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Table of Contents
    
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, 2022
OR
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)
https://cdn.kscope.io/7cdb3ad43e2da9fbf52ce9afc7c369c0-ango-20221130_g1.gif
 
Delaware11-3146460
(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 classTrading symbolName of each exchange on which registered
Common Stock, par value $.01ANGONASDAQ Global Select Market
Preferred Stock Purchase RightsNASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)


Table of Contents
 
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 Registrant’s classes of common stock, as of the latest practicable date.
Class Outstanding as of January 5, 2023
Common Stock, par value $.01 39,134,144



Table of Contents
AngioDynamics, Inc. and Subsidiaries
TABLE OF CONTENTS
 
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

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, 2022Nov 30, 2021Nov 30, 2022Nov 30, 2021
Net sales$85,429 $78,280 $166,966 $155,251 
Cost of sales (exclusive of intangible amortization)40,351 37,725 79,583 74,557 
Gross profit45,078 40,555 87,383 80,694 
Operating expenses:
Research and development6,838 8,199 15,171 15,593 
Sales and marketing26,007 23,606 52,550 48,052 
General and administrative10,835 9,678 20,936 18,621 
Amortization of intangibles4,808 4,889 9,645 9,710 
Change in fair value of contingent consideration1,646 609 1,857 804 
Acquisition, restructuring and other items, net3,059 2,253 8,640 4,693 
Total operating expenses53,193 49,234 108,799 97,473 
Operating loss(8,115)(8,679)(21,416)(16,779)
Other expense:
Interest expense, net(684)(174)(1,065)(330)
Other expense, net(252)(10)(427)(362)
Total other expense, net(936)(184)(1,492)(692)
Loss before income tax benefit(9,051)(8,863)(22,908)(17,471)
Income tax benefit(565)(512)(1,418)(2,148)
Net loss$(8,486)$(8,351)$(21,490)$(15,323)
Loss per share
Basic$(0.21)$(0.21)$(0.55)$(0.39)
Diluted$(0.21)$(0.21)$(0.55)$(0.39)
Weighted average shares outstanding
Basic39,490 39,053 39,394 38,893 
Diluted39,490 39,053 39,394 38,893 
The accompanying notes are an integral part of these consolidated financial statements.
3

Table of Contents
AngioDynamics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
(in thousands of dollars)
 
