile, on May 10, 2019, the Company filed

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a ~~Motion~~motion for ~~Attorney~~attorney fees and non-taxable expenses under 35 USC Sec. 285. ~~On May 21, 2019,~~Bard appealed the ~~Court issued a Memorandum~~judgment to the Federal Circuit and Order which, inter alia, stayed proceedings on the Company’s fee Motion and the Company’s equitable claims pending appeal; and entered Final Judgment on May 21, 2019 as well. Bard filed a second Notice of Appeal on May 23, 2019. Both appeals have since been consolidated and Bard’s opening brief was filed on September 27, 2019; the Company's answering brief was filed on January 15, 2020; and Bard’s reply brief was filed on March 4, 2020. A hearing was held on June 1, 2020, and the court issued its decision on November 10, ~~2020. The~~2020, the Federal Circuit reversed the judgment in part with respect to Section 101 (subject matter eligibility), and vacated and remanded the trial court’s invalidity and non-infringement judgments. The Company filed a combined Petition

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for rehearing and rehearing en banc on December 10, 2020, which was denied on January 15, 2021. The Federal Circuit issued its mandate on January 22, 2021. On March 15, 2021, the District of Delaware entered an order requiring the parties to submit status reports and denied as moot the Company’s motion for attorney’s fees and expenses. The parties submitted status reports on March 29, 2021 and the Court subsequently held two status conferences on July 27, 2021 and August 20, 2021. The parties agreed to schedule trial the week of May 9, 2022 and filed a joint letter indicating the same on September 3, 2021. The Court has not yet docketed the trial and the matter remains pending. The Company maintains its belief that Bard’s claims are without merit. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

On March 8, 2021, Bard filed suit in the District of Delaware asserting certain of the Company’s port products (including certain related infusion sets) infringe U.S. Patent Nos. 8,025,639, 9,603,992 (“’992”) and 9,603,993 (“’993”). On May 20, 2021, the Company filed a Motion to Dismiss Bard’s claims with respect to the ’992 and ’993 patents. On July 22, 2021, the Company submitted the Utah court’s decision invalidating claims of the related ‘302, ‘022, and ‘615 Patents as supplemental authority in support of its Motion to Dismiss. The parties agreed to submit supplemental briefing to address the Utah court’s decision. Bard submitted its brief on August 12, 2021, and the Company submitted its reply on September 2, 2021. The motion remains pending. The Company maintains its belief that Bard’s claims are without merit. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

AngioDynamics, Inc. v. C.R. Bard, Inc.

On May 30, 2017, the Company commenced an action in the United States District Court for the Northern District of New York entitled AngioDynamics, Inc. v. C.R. Bard, Inc. and Bard Access Systems, Inc. (“Bard”). In this action, the Company alleges that Bard has illegally tied the sales of its tip location systems to the sales of its PICCs. The Company alleges that this practice violates the federal antitrust laws and has had, and continues to have, an anti-competitive effect in the market for PICCs. The Company seeks both monetary damages and injunctive relief. Bard moved to dismiss on September 8, 2017. On August 6, 2018 the court denied Bard’s motion in its entirety. Bard made a motion for summary judgment which was denied in its entirety in a decision issued by the Court on May 5, 2021. Bard also raised a series of challenges targeted at one of AngioDynamics’ expert witnesses, which the Court denied in part and granted in part in decisions on May 5, 2021 and June 11, 2021. Discovery is largely complete, ~~summary judgment, including all reply briefs, were fully briefed in October 2020,~~ and ~~the case will subsequently proceed~~trial is scheduled to ~~trial thereafter.~~commence on July 5, 2022.

~~Merz North America Settlement~~

On May 16, 2019, Merz North America, Inc. (“Merz”) commenced an action in the United States District Court for the Southern District of New York entitled Merz North America, Inc. v. AngioDynamics, Inc. In this action, Merz alleged breach of contract against AngioDynamics based on a March 1, 2016 Distribution Agreement. On June 28, 2019, AngioDynamics reached a settlement with Merz. AngioDynamics made a lump-sum payment of $2.5 million to Merz in return for dismissal of the case with prejudice during the first quarter of fiscal year 2020. The case was subsequently dismissed.

15. ACQUISITION, RESTRUCTURING, AND OTHER ITEMS, NET

Acquisition, Restructuring and Other Items

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

Three Months Ended Six Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019 Nov 30, 2020 Nov 30, 2019
Legal (1)
$ 1,185 $ 684 $ 1,980 $ 1,353
Mergers and acquisitions (2)
0 382 1 628
Transition service agreement (3)
(334) (597) (709) (1,334)
Divestiture (4)
112 701 384 1,459
Restructuring 0 0 0 26
Other 165 251 791 789
Total $ 1,128 $ 1,421 $ 2,447 $ 2,921


	Three Months Ended
(in thousands)	Aug 31, 2021		Aug 31, 2020
Legal (1)	$	2,084	$	794

Transition service agreement (2)	—		(375)
Divestiture (3)	—		273

Other	356		627
Total	$	2,440	$	1,319

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

(2) ~~Mergers and acquisitions expenses related to investment banking, legal and due diligence.~~

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

~~(4)~~(3) Divestiture expenses incurred to transition manufacturing from Glens Falls, NY to Queensbury, NY.

Included in the $1.4 million in legal for the six months ended November 30, 2019 is a $0.4 million settlement received for the Biolitec bankruptcy litigation. The settlement received offsets legal expenses paid related to the settlement proceedings.

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16. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

Three Months Ended ~~Nov 30, 2020~~Aug 31, 2021

(in thousands)

Foreign currency translation income

Balance at ~~August~~May 31, ~~2020~~2021

~~754~~3,153

Other comprehensive income before reclassifications, net of tax

~~1,180~~590

~~Amounts reclassified from accumulated other comprehensive loss~~

~~Net other comprehensive income~~

~~1,180~~

~~Balance at November 30, 2020~~

~~1,934~~

~~Six Months Ended Nov 30, 2020~~

~~(in thousands)~~

~~Foreign currency translation income~~

~~Balance at May 31, 2020~~

~~(1,341)~~

~~Other comprehensive income before reclassifications, net of tax~~

~~3,275~~

~~Amounts reclassified from accumulated other comprehensive loss~~

Net other comprehensive income

~~3,275~~590

Balance at ~~November 30, 2020~~August 31, 2021

~~1,934~~3,743

17. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

~~The following table provides a description of recent accounting pronouncements that may have a material effect on the Company's consolidated financial statements:~~


Recently Issued Accounting Pronouncements - Adopted
~~Standard~~	~~Description~~	~~Date Adopted~~	~~Effect on the Consolidated Financial Statements~~
~~ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820)~~	This ASU removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes.	~~June 1, 2020~~	~~The Company adopted the new standard in the first quarter of fiscal year 2021 and it did not have an impact on the Company's consolidated financial statements.~~
~~ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~	This ASU replaces the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates.	~~June 1, 2020~~	~~The Company adopted the new standard in the first quarter of fiscal year 2021 and it did not have an impact on the Company's consolidated financial statements.~~

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


Recently Issued Accounting Pronouncements - Not Yet Applicable or Adopted

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

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

The following information should be read together with the consolidated financial statements and the notes thereto and other information included elsewhere in this quarterly report on Form 10-Q. The following discussion should be read in conjunction with the Company's 2021 Annual Report on Form 10-K, and the consolidated financial statements and notes thereto included elsewhere in the Form 10-Q.

Disclosure Regarding Forward-Looking Statements

This quarterly report on Form 10-Q, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regarding AngioDynamics’ expected future financial position, results of operations, cash flows, business strategy, budgets, projected costs, capital expenditures, products, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include ~~the~~ words such as “expects,” “reaffirms,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “projects,” or variations of such words and similar expressions, are forward-looking statements. These ~~forward looking~~forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Investors are cautioned that actual events or results may differ materially from our ~~expectations.~~expectations, expressed or implied. Factors that may affect our actual results achieved include, without limitation, our ability to develop existing and new products, future actions by FDA or other regulatory agencies, results of pending or future clinical trials, the results of ongoing litigation, overall economic conditions, general market conditions, market acceptance, foreign currency exchange rate fluctuations, the effects on pricing from group purchasing organizations and competition, our ability to integrate purchased businesses and other factors including natural disasters and pandemics (such as the scope, scale and duration of the impact of ~~the novel coronavirus,~~ COVID-19). Other risks and uncertainties include, but are not limited to, the factors described from time to time in our reports filed with the ~~SEC.~~Securities and Exchange Commission (the "SEC").

Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this quarterly report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, ~~speak only as of the date made. AngioDynamics disclaims any obligation to update the forward-looking statements. Investors~~investors are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date stated, or if no date is stated, as of the date of this ~~document.~~report. AngioDynamics disclaims any obligation to update the forward-looking statements.

Disclosure Regarding Trademarks

This report includes trademarks, tradenames and service marks that are our property or the property of other third parties. Solely for convenience, such trademarks and tradenames sometimes appear without any “™” or “®” symbol. However, failure to include such symbols is not intended to suggest, in any way, that we will not assert our rights or the rights of any applicable licensor, to these trademarks and tradenames. For a complete listing of all our trademarks, tradenames and service marks please visit www.angiodynamics.com/IP. Information on our website or connected to our website is not incorporated by reference into this Quarterly Report on Form 10-Q.

Executive Overview

We design, manufacture and sell a wide range of medical, surgical and diagnostic devices used by professional healthcare providers for vascular access, for the treatment of peripheral vascular disease and for use in oncology and surgical settings. Our devices are generally used in minimally invasive, image-guided procedures. Many of our products are intended to be used once and then discarded, or they may be temporarily implanted for short- or longer-term use.

Our business operations cross a variety of markets. Our financial performance is impacted by changing market dynamics, which have included an emergence of value-based purchasing by healthcare providers, consolidation of healthcare providers, the increased role of the consumer in health care decision-making and an aging population, among others. In addition, our growth is impacted by changes within our sector, such as the merging of competitors to gain scale and influence; changes in the regulatory environment for medical device; and fluctuations in the global economy.

Our sales and profitability growth also depends, in part, on the introduction of new and innovative products, together with ongoing enhancements to our existing products. Expansions toof our product offerings are created through internal and external product development, technology licensing and strategic alliances. We recognize the importance of, and intend to continue to make investments in research and development activities and selective business development opportunities ~~and feel confident that our existing capital structure and free cash flow generation will allow us~~ to ~~properly fund those activities.~~provide growth opportunities.

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We sell our products in the United States primarily through a direct sales force, and outside the U.S. through a combination of direct sales and distributor relationships. Our end users include interventional radiologists, interventional cardiologists, vascular surgeons, urologists, interventional and surgical oncologists and critical care nurses. We expect our businesses to grow in both sales and profitability ~~through geographic expansion, market penetration,~~by expanding geographically, penetrating new ~~product introductions~~markets, introducing new products and increasing our ~~direct~~ presence internationally.

The COVID-19 global pandemic has impacted our business and may pose ~~significant risks to our business. It is too early to quantify the impact this situation will have on fiscal year 2021 or beyond, but~~future risks. Even with the public health actions ~~being undertaken~~that have been taken to reduce the spread of the virus, ~~are causing and~~there may continue to ~~cause significant~~be disruptions with respect to consumer demand, hospital operating procedures and workflow, our ability to continue to manufacture products, ~~and~~ the reliability of our supply ~~chain.~~chain and inflation. Accordingly, management ~~is evaluating~~continues to evaluate the Company’s liquidity position, ~~communicating~~communicate with and ~~monitoring~~monitor the actions of our customers and suppliers,

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and ~~reviewing~~review our near-term financial ~~performance as we manage the Company through the uncertainty related to the coronavirus.~~performance.

In evaluating the operating performance of our business, management focuses on revenue, gross margin, operating income, earnings per share and cash flow from operations. A summary of these key financial metrics for the three ~~and six~~ months ended ~~November 30, 2020~~August 31, 2021 compared to the three ~~and six~~ months ended ~~November 30, 2019~~August 31, 2020 are as follows:

Three months ended ~~November 30, 2020:~~August 31, 2021:

•Revenue increased by ~~4.0%~~9.6% to ~~$72.8~~$77.0 million.

•Gross ~~margin decreased 410~~profit increased 120 bps to ~~55.2%~~52.1%.

•~~Operating~~Net loss increased by ~~$1.4~~$2.7 million to ~~$4.8~~$7.0 million.

•Loss per share increased by ~~$0.04~~$0.07 to a loss of ~~$0.11.~~$0.18

~~Six months ended November 30, 2020:~~

•~~Revenue increased by 5.1%~~Our Med Tech business, comprised of Mechanical Thrombectomy, Auryon and NanoKnife, experienced improved performance during the first quarter of fiscal year 2022 as the number of procedures continued to ~~$143.0 million.~~

•~~Gross margin decreased 550 bps to 53.1%.~~

•~~Operating loss increased by $5.7 million to $10.0 million.~~

•~~Loss per share increased by $0.11 to a loss of 0.22.~~

•~~Cash provided by operations increased by $6.6 million to $6.0 million.~~

~~The ongoing recovery~~improve from the COVID-19 ~~pandemic has had a varying~~ impact ~~on each~~in the first quarter of the prior year. In our ~~three businesses. Our Vascular Interventions & Therapies and~~Med Device business, Vascular Access, ~~businesses performed~~excluding the ~~strongest of the businesses during the quarter. The number of procedures improved from the COVID-19 lows~~large prior year order in the ~~second half~~UK, also improved in the first quarter of ~~last~~ fiscal year ~~but remain below pre-COVID-19 levels. Our~~2022 compared to the prior year period. This was partially offset by our Med Device Oncology ~~business~~products, which continued to face pressure from reductions in procedure volumes due to challenges resulting from the COVID-19 related procedure headwinds and a challenging capital spending environment. We continued our commitment to supporting and progressing our key growth initiatives (AngioVac, Auryon and NanoKnife), managing operating expenses and managing our cash and balance sheet.pandemic.

New Accounting Pronouncements

Information regarding new accounting pronouncements is included in Note 17 to our consolidated financial statements in this Quarterly Report on Form 10-Q.

Results of Operations for the Three Months Ended ~~November 30,~~August 31, 2021 and 2020 ~~and 2019~~

For the three months ended ~~November 30, 2020,~~August 31, 2021, the Company reported a net loss of $7.0 million, or a loss of $0.18 per diluted share, on net sales of $77.0 million, compared with a net loss of $4.3 million, or a loss of $0.11 per diluted share, on net sales of ~~$72.8 million, compared with a net loss of $2.7 million, or a loss of $0.07 per diluted share, on net sales of $70.0~~$70.2 million during the same quarter of the prior year.

Net Sales

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

Three Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019 % Growth
Net Sales by Global Business Unit
       Vascular Interventions & Therapies $ 33,900 $ 31,150 8.8%
       Vascular Access 23,930 22,784 5.0%
       Oncology 14,940 16,069 (7.0)%
            Total $ 72,770 $ 70,003 4.0%
Net Sales by Geography
       United States $ 60,684 $ 55,555 9.2%
       International 12,086 14,448 (16.3)%
           Total $ 72,770 $ 70,003 4.0%
The table below summarizes net sales by Med Tech and Med Device:


	Three Months Ended
(in thousands)	Aug 31, 2021		Aug 31, 2020		% Change
Net Sales
Med Tech	$	17,619	$	10,486	68.0%
Med Device	59,352		59,730		(0.6)%
Total	$	76,971	$	70,216	9.6%

2422

Table of Contents


	Three Months Ended
(in thousands)	Aug 31, 2021		Aug 31, 2020		% Change
Net Sales by Global Business Unit
Endovascular Therapies	$	38,058	$	29,857	27.5%
Vascular Access	24,957		28,105		(11.2)%
Oncology	13,956		12,254		13.9%


Total	$	76,971	$	70,216	9.6%

Net Sales by Geography
United States	$	64,464	$	54,108	19.1%
International	12,507		16,108		(22.4)%
Total	$	76,971	$	70,216	9.6%

For the three months ended ~~November 30, 2020,~~August 31, 2021, net sales increased ~~$2.8~~$6.8 million to ~~$72.8~~$77.0 million compared to the same period in the prior year.

