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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 February 28, 2023

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)

 

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)

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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 March 30, 2023
Common Stock, par value $.01						39,236,422

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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)			9
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			32
Item 4.			Controls and Procedures			33
			Part II: Other Information
Item 1.			Legal Proceedings			34
Item 1A.			Risk Factors			34
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 3.			Defaults on Senior Securities			34
Item 4.			Mine Safety Disclosures			34
Item 5.			Other Information			34
Item 6.			Exhibits			35

2

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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												Nine Months Ended
						Feb 28, 2023						Feb 28, 2022						Feb 28, 2023						Feb 28, 2022
Net sales						$	80,712					$	73,970					$	247,678					$	229,221
Cost of sales (exclusive of intangible amortization)						40,208						35,387						119,791						109,944
Gross profit						40,504						38,583						127,887						119,277
Operating expenses:
Research and development						6,852						7,280						22,023						22,873
Sales and marketing						25,406						20,416						77,956						68,468
General and administrative						8,839						8,727						29,775						27,348
Amortization of intangibles						4,739						4,895						14,384						14,605
Change in fair value of contingent consideration						227						201						2,084						1,005
Acquisition, restructuring and other items, net						3,369						2,359						12,009						7,052
Total operating expenses						49,432						43,878						158,231						141,351
Operating loss						(8,928)						(5,295)						(30,344)						(22,074)
Other expense:
Interest expense, net						(736)						(173)						(1,801)						(503)
Other expense, net						—						(289)						(427)						(651)
Total other expense, net						(736)						(462)						(2,228)						(1,154)
Loss before income tax benefit						(9,664)						(5,757)						(32,572)						(23,228)
Income tax benefit						(179)						(799)						(1,597)						(2,947)
Net loss						$	(9,485)					$	(4,958)					$	(30,975)					$	(20,281)
Loss per share
Basic						$	(0.24)					$	(0.13)					$	(0.79)					$	(0.52)
Diluted						$	(0.24)					$	(0.13)					$	(0.79)					$	(0.52)
Weighted average shares outstanding
Basic						39,509						39,092						39,436						38,959
Diluted						39,509						39,092						39,436						38,959

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												Nine Months Ended
						Feb 28, 2023						Feb 28, 2022						Feb 28, 2023						Feb 28, 2022
Net loss						$	(9,485)					$	(4,958)					$	(30,975)					$	(20,281)
Other comprehensive income (loss), before tax:
Foreign currency translation						(3,562)						(1,036)						(5,207)						373
Other comprehensive income (loss), before tax						(3,562)						(1,036)						(5,207)						373
Income tax expense related to items of other comprehensive income (loss)						—						—						—						—
Other comprehensive income (loss), net of tax						(3,562)						(1,036)						(5,207)						373
Total comprehensive loss, net of tax						$	(13,047)					$	(5,994)					$	(36,182)					$	(19,908)

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)

			Feb 28, 2023						May 31, 2022
Assets
Current assets
Cash and cash equivalents			$	30,111					$	28,825
Accounts receivable, net of allowances of $2,030 and $1,939 respectively			50,892						52,304
Inventories			63,532						51,392
Prepaid expenses and other			8,039						10,824
Total current assets			152,574						143,345
Property, plant and equipment, net			45,559						45,005
Intangible assets, net			134,011						152,380
Goodwill			199,976						201,058
Other assets			10,729						10,963
Total assets			$	542,849					$	552,751
Liabilities and stockholders' equity
Current liabilities
Accounts payable			$	35,600					$	28,047
Accrued liabilities			21,775						34,842
Current portion of contingent consideration			9,877						8,783
Other current liabilities			2,380						2,652
Total current liabilities			69,632						74,324
Long-term debt			49,807						25,000
Deferred income taxes			13,490						16,037
Contingent consideration, net of current portion			9,182						8,165
Other long-term liabilities			3,083						4,736
Total liabilities			145,194						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; 39,976,422 and 39,541,173 shares issued and 39,606,422 and 39,171,173 shares outstanding at February 28, 2023 and May 31, 2022, respectively			382						380
Additional paid-in capital			596,225						586,879
Accumulated deficit			(189,388)						(158,413)
Treasury stock, 370,000 shares at February 28, 2023 and May 31, 2022, respectively			(5,714)						(5,714)
Accumulated other comprehensive income			(3,850)						1,357
Total Stockholders’ Equity			397,655						424,489
Total Liabilities and Stockholders' Equity			$	542,849					$	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)