Three Months Ended
Six Months Ended
Nov 30, 2022Nov 30, 2021Nov 30, 2022Nov 30, 2021
Net loss$(8,486)$(8,351)$(21,490)$(15,323)
Other comprehensive income (loss), before tax:
Foreign currency translation (1,095)819 (1,645)1,409 
Other comprehensive income (loss), before tax(1,095)819 (1,645)1,409 
Income tax expense related to items of other comprehensive income (loss)    
Other comprehensive income (loss), net of tax(1,095)819 (1,645)1,409 
Total comprehensive loss, net of tax$(9,581)$(7,532)$(23,135)$(13,914)
The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents
AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands of dollars, except share data)
Nov 30, 2022May 31, 2022
Assets
Current assets
Cash and cash equivalents$29,857 $28,825 
Accounts receivable, net of allowances of $2,110 and $1,939 respectively
52,852 52,304 
Inventories63,177 51,392 
Prepaid expenses and other12,944 10,824 
Total current assets158,830 143,345 
Property, plant and equipment, net45,957 45,005 
Intangible assets, net141,943 152,380 
Goodwill200,755 201,058 
Other assets10,722 10,963 
Total assets$558,207 $552,751 
Liabilities and stockholders' equity
Current liabilities
Accounts payable$34,688 $28,047 
Accrued liabilities26,533 34,842 
Current portion of contingent consideration9,760 8,783 
Other current liabilities2,586 2,652 
Total current liabilities73,567 74,324 
Long-term debt49,796 25,000 
Deferred income taxes14,290 16,037 
Contingent consideration, net of current portion9,072 8,165 
Other long-term liabilities3,524 4,736 
Total liabilities150,249 128,262 
Commitments and contingencies (Note 14)
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; 39,874,144 and 39,541,173 shares issued and 39,504,144 and 39,171,173 shares outstanding at November 30, 2022 and May 31, 2022, respectively
381 380 
Additional paid-in capital593,482 586,879 
Accumulated deficit (179,903)(158,413)
Treasury stock, 370,000 shares at November 30, 2022 and May 31, 2022, respectively
(5,714)(5,714)
Accumulated other comprehensive income(288)1,357 
Total Stockholders’ Equity407,958 424,489 
Total Liabilities and Stockholders' Equity$558,207 $552,751 
The accompanying notes are an integral part of these consolidated financial statements.
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AngioDynamics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands of dollars)
Six Months Ended
Nov 30, 2022Nov 30, 2021
Cash flows from operating activities:
Net loss$(21,490)$(15,323)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization15,478 14,276 
Non-cash lease expense1,248 1,209 
Stock based compensation6,374 5,437 
Change in fair value of contingent consideration1,857 804 
Deferred income taxes(1,525)(2,259)
Change in accounts receivable allowances392 16 
Fixed and intangible asset impairments and disposals87 97 
Other(43)(78)
Changes in operating assets and liabilities:
Accounts receivable(1,019)(2,922)
Inventories(11,831)478 
Prepaid expenses and other(3,931)(4,184)
Accounts payable, accrued and other liabilities(2,843)(4,514)
Net cash used in operating activities(17,246)(6,963)
Cash flows from investing activities:
Additions to property, plant and equipment(2,090)(2,152)
Additions to placement and evaluation units(3,442)(7,189)
Cash paid for acquisitions(540)(3,600)
Net cash used in investing activities(6,072)(12,941)
Cash flows from financing activities:
Proceeds from borrowings on long-term debt70,000 5,000 
Repayment of long-term debt(45,000) 
Deferred financing costs on long-term debt(751) 
Proceeds from exercise of stock options and employee stock purchase plan230 1,388 
Net cash provided by financing activities24,479 6,388 
Effect of exchange rate changes on cash and cash equivalents(129)(354)
Increase (decrease) in cash and cash equivalents1,032 (13,870)
Cash and cash equivalents at beginning of period28,825 48,161 
Cash and cash equivalents at end of period$29,857 $34,291 
Supplemental disclosure of non-cash investing and financing activities:
Accrual for capital expenditures incurred during the period$113 $65 
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 StockAdditional
paid in
capital
Accumulated deficit Accumulated
other
comprehensive
income (loss)
Treasury Stock
SharesAmountSharesAmountTotal
Balance at May 31, 202239,541,173 $380 $586,879 $(158,413)$1,357 (370,000)$(5,714)$424,489 
Net loss(13,004)(13,004)
Exercise of stock options6,617 (29)(29)
Issuance/Cancellation of restricted stock units213,241 (648)(648)
Issuance/Cancellation of performance share units29,826 (312)(312)
Purchases of common stock under ESPP56,894 1 1,070 1,071 
Stock-based compensation3,024 3,024 
Other comprehensive loss, net of tax(550)(550)
Balance at August 31, 202239,847,751 $381 $589,984 $(171,417)$807 (370,000)$(5,714)$414,041 
Net loss(8,486)(8,486)
Exercise of stock options15,000 184 184 
Issuance/Cancellation of restricted stock units11,393 (36)(36)
Stock-based compensation3,350 3,350 
Other comprehensive loss, net of tax(1,095)(1,095)
Balance at November 30, 202239,874,144 $381 $593,482 $(179,903)$(288)(370,000)$(5,714)$407,958 


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Common StockAdditional
paid in
capital
Accumulated deficit Accumulated
other
comprehensive
income
Treasury Stock
SharesAmountSharesAmountTotal
Balance at May 31, 202138,920,951 $377 $573,507 $(131,866)$3,153 (370,000)$(5,714)$439,457 
Net loss(6,972)(6,972)
Exercise of stock options80,635 1 1,279 1,280 
Issuance/Cancellation of restricted stock units279,495 (1,734)(1,734)
Issuance/Cancellation of performance share units59,371 — 
Purchases of common stock under ESPP49,789 1 899 900 
Stock-based compensation2,429 2,429 
Other comprehensive income, net of tax590 590 
Balance at August 31, 202139,390,241 $379 $576,380 $(138,838)$3,743 (370,000)$(5,714)$435,950 
Net loss(8,351)(8,351)
Exercise of stock options56,064 1,022 1,022 
Issuance/Cancellation of restricted stock units8,695 (83)(83)
Purchases of common stock under ESPP19333 
Stock-based compensation3,008 3,008 
Other comprehensive income, net of tax819 819 
Balance at November 30, 202139,455,193 $379 $580,330 $(147,189)$4,562 (370,000)$(5,714)$432,368 