~~Vascular Interventions & Therapies~~

•~~Total Vascular Interventions & Therapies sales~~The Med Tech business increased ~~$2.8 million. Auryon, which was acquired as part~~$7.1 million from the first quarter of the ~~Eximo acquisition in~~prior year. This growth was driven by Auryon sales which grew $4.8 million compared to the ~~second quarter of fiscal year 2020, contributed $2.1~~prior year. The AngioVac business grew $0.7 million ~~in sales. Additionally,~~as the ~~AngioVac and Core businesses continued their strong performance and grew $1.2 million and $0.6 million, respectively. During the quarter, the~~ Company generally continued to see ~~strong~~consistent case volumes in AngioVac despite continued COVID-19 challenges. Additionally, NanoKnife also had improved capital and disposable sales which increased ~~13%~~$1.0 and $0.7 million, respectively. NanoKnife capital growth was in the U.S and Europe while the disposable growth was driven by U.S sales.

The Med Device business net sales decreased $0.4 million from the prior ~~year. These increases were partially offset by lower volume~~year; however, excluding the large prior year order in ~~Venous products due to fewer elective procedures during~~ the ~~COVID-19 pandemic.~~

•~~U.S. Vascular Interventions & Therapies~~UK, net sales increased ~~$3.1 million due to~~$4.8 million. This increase was driven by increased case volume compared to the first quarter of the prior year which resulted in ~~AngioVac,~~ increased sales of Core, ~~Peripheral product sales~~Venous and BioSentry products of $2.1 million, $0.6 million and $0.4 million, respectively. Excluding the prior year order in ~~sales~~the UK, Midlines, PICCs and Ports increased $2.2 million, with $1.1 million of ~~Auryon.~~the increase driven by U.S port sales. These increases were partially offset by decreased Microwave sales ~~volume in Venous.~~

•~~International Vascular Interventions & Therapies sales decreased $0.3~~of $0.4 million.

~~Vascular Access~~

•~~Total Vascular Access sales increased $1.1 million due to increased sales across all product lines. BioFlo product lines comprise 49% of overall Vascular Access sales compared to 52% a year ago.~~

•~~U.S. Vascular Access sales increased $1.6 million as a result of increased sales across all product lines.~~

•~~International Vascular Access sales decreased by $0.5 million.~~

~~Oncology~~

•Total Oncology sales decreased $1.1 million year over year primarily due to lower NanoKnife capital sales of $1.6 million, decreased RadioFrequency Ablation sales of $0.4 million and decreased Balloon product sales of $0.3 million. This was partially offset by increased NanoKnife disposable sales of $0.6 million, Microwave disposable sales of $0.3 million and BioSentry sales of $0.4 million.

•U.S. Oncology sales increased by $0.5 million primarily due to increased NanoKnife disposable sales of $0.7 million, BioSentry sales of $0.4 million and Microwave disposable sales of $0.1 million. This was partially offset by decreased NanoKnife capital sales of $0.4 million and Balloon product sales of $0.3 million due to lower volumes.

•~~International Oncology sales decreased $1.6 million year over year as a result of decreased RadioFrequency Ablation sales of $0.5 million and NanoKnife capital and disposable sales of $1.2 million.~~

The Company has discussed the ongoing transformation from a company with a broad portfolio of largely undifferentiated products to a more focused medical technology company that delivers unique and innovative health care solutions. This transformation enables the Company to move away from the mature, lower-growth markets where we have competed in the past by carving out significant space in larger and faster growing markets. As such, the growth in the near to mid-term will be driven by our high technology platforms including AngioVac, Auryon and NanoKnife.

Gross Profit, Operating expenses, and Other income (expense)

Three Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019 % Change
Gross profit $ 40,174 $ 41,544 (3.3) %
Gross profit % of sales 55.2 % 59.3 %
Research and development $ 9,712 $ 7,764 25.1 %
% of sales 13.3 % 11.1 %
Selling and marketing $ 20,174 $ 20,113 0.3 %
% of sales 27.7 % 28.7 %
General and administrative $ 9,219 $ 10,994 (16.1) %
% of sales 12.7 % 15.7 %

~~Table of Contents~~

~~Gross profit~~ - Gross profit consists of net sales less the cost of goods sold, which includes the costs of materials, products purchased from third parties and sold by us, manufacturing personnel, royalties, freight, business insurance, depreciation of property and equipment and other manufacturing overhead, exclusive of intangible amortization.

~~Gross profit decreased by $1.4 million compared to the prior year. The decrease is primarily attributable to the following:~~

•~~Sales volume positively impacted gross profit by $1.5 million year over year.~~

•Net productivity negatively impacted gross profit by $2.6 million primarily as a result of under absorption of $1.2 million and increased start-up costs related to the Auryon launch of $1.2 million. The under absorption in manufacturing operations was due to the fact that the Company has maintained staffing levels during the COVID-19 global pandemic to mitigate risk, along with a focus on working capital management through inventory reduction.

•~~Mix negatively impacted gross margin by $0.3 million as a result of decreased NanoKnife capital sales. This was partially offset by increased AngioVac sales.~~

~~Research and development expenses~~ - Research and development (“R&D”) expenses include internal and external costs to develop new products, enhance existing products, validate new and enhanced products, and manage clinical, regulatory and medical affairs.

~~R&D expense increased $1.9 million compared to the prior year. The increase is primarily attributable to the following:~~

•Research and development expenses related to the AngioVac platform expansion, the NanoKnife DIRECT© study and the Pathfinder study increased $1.8 million along with $0.7 million of expenses related to Auryon.

•~~Outside consultant spend and other expenses decreased $0.5 million along with decreased travel expenses of $0.2 million.~~

~~Sales and marketing expenses~~ - Sales and marketing (“S&M”) expenses consist primarily of salaries, commissions, travel and related business expenses, attendance at medical society meetings, product promotions and marketing activities.

~~S&M expense increased $0.1 million compared to the prior year. The increase is primarily attributable to the following:~~

•~~Travel expenses decreased $1.4 million due to less travel as a result of the COVID-19 pandemic. In addition, tradeshow and other expenses decreased $1.3 million due to the cancellation of events.~~

•~~Expenses related to the build-out of the Auryon sales and marketing teams to prepare for full product launch of $2.6 million and increased other expenses of $0.2 million.~~

~~General and administrative expenses~~ - General and administrative (“G&A”) expenses include executive management, finance, information technology, human resources, business development, legal, and the administrative and professional costs associated with those activities.

~~G&A expense decreased $1.8 million compared to the prior year. The decrease is primarily attributable to the following:~~

•~~Legal expenses decreased $1.4 million.~~

•~~Travel expenses decreased $0.3 million due to less travel as a result of the COVID-19 pandemic.~~

Three Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019 $ Change
Amortization of intangibles $ 4,593 $ 4,530 $ 63
Change in fair value of contingent consideration $ 184 $ 145 $ 39
Acquisition, restructuring and other items, net $ 1,128 $ 1,421 $ (293)
Other income (expense), net $ (337) $ 121 $ (458)

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

•~~Amortization expense remained consistent with the prior year.~~

~~Table of Contents~~

~~Change in fair value of contingent consideration~~ - Represents changes in contingent consideration driven by changes to estimated future payments on earn-out liabilities created through acquisitions and amortization of present value discounts on long-term contingent consideration.

•~~The change in the fair value of the contingent consideration is the normal amortization of the present value of the Eximo contingent consideration.~~

~~Acquisition, restructuring and other items, net~~ - Represents costs associated with mergers and acquisitions, restructuring expenses, legal costs that are related to litigation that is not in the ordinary course of business, legal settlements and other one-time items.

~~Acquisition, restructuring and other items, net decreased by $0.3 million compared to the prior year. The decrease is primarily attributable to the following:~~

•Legal expense, related to litigation that is outside of the normal course of business, of $1.2 million was recorded in the second quarter of fiscal year 2021 compared to $0.7 million in the prior year.

•~~There was no M&A expense incurred in the second quarter of fiscal year 2021 compared to $0.4 million in the prior year.~~

•In the second quarter of fiscal year 2021, the Company incurred $0.1 million of expense to move manufacturing facilities as a result of the sale of the Fluid Management business compared to $0.7 million in the prior year.