			Nine Months Ended
			Feb 28, 2023						Feb 28, 2022
Cash flows from operating activities:
Net loss			$	(30,975)					$	(20,281)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			23,316						21,682
Non-cash lease expense			1,883						1,822
Stock based compensation			8,177						7,789
Change in fair value of contingent consideration			2,084						1,005
Deferred income taxes			(1,752)						(3,121)
Change in accounts receivable allowances			560						(66)
Fixed and intangible asset impairments and disposals			144						245
Other			(317)						(27)
Changes in operating assets and liabilities:
Accounts receivable			759						(6,441)
Inventories			(12,254)						588
Prepaid expenses and other			(392)						(7,147)
Accounts payable, accrued and other liabilities			(7,109)						(11,802)
Net cash used in operating activities			(15,876)						(15,754)
Cash flows from investing activities:
Additions to property, plant and equipment			(2,756)						(3,258)
Additions to placement and evaluation units			(4,922)						(8,676)
Cash paid for acquisitions			(540)						(3,600)
Net cash used in investing activities			(8,218)						(15,534)
Cash flows from financing activities:
Proceeds from borrowings on long-term debt			70,000						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 plan			1,171						2,354
Net cash provided by financing activities			25,420						7,354
Effect of exchange rate changes on cash and cash equivalents			(40)						(337)
Increase (decrease) in cash and cash equivalents			1,286						(24,271)
Cash and cash equivalents at beginning of period			28,825						48,161
Cash and cash equivalents at end of period			$	30,111					$	23,890
Supplemental disclosure of non-cash investing and financing activities:
Accrual for capital expenditures incurred during the period			$	140					$	(5)

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, 2022			39,541,173						$	380					$	586,879					$	(158,413)					$	1,357					(370,000)						$	(5,714)					$	424,489
Net loss																					(13,004)																								(13,004)
Exercise of stock options			6,617												(29)																														(29)
Issuance/Cancellation of restricted stock units			213,241												(648)																														(648)
Issuance/Cancellation of performance share units			29,826												(312)																														(312)
Purchases of common stock under ESPP			56,894						1						1,070																														1,071
Stock-based compensation															3,024																														3,024
Other comprehensive loss, net of tax																											(550)																		(550)
Balance at August 31, 2022			39,847,751						$	381					$	589,984					$	(171,417)					$	807					(370,000)						$	(5,714)					$	414,041
Net loss																					(8,486)																								(8,486)
Exercise of stock options			15,000												184																														184
Issuance/Cancellation of restricted stock units			11,393												(36)																														(36)
Stock-based compensation															3,350																														3,350
Other comprehensive loss, net of tax																											(1,095)																		(1,095)
Balance at November 30, 2022			39,874,144						$	381					$	593,482					$	(179,903)					$	(288)					(370,000)						$	(5,714)					$	407,958
Net loss																					(9,485)																								(9,485)
Issuance/Cancellation of restricted stock units			9,394												(36)																														(36)
Purchases of common stock under ESPP			92,884						1						976																														977
Stock-based compensation															1,803																														1,803
Other comprehensive loss, net of tax																											(3,562)																		(3,562)
Balance at February 28, 2023			39,976,422						$	382					$	596,225					$	(189,388)					$	(3,850)					(370,000)						$	(5,714)					$	397,655

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			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
Net loss																					(8,351)																								(8,351)
Exercise of stock options			56,064												1,022																														1,022
Issuance/Cancellation of restricted stock units			8,695												(83)																														(83)
Purchases of common stock under ESPP			193												3																														3
Stock-based compensation															3,008																														3,008
Other comprehensive income, net of tax																											819																		819
Balance at November 30, 2021			39,455,193						$	379					$	580,330					$	(147,189)					$	4,562					(370,000)						$	(5,714)					$	432,368
Net loss																					(4,958)																								(4,958)
Exercise of stock options			5,000												77																														77
Issuance/Cancellation of restricted stock units			11,304												(84)																														(84)
Purchases of common stock under ESPP			48,604						1						972																														973
Stock-based compensation															2,352																														2,352
Other comprehensive loss, net of tax																											(1,036)																		(1,036)
Balance at February 28, 2022			39,520,101						$	380					$	583,647					$	(152,147)					$	3,526					(370,000)						$	(5,714)					$	429,692

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 nine months ended February 28, 2023 and 2022, the Consolidated Balance Sheet as of February 28, 2023, the Consolidated Statements of Cash Flows for the nine months ended February 28, 2023 and 2022, and the Consolidated Statements of Stockholders’ Equity for the nine months ended February 28, 2023 and 2022 have been prepared by the Company and are unaudited. The Consolidated 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 February 28, 2023 (and for all periods presented) have been made.