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 Statements of Operations and the Consolidated Statements of Comprehensive Loss for the three and six months ended November 30, 2022 and 2021, the Consolidated Balance Sheet as of November 30, 2022, the Consolidated Statements of Cash Flows for the six months ended November 30, 2022 and 2021, and the Consolidated Statements of Stockholders’ Equity for the six months ended November 30, 2022 and 2021 have been prepared by the Company and are unaudited. The Consolidated Balance Sheet as of May 31, 2022 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, 2022 (and for all periods presented) have been made.
The unaudited interim consolidated financial statements for the three and six months ended November 30, 2022 and 2021 include the accounts of AngioDynamics, Inc. and its wholly owned subsidiaries (collectively, the "Company", "we", "our" or "us"). All intercompany balances and transactions have been eliminated.
2. ACQUISITIONS
Camaro Support Catheter Asset Acquisition
On July 27, 2021, the Company acquired the Camaro support catheter (rebranded as Syntrax) from QX Medical, LLC for an aggregate purchase price of $4.0 million, which included an upfront payment of $3.6 million and $0.4 million in purchase price holdbacks, along with $1.0 million of potential future contingent consideration related to revenue milestones. This acquisition supports the Auryon product family and the Company's strategic plan. The Company accounted for this acquisition as an asset purchase. The Company recorded the amount paid at closing as inventory and fixed assets of $0.1 million and an intangible asset product technology of $3.9 million. The intangible asset will be amortized over 15 years. The contingent consideration is comprised of revenue milestones and will be accounted for when the contingency is resolved or becomes probable and reasonably estimable.
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
As the Company has previously announced, the Company is focused on its ongoing transformation from a company with a broad portfolio of largely undifferentiated products to a more focused medical technology company that delivers unique and innovative health care solutions. The Company believes that this transformation will enable the Company to shift the portfolio from the mature, lower-growth markets where we have competed in the past by investing in technology and products that provide access to larger and faster growing markets. As such, we believe the growth in the near to mid-term will be driven by our Med Tech segment.
The following table summarizes net sales by Med Tech, Med Device and by geography:
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Three Months Ended November 30, 2022Three Months Ended November 30, 2021
(in thousands)United StatesInternationalTotalUnited StatesInternationalTotal
Net sales
Med Tech $20,550 $3,952 $24,502 $16,243 $2,643 $18,886 
Med Device51,081 9,846 60,927 49,107 10,287 59,394 
Total$71,631 $13,798 $85,429 $65,350 $12,930 $78,280 
Six Months Ended November 30, 2022
Six Months Ended November 30, 2021
(in thousands)United StatesInternationalTotalUnited StatesInternationalTotal
Net sales
Med Tech $40,991 $6,327 $47,318 $31,467 $5,026 $36,493 
Med Device99,664 19,984 119,648 98,347 20,411 118,758 
Total$140,655 $26,311 $166,966 $129,814 $25,437 $155,251 
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 products 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 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, net of any variable consideration 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 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. For the duration of these agreements 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 embedded operating lease for the right to use the units. In these arrangements, revenue recognized for the sale of the disposables is not allocated
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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
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.
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 reserves for such amounts, which is included in accrued expenses in the accompanying Consolidated Balance Sheets. These rebates and allowances result from performance-based offers that are primarily based on attaining contractually specified sales volumes. The Company is also required to pay administrative fees 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 months ended November 30, 2022, 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.
The following table presents changes in the Company’s receivables, contract assets and contract liabilities with customers:
(in thousands)Nov 30, 2022
May 31, 2022
Receivables$52,852 $52,304 
Contract assets$ $ 
Contract liabilities$522 $526 
During the six months ended November 30, 2022, the Company had additions to contract liabilities of $0.5 million. This was offset by $0.5 million in revenue that was recognized during the six months ended November 30, 2022.
Costs to Obtain or Fulfill a Customer Contract
Under ASC 606, the Company may recognize 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 and handling 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, 2022May 31, 2022
Raw materials$33,732 $28,251 
Work in process8,201 7,186 
Finished goods21,244 15,955 
Inventories$63,177 $51,392 
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 obsolete, expiring and slow-moving inventory. The total inventory reserve at November 30, 2022 and May 31, 2022 was $3.9 million and $3.7 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 has historically performed its annual goodwill assessment during the third quarter of each fiscal year. During the fourth quarter of fiscal year 2022, the Company changed its annual impairment assessment date from December 31 to April 30 to more closely align the impairment assessment date with the Company's long term planning and forecasting process.
The Company's annual testing for impairment of goodwill was completed as of April 30, 2022. Prior to the first quarter of fiscal year 2023, the Company managed its operations as one reporting unit. At the beginning of the first quarter of fiscal year 2023, the Company began to manage its operations as two operating segments and two reporting units, namely Med Tech and Med Device (see Note 11 "Segment and Geographic Information" set forth in the Notes to our consolidated financial statements included in this Quarterly Report on Form 10-Q). As a result of this change, goodwill was required to be allocated to each reporting unit and an interim goodwill impairment assessment was performed at the Company and reporting unit levels. To determine the fair value of the individual reporting units and the entire company as of June 1, 2022, the Company utilized the income approach. The income approach is based on the projected cash flows discounted to their present value using discount rates, that in the Company's judgment, consider the timing and risk of the forecasted cash flows using internally developed forecasts and assumptions. Under the income approach, the discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Other significant assumptions include revenue growth rates, profitability projections, and terminal value growth rates. The market approach was also considered; however, the income approach was chosen as the Company determined it is a better representation of both the Med Tech and Med Device reporting units' projected long-term performance. The fair value of each reporting unit and the Company as a whole was assessed to determine if there was any impairment. The Company compared each reporting unit's fair value to the adjusted carrying value to conclude that there was no impairment for either reporting unit or the Company as a whole. The adjusted carrying value of each reporting unit was used to calculate the Company's book value to compare to its market capitalization at the assessment date. Based on the results of this evaluation, there were no adjustments to goodwill for either reporting unit or the Company as a whole as of August 31, 2022.
There were no adjustments to goodwill for the six months ended November 30, 2022 other than foreign currency translation adjustments.
Even though the Company determined that there was no goodwill impairment at November 30, 2022, the future occurrence of a potential indicator of impairment, such as a significant adverse change in legal, regulatory, business or economic conditions or a more-likely-than-not expectation that one of the reporting units or a significant portion of either of the reporting units will be sold or disposed of, would require an interim assessment for the reporting units prior to the next required annual assessment as of April 30, 2023.