•As part of the sale of the Fluid Management business, the Company entered into a transition services agreement with Medline for certain legal, human resource, tax, accounting and information technology services from the Company for a period not to exceed 24 months. As a result of the transition services agreement, the Company invoiced Medline $0.3 million in the second quarter of fiscal year 2021 compared to $0.6 million in the prior year.

•~~Other expenses of $0.2 million in the second quarter of fiscal year 2021 consists of severance associated with organizational changes, compared to $0.3 million in the prior year.~~

~~Other income (expense), net~~ ~~- Other expenses include interest expense, foreign currency impacts, bank fees, and amortization of deferred financing costs.~~

•The increase in other expense from the prior year of $0.5 million is primarily due to increased interest expense of $0.1 million for the $40.0 million outstanding on the Revolving Facility at the end of the second quarter of fiscal year 2021 compared to no debt outstanding in the prior year along with decreased interest income of $0.1 million. In addition, there was $0.2 million in unrealized foreign exchange losses at the end of the second quarter of fiscal year 2021.

~~Income Tax Benefit~~

Three Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019
Income tax benefit $ (0.9) $ (0.6)
Effective tax rate including discrete items 17.5 % 17.1 %

Our effective tax rate including discrete items for the three month periods ended November 30, 2020 and 2019 was 17.5% and 17.1%, respectively. In fiscal year 2021, the Company’s effective tax rate differs from the U.S. statutory rate primarily due to the impact of the valuation allowance, foreign taxes, and other non-deductible permanent items (such as non-deductible meals and entertainment, Section 162(m) excess compensation and non-deductible share based compensation).

~~The estimated annual effective tax rate, however, prior to discrete items was 16.1% in the second quarter of fiscal year 2021, as compared to 13.2% for the same period in fiscal year 2020.~~

~~Results of Operations for the Six Months Ended November 30, 2020 and 2019~~

For the six months ended November 30, 2020, the Company reported a net loss of $8.5 million, or a loss of $0.22 per diluted share, on net sales of $143.0 million, compared with a net loss of $4.0 million, or a loss of $0.11 per diluted share, on net sales of $136.0 million during the prior year.

~~Net Sales~~

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

~~Table of Contents~~

Six Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019 % Growth
Net Sales by Global Business Unit
       Vascular Interventions & Therapies $ 63,757 $ 60,063 6.2%
       Vascular Access 52,035 45,943 13.3%
       Oncology 27,194 30,039 (9.5)%
            Total $ 142,986 $ 136,045 5.1%
Net Sales by Geography
       United States $ 114,792 $ 108,492 5.8%
       International 28,194 27,553 2.3%
           Total $ 142,986 $ 136,045 5.1%

~~For the six months ended November 30, 2020, net sales increased $6.9 million to $143.0 million compared to the same period in the prior year.~~

~~Vascular Interventions & Therapies~~

•Total Vascular Interventions & Therapies sales increased $3.7 million. Auryon, which was acquired as part of the Eximo acquisition in the second quarter of fiscal year 2020, contributed $3.2 million in sales. Additionally, the AngioVac and Core businesses continued their strong performance and grew $3.0 million and $0.6 million, respectively. The Company continued to see strong case volumes in AngioVac, which increased 26% from the prior year. These increases were partially offset by lower volume in Venous products due to fewer elective procedures during the COVID-19 pandemic.

•U.S. Vascular Interventions & Therapies sales increased $4.4 million due to increased case volume in AngioVac, increased Core Peripheral product sales and $3.2 million in sales of Auryon. These increases were partially offset by decreased sales volume in Venous.

•~~International Vascular Interventions & Therapies sales decreased $0.7 million.~~

~~Vascular Access~~

•Total Vascular Access sales increased $6.1 million due to increased sales of PICCs and Midlines of $3.6 million and $2.7 million, respectively. These increases are the result of a large order in the United Kingdom related to the COVID-19 pandemic for $5.2 million in the first quarter of fiscal year 2021 along with the distribution agreement with MedComp. These increases were offset by decreased sales in Ports. BioFlo product lines comprise 54% of overall Vascular Access sales compared to 51% a year ago.

•~~U.S. Vascular Access sales increased $1.5 million primarily due to increased Midline and PICC sales of $0.6 million and $0.8 million, respectively.~~

•International Vascular Access sales increased by $4.6 million primarily as a result of a large order in the United Kingdom related to the COVID-19 pandemic for $5.2 million. This was partially offset by decreased PICC sales in Latin America of $0.8 million.

~~Oncology~~

•Total Oncology sales decreased $2.8 million year over year primarily due to lower NanoKnife capital sales of $2.4 million, decreased RadioFrequency Ablation sales of $1.0 million and decreased Balloon product sales of $0.9 million. This was partially offset by increased Microwave disposable sales of $0.7 million, NanoKnife disposable sales of $0.5 million and BioSentry sales of $0.8 million.

•U.S. Oncology sales increased by $0.4 million primarily due to increased NanoKnife disposable sales of $0.8 million, BioSentry sales of $0.8 million and Microwave disposable sales of $0.5 million. This was partially offset by decreased NanoKnife capital sales of $0.5 million and Balloon product sales of $0.9 million.

•~~International Oncology sales decreased $3.2 million year over year as a result of decreased RadioFrequency Ablation sales of $1.2 million and NanoKnife capital and disposable sales of $2.1 million.~~

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~~Gross Profit, Operating expenses, and Other income (expense)~~


		Six Months Ended								Three Months Ended
(in thousands)	(in thousands)	Nov 30, 2020			Nov 30, 2019			% Change			(in thousands)	Aug 31, 2021			Aug 31, 2020			% Change
Gross profit	Gross profit	$	75,938		$	79,761		(4.8)	%		Gross profit	$	40,139		$	35,764		12.2	%
Gross profit % of sales	Gross profit % of sales	53.1		%	58.6		%				Gross profit % of sales	52.1		%	50.9		%
Research and development	Research and development	$	18,721		$	14,055		33.2	%		Research and development	$	7,394		$	9,009		(17.9)	%
% of sales	% of sales	13.1		%	10.3		%				% of sales	9.6		%	12.8		%
Selling and marketing	Selling and marketing	$	37,879		$	39,493		(4.1)	%		Selling and marketing	$	24,446		$	17,705		38.1	%
% of sales	% of sales	26.5		%	29.0		%				% of sales	31.8		%	25.2		%
General and administrative	General and administrative	$	17,776		$	19,448		(8.6)	%		General and administrative	$	8,943		$	8,557		4.5	%
% of sales	% of sales	12.4		%	14.3		%				% of sales	11.6		%	12.2		%

Gross profit - Gross profit consists of net sales less the cost of goods sold, which includes the costs of materials, products purchased from third parties and sold by us, manufacturing personnel, royalties, freight, business insurance, depreciation of property and equipment and other manufacturing overhead, exclusive of intangible amortization.

Gross profit ~~decreased~~increased by ~~$3.8~~$4.4 million compared to the prior year. The ~~decrease~~change is primarily attributable to the following:

•Sales volume positively impacted gross profit by ~~$4.5~~$4.2 million year over ~~year.~~year;

•~~Net productivity negatively~~Sales mix positively impacted gross profit by $5.5 million primarily as a result of under absorption of $3.7 million and start-up costs related to the Auryon launch of $1.8 million. The under absorption in manufacturing operations was due to the fact that the Company has maintained staffing levels during the COVID-19 global pandemic to mitigate risk, along with a focus on working capital management through inventory reduction.

•~~Mix negatively impacted gross margin by $1.7~~$0.7 million as a result of ~~the large order in the United Kingdom for lower gross margin products~~increased sales of NanoKnife, Auryon and ~~decreased NanoKnife capital sales. This was partially offset by increased AngioVac sales.~~AngioVac;

•~~A reserve for recalled products~~Increased Auryon start up costs related to placed units of ~~$0.5 million and amortization of prior year capitalized variances of $0.4~~$1.0 million negatively impacted gross ~~margin.~~profit year over year; and

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•Inflationary costs on raw materials, labor and freight had a negative impact of $1.4 million year over year, partially offset by favorablility in production volume and other initiatives of $1.2 million and $0.4 million, respectively.