The unaudited interim consolidated financial statements for the three and nine months ended February 28, 2023 and 2022 include the accounts of AngioDynamics, Inc. 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 February 28, 2023																		Three Months Ended February 28, 2022
(in thousands)			United States						International						Total						United States						International						Total
Net sales
Med Tech			$	20,381					$	2,493					$	22,874					$	17,782					$	1,830					$	19,612
Med Device			47,239						10,599						57,838						44,663						9,695						54,358
Total			$	67,620					$	13,092					$	80,712					$	62,445					$	11,525					$	73,970

			Nine Months Ended February 28, 2023																		Nine Months Ended February 28, 2022
(in thousands)			United States						International						Total						United States						International						Total
Net sales
Med Tech			$	61,373					$	8,820					$	70,193					$	49,249					$	6,857					$	56,106
Med Device			146,901						30,584						177,485						143,010						30,105						173,115
Total			$	208,274					$	39,404					$	247,678					$	192,259					$	36,962					$	229,221

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 nine months ended February 28, 2023, 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)			Feb 28, 2023						May 31, 2022
Receivables			$	50,892					$	52,304
Contract assets			$	—					$	—
Contract liabilities			$	571					$	526

During the nine months ended February 28, 2023, the Company had additions to contract liabilities of $0.6 million. This was offset by $0.6 million in revenue that was recognized during the nine months ended February 28, 2023.

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)			Feb 28, 2023						May 31, 2022
Raw materials			$	34,471					$	28,251
Work in process			7,924						7,186
Finished goods			21,137						15,955
Inventories			$	63,532					$	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 February 28, 2023 and May 31, 2022 was $3.1 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.

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Goodwill for each reporting unit is allocated as follows:

			Nine months ended Feb 28, 2023
(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
Foreign currency translation adjustments			$	(779)					$	—					$	(779)
Balance, February 28, 2023			$	159,447					$	40,529					$	199,976

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

Even though the Company determined that there was no goodwill impairment at February 28, 2023, the future occurrence of a potential indicator of impairment, such as a significant adverse change in legal, regulatory, business or economic conditions or a more-likely-than-not expectation that one of the reporting units or a significant portion of either of the reporting units will be sold or disposed of, would require an interim assessment for the reporting units prior to the next required annual assessment as of April 30, 2023.

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:

			Feb 28, 2023
(in thousands)			Gross carrying value						Accumulated amortization						Net carrying value
Product technologies			$	233,752					$	(122,017)					$	111,735
Customer relationships			60,096						(40,995)						19,101
Trademarks			9,950						(7,396)						2,554
Licenses			5,377						(4,756)						621
			$	309,175					$	(175,164)					$	134,011

			May 31, 2022
(in thousands)			Gross carrying value						Accumulated amortization						Net carrying value
Product technologies			$	239,467					$	(112,141)					$	127,326
Customer relationships			60,115						(38,003)						22,112
Trademarks			9,950						(7,185)						2,765
Licenses			4,837						(4,660)						177
			$	314,369					$	(161,989)					$	152,380

Amortization expense for the three months ended February 28, 2023 and 2022 was $4.7 million and $4.9 million, respectively. Amortization expense for the nine months ended February 28, 2023 and 2022 was $14.4 million and $14.6 million, respectively.

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

(in thousands)
Remainder of 2023			$	5,918
2024			16,406
2025			16,388
2026			16,207
2027			16,036
2028 and thereafter			63,056
			$	134,011

6. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

(in thousands)			Feb 28, 2023						May 31, 2022
Payroll and related expenses			$	9,355					$	20,232
Royalties			2,202						2,986
Outside services			3,171						3,731
Research and development			1,368						1,279
Sales and franchise taxes			328						750
Rebates			359						511
Other			4,992						5,353
			$	21,775					$	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).

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

* The definitions of consolidated total indebtedness, consolidated EBITDA, consolidated capital expenditures and consolidated interest expense are specifically defined in the Credit Agreement included as an exhibit to Form 8-K filed on August 31, 2022.

As of February 28, 2023, there was $25.0 million outstanding on the Revolving Facility and $25.0 million outstanding on the Delayed Draw Term Loan and the interest rate at February 28, 2023 applicable to each was 6.15%. As of February 28, 2023 and May 31, 2022, the carrying value of long-term debt approximated its fair market value.