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Goodwill for each reporting unit is allocated as follows:
Six Months Ended Nov 30, 2022
(in thousands)Med Tech Med Device Total
Balance, June 1, 2022$160,529 $40,529 $201,058 
Foreign currency translation adjustments (20) (20)
Balance, August 31, 2022$160,509 $40,529 $201,038 
Foreign currency translation adjustments(283) (283)
Balance, November 30, 2022
$160,226 $40,529 $200,755 
There were no adjustments to goodwill for the six months ended November 30, 2022 other than foreign currency translation adjustments.
Definite Lived Intangible Assets
Intangible assets other than goodwill are amortized over their estimated useful lives on a straight-line 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.
Intangible assets consisted of the following:
Nov 30, 2022
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Product technologies$237,863 $(119,301)$118,562 
Customer relationships60,076 (39,972)20,104 
Trademarks9,950 (7,326)2,624 
Licenses5,377 (4,724)653 
$313,266 $(171,323)$141,943 
May 31, 2022
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Product technologies$239,467 $(112,141)$127,326 
Customer relationships60,115 (38,003)22,112 
Trademarks9,950 (7,185)2,765 
Licenses4,837 (4,660)177 
$314,369 $(161,989)$152,380 
Amortization expense for the three months ended November 30, 2022 and 2021 was $4.8 million and $4.9 million, respectively. Amortization expense for the six months ended November 30, 2022 and 2021 was $9.6 million and $9.7 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 2023$9,229 
202416,680 
202516,662 
202616,481 
202716,310 
2028 and thereafter66,581 
$141,943 