Research and development ~~expenses~~expense - Research and development (“R&D”) ~~expenses include~~expense includes internal and external costs to develop new products, enhance existing products, validate new and enhanced products, and manage clinical, regulatory and medical affairs.

R&D expense ~~increased $4.7~~decreased $1.6 million compared to the prior year. The ~~increase~~change is primarily attributable to the following:

•~~Research and development expenses related~~R&D project expense decreased $1.0 million year over year primarily due to the ~~AngioVac platform expansion, the NanoKnife DIRECT~~© ~~study~~timing of certain projects; and ~~the Pathfinder study increased $3.4 million along with $2.0 million of expenses related to Auryon.~~

•~~Outside consultant spend~~Compensation and ~~other expenses~~benefits expense decreased ~~$0.5~~$0.4 million ~~along with decreased travel expenses~~as a result of ~~$0.2 million.~~open roles.

Sales and marketing ~~expenses~~expense - Sales and marketing (“S&M”) ~~expenses consist~~expense consists primarily of salaries, commissions, travel and related business expenses, attendance at medical society meetings, product promotions and marketing activities.

S&M expense ~~decreased $1.6~~increased $6.7 million compared to the prior year. The ~~decrease~~change is primarily attributable to the following:

•~~Travel expenses decreased $2.8~~Compensation and benefits expense increased $4.3 million due to ~~less travel as a result of the COVID-19 pandemic. In addition, tradeshow and other expenses decreased $3.1 million due to the cancellation of events.~~

•~~Compensation and benefits decreased approximately $0.4 million which is primarily the result of open roles.~~

•~~Expenses related to~~additional headcount from the build-out of the Auryon sales and marketing ~~teams to prepare for full product launch of $4.7 million.~~teams; and

•Travel and other expenses increased $2.5 million as some COVID-19 restrictions were lifted.

General and administrative ~~expenses~~expense - General and administrative (“G&A”) ~~expenses include~~expense includes executive management, finance, information technology, human resources, business development, legal, and the administrative and professional costs associated with those activities.

G&A expense ~~decreased $1.7~~increased $0.4 million compared to the prior year. The ~~decrease~~change is primarily attributable to the following:

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•~~Legal expenses decreased $1.2 million.~~Compensation and benefits expense increased $0.9 million year over year primarily due to increased headcount; and

•~~Travel expenses~~Outside consultant spend decreased ~~$0.3~~$0.7 million, ~~due to less travel as a result of~~partially offsetting the ~~COVID-19 pandemic.~~foregoing increase.


		Six Months Ended						Three Months Ended
(in thousands)	(in thousands)	Nov 30, 2020		Nov 30, 2019		$ Change			(in thousands)	Aug 31, 2021		Aug 31, 2020		$ Change
Amortization of intangibles	Amortization of intangibles	$	9,546	$	8,398	$	1,148		Amortization of intangibles	$	4,821	$	4,953	$	(132)
Change in fair value of contingent consideration	Change in fair value of contingent consideration	$	(473)	$	(303)	$	(170)		Change in fair value of contingent consideration	$	195	$	(657)	$	852
Acquisition, restructuring and other items, net	Acquisition, restructuring and other items, net	$	2,447	$	2,921	$	(474)		Acquisition, restructuring and other items, net	$	2,440	$	1,319	$	1,121
Other expense, net		$	(28)	$	(442)	$	414
Other income (expense), net									Other income (expense), net	$	(508)	$	309	$	(817)

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

•Amortization expense ~~increased $1.1~~decreased $0.1 million ~~compared to~~from the prior year ~~as a result~~due to assets that became fully amortized in fiscal year 2021 along with the write-off of the ~~Eximo Medical and C3 Wave tip location acquisitions, which increased~~OARtrac intangible ~~assets~~asset in the fourth quarter of fiscal year 2021. This was partially offset by ~~$60.3~~amortization relating to the Camaro intangible asset addition of $3.9 million ~~and $9.4 million, respectively. These additions resulted~~ in ~~additional amortization expense~~the first quarter of ~~$2.4 million.~~fiscal year 2022.

Change in fair value of contingent consideration - Represents changes in contingent consideration driven by changes to estimated future payments on earn-out liabilities created through acquisitions and amortization of present value discounts on long-term contingent consideration.

•The change ~~from the prior year is due to a decision to no longer pursue the final RadiaDyne technical milestone, which resulted in a reduction in the liability of $0.8 million. This reduction~~ in the fair value ~~was offset by normal amortization of the present value of~~is related to the Eximo contingent ~~consideration recorded in the second quarter of fiscal year 2020.~~consideration.

Acquisition, restructuring and other items, net - Represents costs associated with mergers and acquisitions, restructuring expenses, legal costs that are related to litigation that is not in the ordinary course of business, legal settlements and other one-time items.

Acquisition, restructuring and other items, net, ~~decreased~~increased by ~~$0.5~~$1.1 million compared to the prior year. The ~~decrease~~change is primarily attributable to the following:

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•Legal expense, related to litigation that is outside of the normal course of business, of ~~$2.0~~$2.1 million was recorded in the first quarter of fiscal year ~~2021~~2022 compared to ~~$1.4~~$0.8 million in the prior ~~year.~~year;

•~~There was no M&A expense incurred in~~In the ~~second~~first quarter of fiscal year 2021, ~~compared to $0.6 million in the prior year.~~

•~~In fiscal year 2021, the Company incurred $0.4 million of expense to move manufacturing facilities~~and as a result of the sale of the Fluid Management business, ~~compared~~the Company incurred $0.3 million of expense to ~~$1.5~~move manufacturing facilities and the Company received $0.4 million ~~in the prior year.~~

•Asfrom Medline Industries, Inc. as part of the sale of the Fluid Management business, the Company entered into a transition services agreement with Medline for certain legal, human resource, tax, accounting and information technology services from the Company for a period not to exceed 24 months. As a result of the transition services agreement, the Company invoiced Medline $0.7 million inTSA agreement. These activities were completed during fiscal year ~~2021 compared to $1.3 million in the prior year.~~2021; and

•Other expenses of ~~$0.8~~$0.4 million in ~~consists~~the first quarter of fiscal year 2022 compared to $0.6 million in the prior year consisted mainly of severance associated with organizational ~~changes, compared to $0.8 million in the prior year.~~changes.

Other ~~expense,~~income (expense), net- Other expenses include interest expense, foreign currency impacts, bank fees, and amortization of deferred financing costs.

•The ~~decrease~~increase in other expense from the prior year of ~~$0.4~~$0.8 million is primarily due to unrealized foreign currency ~~unrealized gains~~losses of $0.5 million and the prior year write-off of deferred financing fees associated with the old Credit Facility of $0.6 million. This was partially offset by increased interest expense of $0.2 million for the $40.0 million outstanding on the Revolving Facility at the end of the second quarter of fiscal year 2021 compared to no debt outstanding in the prior year. In addition, interest income decreased by $0.3$0.9 million.

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Income Tax Benefit

Six Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019
Income tax benefit $ (1.5) $ (0.7)
Effective tax rate including discrete items 14.5 % 14.5 %


	Three Months Ended
(in thousands)	Aug 31, 2021			Aug 31, 2020
Income tax benefit	$	(1.6)		$	(0.5)
Effective tax rate including discrete items	19.0		%	11.3		%

Our effective tax rate including discrete items for the ~~six month~~three-month periods ended ~~November 30,~~August 31, 2021 and 2020 was 19.0% and ~~2019 was 14.5% and 14.5%~~11.3%, respectively. In fiscal year ~~2021,~~2022, the Company’s effective tax rate differs from the U.S. statutory rate primarily due to the impact of the valuation allowance, foreign taxes, and other non-deductible permanent items (such as non-deductible meals and entertainment, Section 162(m) excess compensation and non-deductible ~~share based~~share-based compensation).

The estimated annual effective tax rate, however, prior to discrete items was ~~16.1%~~10.6% in the ~~second~~first quarter of fiscal year ~~2021,~~2022, as compared to ~~13.2%~~14.2% for the same period in fiscal year ~~2020.~~ 2021.