(in thousands)			Feb 28, 2023
Revolving Facility			$	25,000
Delayed Draw Term Loan			25,000
Less: unamortized debt issuance costs			(193)
Total long-term debt			$	49,807

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

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 5.2% as of the third quarter of fiscal year 2023, as compared to 12.7% 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 February 28, 2023. 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 February 28, 2023, there was a maximum of 2.9 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 February 28, 2023, there was a maximum of 3.2 million shares of common stock available for future grant under the employee stock purchase plan.

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For the three months ended February 28, 2023 and 2022, share-based compensation expense was $1.8 million and $2.4 million, respectively. For the nine months ended February 28, 2023 and 2022, share-based compensation expense was $8.2 million and $7.8 million, respectively.

During the nine months ended February 28, 2023 and 2022, the Company granted stock options and restricted stock units under the 2020 Plan to certain employees and members of the Board of Directors. Stock option awards are valued using the Black-Scholes option-pricing model and then amortized on a straight-line basis over the requisite service period of the award. Restricted stock unit awards are valued based on the closing trading value of the Company’s common stock on the date of grant and then amortized on a straight-line basis over the requisite service period of the award.

During the nine months ended February 28, 2023 and 2022, the Company granted performance share units under the 2020 Plan to certain employees. 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 February 28, 2023, there was $17.6 million of unrecognized compensation expense related to share-based payment arrangements. These costs are expected to be recognized over a weighted-average period of approximately three years. 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 Ended												Nine Months Ended
(in thousands)			Feb 28, 2023						Feb 28, 2022						Feb 28, 2023						Feb 28, 2022
Basic			39,509						39,092						39,436						38,959
Effect of dilutive securities			—						—						—						—
Diluted			39,509						39,092						39,436						38,959
Securities excluded as their inclusion would be anti-dilutive			3,706						3,457						3,706						3,457

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 CEO 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 $542.8 million as of February 28, 2023.

The table below summarizes net sales and gross margin by Med Tech and Med Device including prior periods during which the Company considered the business to be a single operating segment, in order to conform to the current period presentation:

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			Three Months Ended												Nine Months Ended
(in thousands)			Feb 28, 2023						Feb 28, 2022						Feb 28, 2023						Feb 28, 2022
Med Tech Net Sales			$	22,874					$	19,612					$	70,193					$	56,106
Gross profit			14,774						12,965						44,816						37,060
Gross margin			64.6		%				66.1		%				63.8		%				66.1		%
Med Device Net Sales			$	57,838					$	54,358					177,485						$	173,115
Gross profit			25,730						25,618						83,071						$	82,217
Gross margin			44.5		%				47.1		%				46.8		%				47.5		%
Total Net Sales			$	80,712					$	73,970					$	247,678					$	229,221
Gross profit			40,504						38,583						127,887						119,277
Gross margin			50.2		%				52.2		%				51.6		%				52.0		%

Geographic information

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

			Three Months Ended												Nine Months Ended
(in thousands)			Feb 28, 2023						Feb 28, 2022						Feb 28, 2023						Feb 28, 2022
Net Sales
United States			$	67,620					$	62,445					$	208,274					$	192,259
International			13,092						11,525						39,404						36,962
Total			$	80,712					$	73,970					$	247,678					$	229,221

For the three months ended February 28, 2023 and 2022, international sales as a percentage of total net sales were 16.2% and 15.6%, respectively. For the nine months ended February 28, 2023 and 2022, international sales as a percentage of total net sales were 15.9% and 16.1%, respectively. 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 85% 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 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 their immediate or short-term maturities. The recurring fair value measurements using significant unobservable inputs (Level 3) relate to contingent consideration liabilities.

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

			Fair Value Measurements using inputs considered as:																		Fair Value at Feb 28, 2023
(in thousands)			Level 1						Level 2						Level 3
Financial Liabilities
Contingent consideration for acquisition earn outs			$	—					$	—					$	19,059					$	19,059
Total Financial Liabilities			$	—					$	—					$	19,059					$	19,059
			Fair Value Measurements using inputs considered as:																		Fair Value at May 31, 2022
(in thousands)			Level 1						Level 2						Level 3
Financial Liabilities
Contingent consideration for acquisition earn outs			$	—					$	—					$	16,948					$	16,948
Total Financial Liabilities			$	—					$	—					$	16,948					$	16,948

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

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

			Three Months Ended Feb 28, 2023
(in thousands)			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance, November 30, 2022			$	18,832
Change in present value of contingent consideration (1)			227
Balance, February 28, 2023			$	19,059

			Nine Months Ended Feb 28, 2023
(in thousands)			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance, May 31, 2022			$	16,948
Change in present value of contingent consideration (1)			2,084
Currency gain from remeasurement			27
Balance, February 28, 2023			$	19,059

(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 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.