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6. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
(in thousands)Nov 30, 2022May 31, 2022
Payroll and related expenses$10,185 $20,232 
Royalties1,967 2,986 
Outside services6,739 3,731 
Research and development1,084 1,279 
Sales and franchise taxes815 750 
Rebates421 511 
Other5,322 5,353 
$26,533 $34,842 
7. LONG-TERM DEBT
On August 30, 2022, the Company repaid all amounts outstanding under its then existing credit agreement and entered into a new Credit Agreement (the "Credit Agreement") with its lenders, JPMorgan Chase Bank, N.A., as Administrative Agent, sole bookrunner, and sole lead arranger, and Bank of America, N.A. and KeyBank National Association, as Syndication Agents.
The Credit Agreement provides for a $75.0 million secured revolving credit facility (the "Revolving Facility") and a $30.0 million delayed draw term loan (the "Delayed Draw Term Loan"), and also includes an uncommitted expansion feature that allows the Company to increase the total revolving commitments and/or add new tranches of term loans in an aggregate amount not to exceed $75.0 million.  Each exercise of such expansion feature must be drawn in $5.0 million increments. The proceeds of the Revolving Facility may be used for general corporate purposes, including permitted acquisitions. The proceeds of the Delayed Draw Term Loan may be used for general corporate purposes, including primarily to finance the manufacturing costs of the Auryon laser capital equipment.
The Credit Agreement has a five-year maturity. Interest on the Revolving Facility and Delayed Draw Term Loan will be based, at the Company's option, on a rate equal to (i) the Secured Overnight Financing Rate ("SOFR") plus 0.10% (subject to a floor of 0%), or (ii) if the Company elects to treat a borrowing as an ABR Borrowing, an alternate base rate based on SOFR, plus, in each case, an applicable margin of 1.25%, 1.50% or 1.75%, depending on the leverage ratio. If any amounts are not paid when due, such overdue amounts will bear interest at an amount generally equal to 2.0% plus the existing loan rate. The Credit Agreement also carries a commitment fee in the case of the Revolving Facility, and a ticking fee, in the case of the Delayed Draw Term Loans of 0.20% to 0.25% per annum on the unused portion.
The Company's obligations under the Credit Agreement are unconditionally guaranteed, jointly and severally, by the Company's material direct and indirect domestic subsidiaries (the “Guarantors”). All obligations of the Company and the Guarantors under the Credit Agreement are secured by first priority security interests in substantially all of the assets of the Company and the Guarantors.
The Credit Agreement includes customary representations, warranties and covenants, and acceleration, indemnity and events of default provisions, including, among other things, two quarterly financial covenants as follows: 
Maximum leverage ratio of consolidated total indebtedness* to consolidated EBITDA* of not greater than 3.00 to 1.00 (during certain periods following material acquisitions the ratio shall be increased to 3.50 to 1.00).
Fixed charge coverage ratio of consolidated EBITDA minus consolidated capital expenditures* to consolidated interest expense* paid or payable in cash plus scheduled principal payments in respect of indebtedness under the Credit Agreement of not less than 1.25 to 1.00.
* The definitions of consolidated total indebtedness, consolidated EBITDA, consolidated capital expenditures and consolidated interest expense are specifically defined in the Credit Agreement included as an exhibit to Form 8-K filed on August 31, 2022.
As of November 30, 2022, there was $25.0 million outstanding on the Revolving Facility and $25.0 million outstanding on the Delayed Draw Term Loan and the interest rate at November 30, 2022 applicable to each was 5.59%. As of November 30, 2022 and May 31, 2022, the carrying value of long-term debt approximated its fair market value.
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(in thousands)Nov 30, 2022
Revolving Facility$25,000 
Delayed Draw Term Loan25,000 
Less: unamortized debt issuance costs(204)
      Total long-term debt$49,796 

Principal payments of approximately 3.57% on the Delayed Draw Term Loan will amortize in equal quarterly installments over a five year period beginning on the earlier of a full draw or the expiry of the draw period (March 1, 2024).

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 5.8% as of the second quarter of fiscal year 2023, as compared to 12.3% for the same period in fiscal year 2022. In fiscal year 2023, 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 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, 2022. 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.