Liquidity and Capital Resources

We ~~are continuously and critically reviewing~~regularly review our liquidity and anticipated capital requirements in light of the significant uncertainty created by the COVID-19 global pandemic. We believe that our current cash on hand and availability under our ~~revolving credit facility~~Revolving Facility provide sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months. We are closely monitoring receivables and payables. ~~In addition, we believe that our recently increased inventory levels provide additional risk mitigation in the event we incur a manufacturing disruption.~~

Our cash and cash equivalents totaled ~~$58.0~~$35.5 million as of ~~November 30, 2020,~~August 31, 2021, compared with ~~$54.4~~$48.2 million as of May 31, ~~2020.~~2021. As of ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020,~~2021, total debt outstanding related to the Revolving Facility was ~~$40.0 million.~~$25.0 million and $20.0 million, respectively. The fair value of contingent consideration liability as of ~~November 30, 2020~~August 31, 2021 and May 31, ~~2020,~~2021, was ~~$15.2~~$15.9 million and ~~$15.6~~$15.7 million, respectively.

The table below summarizes our cash flows:

Six Months Ended
(in thousands) Nov 30, 2020 Nov 30, 2019
Cash provided by (used in):
Operating activities $ 6,023 $ (597)
Investing activities (3,185) (50,124)
Financing activities 481 (135,749)
Effect of exchange rate changes on cash and cash equivalents 271 76
Net change in cash and cash equivalents $ 3,590 $ (186,394)


	Three Months Ended
(in thousands)	Aug 31, 2021		Aug 31, 2020
Cash provided by (used in):
Operating activities	$	(8,904)	$	(5,425)
Investing activities	(9,092)		(1,824)
Financing activities	5,446		491
Effect of exchange rate changes on cash and cash equivalents	(139)		252
Net change in cash and cash equivalents	$	(12,689)	$	(6,506)

Cash flows consisted of the following:

Cash ~~provided by (used in)~~used in operating activities

~~Six~~Three months ended ~~November 30,~~August 31, 2021 and 2020:

•Net loss of ~~$8.5~~$7.0 million and $4.3 million for the period ended August 31, 2021 and 2020, respectively, plus the non-cash items, primarily driven by depreciation and amortization and ~~share~~stock based compensation, along with the changes ~~in working capital below, contributed to cash provided by operations of $6.0 million.~~

•Working capital was favorably impacted by decreased inventory on hand of $10.5 million. This was partially offset by increased accounts receivable of $2.3 million and decreased accounts payable and accrued liabilities of $3.8 million.

~~Six months ended November 30, 2019:~~

•~~Net loss of $4.0 million plus the non-cash items, primarily driven by depreciation and amortization, contributed to cash used in operations of $0.6 million.~~

•Working capital was negatively impacted by increased inventory on hand of $10.0 million and decreased accounts payable and accrued liabilities of $8.8 million. Accounts receivable had a favorable impact on working capital as a result of the sale of the Fluid Management business.

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in working capital below, contributed to cash used in operations of $8.9 million and $5.4 million, respectively, for these periods.

•For the period ended August 31, 2021, working capital was negatively impacted by decreased accounts payable, accrued liabilities and other liabilities of $6.3 million, mainly driven by the payment of annual incentive compensation in the first quarter.

•For the period ended August 31, 2020, working capital was negatively impacted by increased accounts receivable of $2.7 million and decreased accounts payable, accrued liabilities and other liabilities of $10.1 million. Inventory had a favorable impact on working capital of $7.2 million.

Cash used in investing activities

~~Six~~Three months ended ~~November 30, 2020~~August 31, 2021 and ~~2019:~~2020:

•$~~3.2~~1.0 million inand $1.8 million, respectively, of cash was used for fixed asset ~~additions versus $4.0 million in the prior year.~~additions;

•$~~45.8~~4.5 million of cash ~~payment to acquire Eximo Medical Ltd.~~was used for Auryon placement and evaluation unit additions in ~~the second quarter of fiscal year 2020.~~

~~Cash provided by (used in) financing activities~~

~~Six months ended November 30, 2020 and 2019:~~

•~~$132.5 million repayment of long-term debt in conjunction with the new Credit Agreement that was entered into at the beginning of~~ the first quarter of fiscal year ~~2020. Refer to Note 7 of the financial statements.~~2022; and

•$~~0.5~~3.6 million of cash was used for the QX Medical asset acquisition in the first quarter of fiscal year 2022.

Cash provided by financing activities

Three months ended August 31, 2021 and 2020:

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

•$0.4 million and $0.5 million, respectively, of proceeds from stock option and ESPP ~~activity versus $1.3 million in outlays in the prior year.~~activity.

•~~$1.2 million payment on earn-out liabilities in the prior year.~~

On June 3, 2019 and in connection with the completion of the Fluid Management divestiture, the Company repaid all amounts outstanding under its existing Credit Agreement and entered into a new Credit Agreement. The Credit Agreement provides for a $125.0 million secured Revolving Facility, which includes an uncommitted expansion feature that allows the Company to increase the total revolving commitments and/or add new tranches of term loans in an aggregate amount not to exceed $75.0 million. The Credit Agreement includes customary representations, warranties and covenants, and acceleration, indemnity and events of default provisions, including, among other things, two financial covenants. One financial covenant requires us to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00. The other financial covenant requires us to maintain a total leverage ratio of not greater than 3.00 to 1.00. The total leverage ratio is based upon our trailing twelve months total adjusted EBITDA (as defined in the Credit Agreement). The amount that we can borrow under our Credit Agreement is directly based on our leverage ratio. The interest rate on the Revolving Facility at August 31, 2021 was 1.34%. The Company was in compliance with the Credit Agreement covenants as of August 31, 2021.

~~On December 17, 2019,~~In the first quarter of fiscal year 2022, the Company made a ~~$15.0~~$5.0 million draw on the Revolving Facility ~~as part of~~in conjunction with the ~~acquisition of the C3 Wave tip location~~QX Medical asset from Medical Components Inc. that is described Note 2 to the financial statements. In the fourth quarter of fiscal year 2020, the Company made an additional $25.0 million draw on the Revolving Facility.acquisition. In December 2020 ~~a payment~~and March 2021, payments of $10.0 million ~~was~~each were made on the Revolving Facility. We believe that our current cash balance, together with cash generated from operations and access to our Revolving Facility, will provide sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months. If we seek to make ~~significant~~ acquisitions of other businesses or technologies in the future for cash, we may require external financing.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Rate Risk

We are exposed to market risk from changes in currency exchange rates, as well as interest rate fluctuations on our credit facility and investments that could impact our results of operations and financial position.

We transact sales in currencies other than the U.S. Dollar, particularly the Euro, British pound and Canadian dollar. ~~Approximately~~For the three months ended August 31, 2021, approximately 6% of our sales ~~in fiscal year 2021~~ were denominated in foreign currencies. We do not have expenses denominated in foreign currencies at the level of our sales and as a result, our profitability is exposed to currency fluctuations. When the U.S. Dollar strengthens, our sales and gross profit will be negatively impacted. In addition, we have assets and liabilities denominated in non-functional currencies which are remeasured at each reporting period, with the offset to changes presented as a component of Other (Expenses) Income. Significant non-functional balances include accounts receivable due from a sub-section of our international customers.

Interest Rate Risk

On June 3, 2019, we entered into the Credit Agreement which provides for a ~~$125~~$125.0 million Revolving Facility. Interest on the facility will be based, at the Company’s option, on either a base rate of LIBOR or alternate base rate, plus an applicable margin tied to the Company’s total leverage ratio and having ranges between 0.25% and 0.75% for base rate loans and between 1.25% and 1.75% for LIBOR loans. In the event of default, the interest rate may be increased by 2.0%. As of ~~November 30, 2020~~August 31, 2021 there was ~~$40.0~~$25.0 million outstanding on the Revolving Facility. The interest rate on the Revolving Facility at August 31, 2021 was 1.34%.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash and cash equivalents, our credit facility and trade accounts receivable.

The Company maintains cash and cash equivalents at various institutions and performs periodic evaluations of the relative credit standings of these financial institutions to ensure their credit worthiness. In addition, the Credit Agreement is structured across five above investment grade banks. The Company has the ability to draw equally amongst the five banks which limits the concentration of credit risk of one institution.