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

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sales are based on internal projections and extensive analysis of the target market and the sales potential. Increases or decreases in any valuation inputs in isolation may result in a significantly lower or higher fair value measurement in the future.

The recurring Level 3 fair value measurements of the contingent consideration liabilities include the following significant unobservable inputs as of February 28, 2023:

(in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

Revenue based payments

$

19,059

Discounted cash flow

Discount rate

5%

Probability of payment

90% - 100%

Projected fiscal year of payment

2023 - 2025

At February 28, 2023, the amount of undiscounted future contingent consideration that the Company expects to pay as a result of all completed acquisitions is approximately $20.0 million. The milestones, including revenue projections and technical milestones associated with the contingent consideration, must be reached in future periods ranging from fiscal years 2023 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						Feb 28, 2023						May 31, 2022
Assets
Operating lease ROU asset			Other assets						$	5,143					$	6,974
Liabilities
Current operating lease liabilities			Other current liabilities						2,299						2,560
Non-current operating lease liabilities			Other long-term liabilities						3,049						4,703
Total lease liabilities									$	5,348					$	7,263

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:

			Feb 28, 2023
Weighted average remaining term (in years)			2.72
Weighted average discount rate			3.8		%

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

(in thousands)			Feb 28, 2023
Remainder of 2023			$	699
2024			2,191
2025			1,428
2026			1,130
2027 and thereafter			171
Total lease payments			$	5,619
Less: Imputed Interest			271
Total lease obligations			$	5,348
Less: Current portion of lease obligations			2,299
Long-term lease obligations			$	3,049

During the three months ended February 28, 2023 and 2022, the Company recognized $0.7 million and $0.7 million of operating lease expense, respectively, which includes immaterial short-term leases. During the nine months ended February 28, 2023 and 2022, the Company recognized $2.0 million and $2.1 million of operating leases expense, respectively, which includes immaterial short-term leases. The expenses on the Consolidated Statement of Operations were classified as follows:

			Three Months Ended												Nine Months Ended
(in thousands)			Feb 28, 2023						Feb 28, 2022						Feb 28, 2023						Feb 28, 2022
Cost of sales			$	221					$	218					$	661					$	656
Research and development			54						52						158						201
Sales and marketing			42						40						122						119
General and administrative			379						374						1,103						1,138
			$	696					$	684					$	2,044					$	2,114

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

(in thousands)			Feb 28, 2023						Feb 28, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases			$	2,079					$	2,041
ROU assets obtained in exchange for lease liabilities
Operating leases			$	—					$	33

14. COMMITMENTS AND CONTINGENCIES

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”) filed a suit 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 (US Patent Nos. 7,785,302 ("302"), 7,959,615 (“615”) and 7,947,022 ("022")). The case was stayed pending reexamination in the US Patent and Trademark Office ("USPTO"). Following the reexamination proceedings, and the parties’ related appeals to the Federal Circuit which resulted in further proceedings at the USPTO, certain claims of the 615 patent were held invalid, while the remaining claims of the 615 patent and the other two patents were upheld over the prior art references considered in the reexamination proceedings. Thereafter, the case was transferred from the District of Utah to the United States District Court for the District of Delaware (“District of Delaware”). On July 22, 2021, in another case against a different defendant, the District of Utah invalidated multiple claims of the ‘302, ‘022, and ‘615 Patents under 35 USC §101, including claims asserted against the Company. On December 27, 2021, the District of Delaware stayed the case pending the Federal Circuit's resolution of Bard's appeal from the Utah Decision. On February 17, 2023, the Federal Circuit Reversed-in-Part, Vacated-in-Part, and Remanded the Utah

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Decision. The other defendant subsequently filed a Petition for Rehearing with the Federal Circuit on March 20, 2023, and a mandate has not yet issued. The District of Delaware lifted the stay on February 28, 2023 and held a status conference on March 23, 2023. A scheduling order has not yet been entered, but a jury trial is currently scheduled for April 29, 2024. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