9. SHARE-BASED COMPENSATION
On October 13, 2020, the Company's shareholders approved the 2020 Stock and Incentive Award Plan (the “2020 Plan”). 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. On November 3, 2022 the Company's shareholders approved an amendment to the 2020 Plan to increase the reserve of shares of common stock available for future grants by 1,950,000 shares. As of November 30, 2022, there was a maximum of 2.8 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. On November 3, 2022 the Company's shareholders approved an amendment to the employee stock purchase plan to increase the reserve of shares of common stock available for future grants by 1,000,000 shares. As of November 30, 2022, there was a maximum of 3.3 million shares of common stock available for future grant under the employee stock purchase plan.
For the three months ended November 30, 2022 and 2021, share-based compensation expense was $3.4 million and $3.0 million, respectively. For the six months ended November 30, 2022 and 2021, share-based compensation expense was $6.4 million and $5.4 million, respectively.
During the six months ended November 30, 2022 and 2021, the Company granted stock options and restricted stock units under the 2020 Plan to certain employees and members of the Board of Directors. Stock option awards are valued using the Black-Scholes option-pricing model and then amortized on a straight-line basis over the requisite service period of the award. Restricted stock unit awards are valued based on the closing trading value of the Company’s common stock on the date of grant and then amortized on a straight-line basis over the requisite service period of the award.
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During the six months ended November 30, 2022 and 2021, the Company granted performance share units under the 2020 Plan to certain employees. The awards may be earned by achieving performance levels over the requisite service period. The performance criteria are based on achieving certain performance targets and the total shareholder return (“TSR”) of the 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 is based on a Monte Carlo simulation model.
As of November 30, 2022, there was $24.4 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 two years. The Company has sufficient shares to satisfy expected share-based payment arrangements.
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 EndedSix Months Ended
(in thousands)Nov 30, 2022Nov 30, 2021Nov 30, 2022Nov 30, 2021
Basic39,490 39,053 39,394 38,893 
Effect of dilutive securities    
Diluted39,490 39,053 39,394 38,893 
Securities excluded as their inclusion would be anti-dilutive3,793 3,510 3,793 3,510 

11. SEGMENT AND GEOGRAPHIC INFORMATION
Segment information
The Company regularly reviews its segments and the approach used by the chief operating decision maker, the President and Chief Executive Officer ("CEO"), and management to evaluate performance and allocate resources. Prior to the first quarter of fiscal year 2023, the Company considered the business to be a single operating segment engaged in the development, manufacture and sale of medical devices for vascular access, peripheral vascular disease and oncology on a global basis. Commencing with the first quarter of fiscal year 2023, the Company began to manage its operations through two segments, Med Tech and Med Device to align with the transformation from a company with a broad portfolio of largely undifferentiated products to a more focused medical technology company. The Company's chief operating decision maker evaluates these two segments based on net sales and gross margin to, among other items, allocate resources and assess performance. Executives reporting to the CEO include those responsible for commercial operations, manufacturing operations, regulatory and quality and certain corporate functions. The CEO evaluates all other elements of profitability, investment and cash flow metrics on a consolidated global basis due to shared infrastructure and resources.
The Company manages its assets on a total company basis, not by operating segment; therefore, the CEO does not review any asset information by operating segment and, accordingly, asset information is not reported or evaluated by operating segment. Total assets were $558.2 million as of November 30, 2022.
The table below summarizes net sales and gross margin by Med Tech and Med Device including prior periods during which the Company considered the business to be a single operating segment, in order to conform to the current period presentation:
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Three Months EndedSix Months Ended
(in thousands)Nov 30, 2022Nov 30, 2021Nov 30, 2022Nov 30, 2021
Med Tech Net Sales$24,502 $18,886 $47,318 $36,493 
Gross profit 15,614 12,578 30,043 24,095 
Gross margin 63.7 %66.6 %63.5 %66.0 %
Med Device Net Sales$60,927 $59,394 119,648 $118,758 
Gross profit 29,464 27,977 57,340 $56,599 
Gross margin 48.4 %47.1 %47.9 %47.7 %
Total Net Sales$85,429 $78,280 $166,966 $155,251 
Gross profit45,078 40,555 87,383 80,694 
Gross margin52.8 %51.8 %52.3 %52.0 %
Geographic information
The table below summarizes net sales by geographic area based on external customer location:
Three Months EndedSix Months Ended
(in thousands)Nov 30, 2022Nov 30, 2021Nov 30, 2022Nov 30, 2021
Net Sales
United States$71,631 $65,350 $140,655 $129,814 
International13,798 12,930 26,311 25,437 
Total$85,429 $78,280 $166,966 $155,251 
For the three months ended November 30, 2022 and 2021, international sales as a percentage of total net sales were 16.2% and 16.5%, respectively. For the six months ended November 30, 2022 and 2021, international sales as a percentage of total net sales were 15.8% and 16.4%, respectively. Sales to any one country outside the U.S., as determined by shipment destination, did not comprise a material portion of net sales in any of the last three fiscal years. In addition, no one customer represents more than 10% of consolidated net sales and 96% of long-lived assets are located within the United States.

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 significant 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 Co