Concentration of credit risk with respect to trade accounts receivable is limited due to the large number of customers that purchase products from the Company. No single customer represents more than 10% of total sales. The Company monitors the creditworthiness of its ~~customers~~customers. As the Company’s standard payment terms are 30 to ~~which it grants credit terms in~~90 days from invoicing, the ~~normal course of business.~~Company does not provide any significant financing to its customers. Although the Company does not currently foresee a significant credit risk associated with the outstanding accounts receivable, repayment is dependent upon the financial stability of our customers.

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Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

As of the end of the period covered by this report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting for the fiscal quarter ended ~~November 30, 2020~~August 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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AngioDynamics, Inc. and Subsidiaries

PART II: OTHER INFORMATION

~~Item 1. Legal Proceedings.~~

~~The Company is involved in various legal proceedings, including commercial, intellectual property, product liability,~~See Note 14 "Commitments and regulatory matters of a nature considered normal for its business. The Company accrues for amounts related to these matters if it is probable that a liability has been incurred, and an amount can be reasonably estimated. The Company discloses such matters when there is at least a reasonable possibility that a material loss may have been incurred. However, the Company cannot predict the outcome of any litigation or the potential for future litigation.

~~C.R. Bard, Inc. v. AngioDynamics, Inc.~~

~~On January 11, 2012, C.R. Bard, Inc. (“Bard”) filed a suit~~Contingencies" set forth in the United States District Court of Utah claiming certain of the Company's implantable port products infringe on three U.S. patents held by Bard (the "Utah Action"). Bard’s complaint sought unspecified damages and other relief. The Company filed petitions for reexaminationnotes to our consolidated financial statements included in the US Patent and Trademark Office ("USPTO") seeking to invalidate all three patents asserted by Bard in the litigation. The Company's petitions were granted and 40 of Bard's 41 patent claims were rejected and, following further proceedings, the Patent Office issued a Final Rejection of all 40 claims subject to reexamination. Thereafter, Bard filed appeals to the USPTO Board of Appeals and Interferences for all three reexaminations which were decided as follows: For US Patent No. 7,785,302, the rejections of six of the ten claims under reexamination were affirmed, but were reversed on four of the ten claims. For U.S. Patent No. 7,959,615 the rejections of eight of the ten claims under reexamination were affirmed but the rejections of the other two of the ten claims were reversed. In the third, for U.S. Patent No. 7,947,022 the rejections of all twenty claims under reexamination were affirmed. Thereafter, Bard sought Rehearing in all three appeals and the Company sought Rehearing in the ‘302 and ‘615 appeals. The USPTO denied all three Rehearing Requests, but modified its characterization of one prior art reference for the ‘302 and ‘022 decisions.

Bard filed appeals to the Federal Circuit Court of Appeals in all three reexams and the Company Cross-Appealed for the ‘302 and the ‘615 reexams. MedComp also filed an Amicus Brief in support of the Company on November 22, 2017. Meanwhile, on July 12, 2017 Bard assigned the asserted patents to Bard Peripheral Vascular, Inc. (“BPV”) which was added as co-Appellant before the Federal Circuit and as a co-Plaintiff in the Utah action. An oral hearing was held on September 5, 2018 and the Court rendered its decision on September 28, 2018, affirming that claims 1-5 and 10 of the ‘615 patent were invalid, but that claims 6-7 of the 615 patent and claims 1-4 of the 302 patent were valid over the prior art references considered in the Reexamination proceedings. The Federal Circuit also reversed the PTAB’s claim construction ruling and remanded for consideration of obviousness for the remaining claims under the new claim construction ruling and for further findings with respect to whether one of the asserted references qualified as a printed publication. On January 28, 2019, on remand, the USPTO reversed the rejections of the ‘302 claims 1-10, ‘022 claims 1-20 and ‘615 claims 8-9. The USPTO has since issued Inter Partes Reexamination Certificates for the ‘302 Patent for the ‘022 patent and for the ‘615 patent. The Company thereafter filed a Motion to Unstay the Utah Case and that motion was granted. On November 4, 2019 the Court held a joint Status Conference among the Company’s Utah Action and two other cases filed by Bard on the same patents against MedComp and Smiths. The Court set a schedule for defendant's Motions to Dismiss or Transfer. The Company filed its motion on November 25, 2019; and Bard filed a responsive brief and a motion for venue discovery on December 9, 2019. The Company filed a responsive brief on December 16, 2019 and Bard filed a reply on December 23, 2019. On February 27, 2020, the Court referred all non-dispositive motions to the presiding Magistrate and on March 3, 2020 the Court granted Bard’s Motion for Venue Discovery and denied the Company’s transfer motion without prejudice to re-filing after completion of the venue discovery, but no later than June 30, 2020. Following venue discovery, AngioDynamics re-filed its Motion to Dismiss or Transfer on June 30, 2020. Bard filed an opposition brief on July 28, 2020, and the Company filed a subsequent reply. The Court granted AngioDynamics’s Motion to Transfer on November 16, 2020. The case is currently pending in the District of Delaware and a scheduling conference has been set for January 21, 2021.The Company believes these claims are without merit and intends to defend them vigorously. The Company has not recorded an expense related to the outcomePart I, Item I of this ~~litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.~~

On March 10, 2015, Bard and BPV filed suit in the United States District Court for the District of Delaware (the “Delaware Action") claiming certain of the Company's implantable port products infringeQuarterly Report on three other U.S. patents held by Bard, which are different from those asserted in the Utah action. Bard's complaint seeks unspecified damages and other relief. On June 1, 2015, the Company filed two motions in response to Bard’s Complaint - one sought transfer to the District of Utah where the Utah Action is currently pending, and the other sought dismissal of the entire complaint on grounds that none of the claims in the asserted patents is directed to patent eligible subject matter under Section 101 of the Patent Statute and in light of recent authority from the U. S. Supreme Court.

~~Table of Contents~~

On October 20, 2017, the scheduling order for the case was amended to, among other things, set a trial date commencing July 23, 2018. The parties completed Expert Discovery in January 2018 and completed briefing on their respective case dispositive motions on April 27, 2018. On June 26, 2018, the Court denied all case dispositive motions, ruling that issues of material fact remained in dispute. On July 9, 2018, the Court continued the trial until March 2019. On January 9, 2019 the Court held a further claim construction hearing to resolve two outstanding claim construction issues prior to trial. A Report and Recommendation (by Magistrate-Judge Fallon) was issued on February 11, 2019 and entered by the Court on February 28, 2019. Jury selection was held on Friday March 1, 2019 and trial began on March 4, 2019. On day four of the jury trial, at the close of C.R. Bard’s case, the Court granted the Company's oral motion for judgment as a matter of law under rule 50(a) as well as its motions for summary judgement on the grounds that the asserted patents are invalid, ineligible, not infringed and not willfully infringed. On April 5, 2019, Bard filed a precautionary Notice of Appeal to the Federal Circuit. On April 26, 2019, the District Court issued a Memorandum and Order confirming the grant of judgment in the Company’s favor of patent ineligibility, non-infringement, patent invalidity and no willful infringement. Meanwhile, on May 10, 2019, the Company filed a Motion for Attorney fees and non-taxable expenses under 35 USC Sec. 285. On May 21, 2019, the Court issued a Memorandum and Order which, inter alia, stayed proceedings on the Company’s fee Motion and the Company’s equitable claims pending appeal; and entered Final Judgment on May 21, 2019 as well. Bard filed a second Notice of Appeal on May 23, 2019. Both appeals have since been consolidated and Bard’s opening brief was filed on September 27, 2019; the Company's answering brief was filed on January 15, 2020; and Bard’s reply brief was filed on March 4, 2020. A hearing was held on June 1, 2020, and the court issued its decision on November 10, 2020. The Federal Circuit reversed the judgment in part with respect to Section 101, and vacated and remanded the trial court’s invalidity and non-infringement judgments. The Company filed a combined Petition for rehearing and rehearing ~~en banc~~ on December 10, 2020 which remains pending. The Company maintains its belief that Bard’s claims are without merit. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

~~AngioDynamics, Inc. v. C.R. Bard, Inc.~~

~~Merz North America Settlement~~

Form 10-Q.

~~Table of Contents~~

Item 1A. Risk Factors.