On March 10, 2015, Bard and Bard Peripheral Vascular filed suit in the District of Delaware claiming certain of the Company's implantable port products infringe on three U.S. patents held by Bard (US Patent Nos. 8,475,417, 8,545,460, 8,805,478). The case proceeded through trial which began on March 4, 2019. At the close of Bard’s case, the Court granted the Company's oral motion for judgment as a matter of law as well as its motions for summary judgment on the grounds that the asserted patents are invalid, ineligible, not infringed and not willfully infringed. On May 10, 2019, the Company filed a motion for attorney fees and non-taxable expenses under 35 USC Sec. 285. Bard appealed the judgment to the Federal Circuit and on November 10, 2020, the Federal Circuit reversed the judgment in part with respect to Section 101 (subject matter eligibility), and vacated and remanded the trial court’s invalidity and non-infringement judgments. Following remand from the Federal Circuit, a jury trial commenced in the District of Delaware beginning November 14, 2022. On November 22, 2022, a jury entered a verdict finding that certain of the Company’s implantable port products infringe certain claims of U.S. patents held by Bard. The issue of damages was bifurcated by the Court during trial, was not determined by the jury and will be subject to a separate proceeding. The Company strongly disagrees with the claims and the verdict. The issues presented to the jury do not comprise all of the issues to be determined in the case. Equitable issues remain to be decided by the judge, and damages remain to be decided by a jury. The Company believes it has meritorious defenses and positions with respect to the matters remaining to be decided and the jury decision, and intends to vigorously pursue all available remedies and defenses, including post-trial motions and appeals. The parties have filed post-trial briefs, and the Court heard argument on March 13, 2023. A decision is forthcoming. The 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 and 9,603,993. On December 27, 2021, the District of Delaware stayed the case pending the Federal Circuit's resolution of Bard's appeal of the Utah decision invalidating multiple claims of the ‘302, ‘022, and ‘615 patents under 35 USC §101. Following the Federal Circuit’s decision on appeal, the District of Delaware lifted the stay on February 28, 2023, and held a scheduling conference on March 23, 2023. A scheduling order has not yet been entered, but a jury trial is currently scheduled for June 9, 2025. The Company maintains its belief that Bard's claims are without merit. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

AngioDynamics, Inc. 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 alleged that Bard had illegally tied the sales of its tip location systems to the sales of its PICCs in violation of federal antitrust laws and this practice had an anti-competitive effect in the US market for PICCs. The Company sought both monetary damages and injunctive relief. On October 6, 2022, a jury verdict was rendered finding Bard did not restrain competition in violation of federal antitrust laws.

15. ACQUISITION, RESTRUCTURING, AND OTHER ITEMS, NET

Acquisition, Restructuring and Other Items

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

			Three Months Ended												Nine Months Ended
(in thousands)			Feb 28, 2023						Feb 28, 2022						Feb 28, 2023						Feb 28, 2022
Legal (1)			$	2,614					$	1,681					$	6,899					$	5,837
Mergers and acquisitions (2)			—						—						—						59
Manufacturing relocation (3)			324						396						1,062						455
Israeli Innovation Authority prepayment (4)			—						—						3,544						—
Other			431						282						504						701
Total			$	3,369					$	2,359					$	12,009					$	7,052

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

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

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

(4) In the first quarter of fiscal year 2023, a $3.5 million payment was made to the Israeli Innovation Authority to fully satisfy the obligation related to grant funds that were provided to Eximo for development of the Auryon laser prior to the acquisition in the second quarter of fiscal year 2020.

16. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

			Three Months Ended Feb 28, 2023
(in thousands)			Foreign currency translation income
Balance at November 30, 2022			$	(288)
Other comprehensive loss, net of tax			(3,562)
Net other comprehensive loss			$	(3,562)
Balance at February 28, 2023			$	(3,850)

			Nine Months Ended Feb 28, 2023
(in thousands)			Foreign currency translation income
Balance at May 31, 2022			$	1,357
Other comprehensive loss, net of tax			(5,207)
Net other comprehensive loss			$	(5,207)
Balance at February 28, 2023			$	(3,850)

17. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements - Adopted

Standard			Description			Effective Date			Effect on the Consolidated Financial Statements
ASU 2021-10,  Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance			This ASU increases the transparency of government assistance to include the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements.			June 1, 2022			The Company adopted the new standard in the first quarter of fiscal year 2023 and it did not have an impact on the Company's consolidated financial statements.

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Recently Issued Accounting Pronouncements - Not Yet Applicable or Adopted
Standard			Description			Effective Date			Effect on the Consolidated Financial Statements
ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers			This ASU improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.			June 1, 2023			The Company plans to adopt the new standard in the first quarter of fiscal year 2024 and does not expect there to be a material impact to the consolidated financial statements.