In addition to information set forth in this report, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” of our annual report on Form 10-K for our fiscal year ended May 31, ~~2020~~2021 which set forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results. You should review and consider such Risk Factors in making any investment decision with respect to our securities. An investment in our securities continues to involve a high degree of risk. There have been no material changes to the risk factors previously disclosed in our annual report on Form 10-K.

~~Table of Contents~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information with respect to the shares of the Company’s common stock repurchased during the ~~six~~three months ended ~~November 30, 2020:~~

Issuer Purchases of Equity Securities
Total
Number of
Shares
Purchased Average
Price Paid
per Share Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Programs (1) Maximum
Approximate
Dollar Value
of Shares
that May Yet
Be
Purchased
Under Plans
or Programs (1)
September 1, 2020 - September 30, 2020 — $ — — $ —
October 1, 2020 - October 31, 2020 849 $ 11.24 — $ —
November 1, 2020 - November 30, 2020 — $ — — $ —
Total 849 $ 11.24 — —
August 31, 2021:


	Issuer Purchases of Equity Securities
	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (2)	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs (2)
June 1, 2021 - June 30, 2021	—	$	—	—	$	—
July 1, 2021 - July 31, 2021	23,498	$	26.65	—	$	—
August 1, 2021 - August 31, 2021	41,348	$	27.45	—	$	—
Total	64,846	$	27.16	—	—

(1)These shares were purchased from employees to satisfy tax withholding requirements on the vesting of restricted shares/units from equity-based awards.

(2)These amounts are not applicable as the Company currently does not have a share repurchase program in effect.

Item 3. Defaults on Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

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Item 6

EXHIBIT INDEX

Incorporated by Reference

No.

Description

Form

Exhibit

Filing Date

~~10.1.9~~10.1

~~AngioDynamics, Inc.~~Form of Performance Share Award Agreement pursuant to the 2020 Stock and Incentive Award Plan

~~DEF 14A~~

~~September 3, 2020~~

~~10.2~~

~~AngioDynamics, Inc. Employee Stock Purchase Plan (as amended)~~

~~DEF 14A~~

~~September 3, 2020~~

~~10.4.6~~

~~Form of 2020 Performance Share Award Agreement pursuant to the AngioDynamics, Inc. 2004 Stock and Incentive Award Plan~~

31.1

Certification pursuant to Rule 13a-14(a) or 15d-14 under the Securities Exchange Act of 1934

31.2

Certification pursuant to Rule 13a-14(a) or 15d-14 under the Securities Exchange Act of 1934

32.1

Certification of Chief Executive Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101.SCH

XBRL Schema Document

101.CAL

XBRL Calculation Linkbase Documents

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Labels Linkbase Documents

101.PRE

XBRL Presentation Linkbase Documents

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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.

ANGIODYNAMICS, INC.

(Registrant)

Date:

~~January 8,~~September 30, 2021

/ S / JAMES C. CLEMMER

James C. Clemmer, President,

Chief Executive Officer

(Principal Executive Officer)

Date:

~~January 8,~~September 30, 2021

/ S / STEPHEN A. TROWBRIDGE

Stephen A. Trowbridge, Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer)

4031


	Nov 30, 2020		May 31, 2020
Assets
Current assets
Cash and cash equivalents	$	58,025	$	54,435

Accounts receivable, net of allowances of $1,941 and $2,150 respectively	33,604		31,263
Inventories	49,582		59,905


Prepaid expenses and other	8,493		7,310
Total current assets	149,704		152,913
Property, plant and equipment, net	29,628		28,312
Other assets	17,513		15,338
Intangible assets, net	190,559		197,136
Goodwill	201,117		200,515

Total assets	$	588,521	$	594,214
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	15,979	$	19,096
Accrued liabilities	27,610		29,380


Current portion of contingent consideration	0		836
Other current liabilities	2,223		2,133
Total current liabilities	45,812		51,445
Long-term debt, net of current portion	40,000		40,000
Deferred income taxes	23,018		24,057
Contingent consideration, net of current portion	15,178		14,811
Other long-term liabilities	10,170		9,029
Total liabilities	134,178		139,342
Commitments and contingencies (Note 14)	0		0
Stockholders' equity
Preferred stock, par value $0.01 per share, 5,000,000 shares authorized; 0 shares issued and outstanding	0		0
Common stock, par value $0.01 per share, 75,000,000 shares authorized; 38,702,030 and 38,448,536 shares issued and 38,332,030 and 38,078,536 shares outstanding at November 30, 2020 and May 31, 2020, respectively	375		374
Additional paid-in capital	566,602		561,871
Accumulated deficit	(108,854)		(100,318)
Treasury stock, 370,000 shares at November 30, 2020 and May 31, 2020, respectively	(5,714)		(5,714)
Accumulated other comprehensive income (loss)	1,934		(1,341)
Total Stockholders’ Equity	454,343		454,872
Total Liabilities and Stockholders' Equity	$	588,521	$	594,214


	Common Stock			Additional paid in capital		Retained earnings		Accumulated other comprehensive loss		Treasury Stock
	Shares	Amount								Shares	Amount		Total
Balance at May 31, 2019	37,984,382	$	372	$	555,040	$	66,469	$	(1,352)	(370,000)	$	(5,714)	$	614,815
Net loss						(1,275)							(1,275)
Exercise of stock options	48,136	1		530									531
Issuance/Cancellation of restricted stock units	287,087			(2,459)									(2,459)

Purchases of common stock under ESPP	40,270			628									628
Stock-based compensation				1,984									1,984
Other comprehensive loss, net of tax								(151)					(151)
Balance at August 31, 2019	38,359,875	$	373	$	555,723	$	65,194	$	(1,503)	(370,000)	$	(5,714)	$	614,073
Net loss						(2,736)							(2,736)

Issuance/Cancellation of restricted stock units	4,051												0
Stock-based compensation				2,242									2,242
Other comprehensive income, net of tax								231					231
Balance at November 30, 2019	38,363,926	$	373	$	557,965	$	62,458	$	(1,272)	(370,000)	$	(5,714)	$	613,810


	Three Months Ended Nov 30, 2020						Three Months Ended Nov 30, 2019
(in thousands)	United States		International		Total		United States		International		Total
Net sales
Vascular Interventions & Therapies	$	30,689	$	3,211	$	33,900	$	27,601	$	3,549	$	31,150
Vascular Access	20,161		3,769		23,930		18,563		4,221		$	22,784
Oncology	9,834		5,106		14,940		9,391		6,678		$	16,069
Total	$	60,684	$	12,086	$	72,770	$	55,555	$	14,448	$	70,003


	Six Months Ended Nov 30, 2020						Six Months Ended Nov 30, 2019
(in thousands)	United States		International		Total		United States		International		Total
Net sales
Vascular Interventions & Therapies	$	57,669	$	6,088	$	63,757	$	53,277	$	6,786	$	60,063
Vascular Access	39,383		12,652		52,035		37,847		8,096		$	45,943
Oncology	17,740		9,454		27,194		17,368		12,671		$	30,039
Total	$	114,792	$	28,194	$	142,986	$	108,492	$	27,553	$	136,045


(in thousands)
Remainder of 2021	$	8,488
2022	17,038
2023	17,488
2024	15,986
2025	17,006
2026 and thereafter	114,553
	$	190,559


	Fair Value Measurements using inputs considered as:						Fair Value at Nov 30, 2020
(in thousands)	Level 1		Level 2		Level 3








Financial Liabilities

Contingent consideration for acquisition earn outs	$	0	$	0	$	15,178	$	15,178
Total Financial Liabilities	$	0	$	0	$	15,178	$	15,178

	Fair Value Measurements using inputs considered as:						Fair Value at May 31, 2020
(in thousands)	Level 1		Level 2		Level 3






Financial Liabilities

Contingent consideration for acquisition earn outs	$	0	$	0	$	15,647	$	15,647
Total Financial Liabilities	$	0	$	0	$	15,647	$	15,647


	Issuer Purchases of Equity Securities
	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs (1)
September 1, 2020 - September 30, 2020	—	$	—	—	$	—
October 1, 2020 - October 31, 2020	849	$	11.24	—	$	—
November 1, 2020 - November 30, 2020	—	$	—	—	$	—
Total	849	$	11.24	—	—