Most of our products must receive clearance or approval from the FDA or comparable regulatory agencies abroad before they can be marketed or sold. State, federal and foreign registration regulations are both evolving and subject to varied levels of

interpretation and enforcement. It can be costly and time-consuming to obtain and maintain regulatory approvals to market a medical device. Approvals might not be granted on a timely basis, if at all, for new devices, new indications for use or certain modifications or enhancements to previously approved products. Even after a device receives regulatory approval it remains subject to significant regulatory and quality requirements, such as manufacturing, recordkeeping, renewal, recertification or reporting and other post market approval requirements, which may include clinical, laboratory or other studies. Product approvals by the FDA and other foreign regulators can be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial approval or may be re-classified to a higher regulatory classification, such as requiring a Pre-Market Approval (“PMA”) for a previously cleared 510(k) device. Regulations are also subject to change as a result of legislative, administrative or judicial action, which may further increase our costs or reduce sales. Our failure to maintain approvals, obtain approval for new products or comply with other applicable regulatory requirements could adversely affect our business, results of operations, financial condition and/or liquidity.

The healthcare industry is under continued scrutiny from state, federal and international governments, including with respect to industry practices in the area of sales and ~~marketing,~~marketing. Certain states, including ~~provisions~~Massachusetts, have recently passed or are considering legislation restricting our interactions with health care providers and requiring disclosure of ~~the Physician Payment Sunshine Act.~~many payments to them. The federal government has recently introduced similar legislation, which may or may not preempt state laws. If our marketing, sales or other activities fail to comply with the FDA’s or other comparable foreign regulatory agencies’ regulations or guidelines, or other applicable laws, we may be subject to warnings from the FDA or investigations or enforcement actions from the FDA, Medicare, the Office of Inspector General of the U.S. Department of Health and Human Services or other government agencies or enforcement bodies. ~~Additionally, in~~We anticipate that the ~~European Union, a new draft Medical Device Regulation was published in 2016 imposing stricter requirements for the marketing~~government will continue to scrutinize our industry closely, and ~~sale of medical devices~~that additional regulation by governmental authorities may increase compliance costs, increase exposure to litigation and ~~grants Notified Bodies increased post-market surveillance authority. The Company is monitoring the implementation of the regulation and has undertaken initial actions~~may have other adverse effects to ~~move toward compliance based on the published draft of the regulation.~~our operations. The Company’s failure to comply with any marketing or sales regulations or any other applicable regulatory requirements could adversely affect our business, results of operations, financial condition and/or liquidity.

In the recent past, medical device manufacturers have been the subject of investigations from government agencies related to their relationships with doctors, product sales and marketing and off-label promotion of products, among other activities or practices. If an enforcement action involving the Company were to occur, it could result in penalties, fines, detainment, seizures, recalls, product bans, operating restrictions (which may include loss of a license or authorization), the exclusion of our products from reimbursement under government-funded programs and/or prohibitions on our ability to sell our products, and could have a material adverse effect on our business, results of operations, financial condition and/or liquidity. In addition, remediation of any issues identified by the FDA or other regulators could require facility upgrades, process changes, additional labeling requirements or other measures, any of which could have a material adverse effect on our business and/or results of operations. See Item 3. “Legal Proceedings” below for a description of the subpoenas and Civil Investigation Demands from a number of State Attorneys General and investigative subpoena from the Department of Defense, in each case, seeking information related to certain of the Company’s products.

In addition, lawsuits by or otherwise involving employees, customers, licensors, licensees, suppliers, vendors, business partners, distributors, shareholders or competitors with respect to how we conduct our business could be very costly and could substantially disrupt our business. Disputes from time-to-time with companies or individuals are not uncommon, and we cannot assure you that we will be able to resolve these disputes on terms favorable to us. See Item 3. “Legal Proceedings” below for a description of lawsuits against the Company. The occurrence of an adverse monetary or equitable judgment or a large expenditure in connection with a settlement of any of these matters could have a material adverse effect on our business, financial condition, results of operations ~~financial condition~~ and/or liquidity.

~~We are subject to healthcare fraud and abuse regulations that could result in significant liability, require us to change our business practices and restrict our operations in the future.~~

We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, including anti-kickback and false claims laws. Violations of these laws are punishable by criminal or civil sanctions, including substantial fines, imprisonment and exclusion from participation in healthcare programs such as Medicare and Medicaid and health programs outside the United States. These laws and regulations are wide ranging and subject to changing interpretation and application, which could restrict our sales or marketing practices. Furthermore, since many of our customers rely on reimbursement from Medicare, Medicaid and other governmental programs to cover a substantial portion of their expenditures, our exclusion from such programs as a result of a violation of these laws could have a material adverse effect on our business, results of operations, financial condition and cash flow.

If we or some of our suppliers fail to comply with the FDA’s Quality System Regulation, or QSR, and other applicable ~~postmarket~~post-market requirements, our manufacturing operations could be disrupted, our product sales and profitability could suffer, and we may be subject to a wide variety of FDA enforcement actions.

After a device is placed on the market, numerous regulatory requirements apply. We are subject to inspection and marketing surveillance by the FDA to determine our compliance with all regulatory requirements. Our failure to comply with applicable regulatory requirements could result in the FDA or a court instituting a wide variety of enforcement actions against us, including a public "Warning Letter"; an order to shut down some or all manufacturing operations; a recall of products; fines or civil penalties; seizure or detention of our products; refusing our requests for 510(k) clearance or a PMA of new or modified products; withdrawing 510(k) clearance or PMA approvals already granted to us; and criminal prosecution.

Our manufacturing processes and those of some of our suppliers must comply with the FDA’s Quality System Regulation, or QSR, which governs the methods used in, and the facilities and controls used for, the design, testing, manufacture, control, quality assurance, installation, servicing, labeling, packaging, storage and shipping of medical ~~devices.~~devices, and with current medical device adverse event reporting regulations, and similar foreign rules and regulations. The FDA enforces the QSR through unannounced inspections. Despite our training and compliance programs, our internal control policies and procedures may not always protect us from negligent, reckless or criminal acts committed by our employees or agents. If we, or one of our suppliers, fail a QSR inspection, or if a corrective action plan adopted by us or one of our suppliers is not sufficient, the FDA may bring an enforcement action, and our operations could be disrupted and our manufacturing delayed. We are also subject to the FDA’s general prohibition against promoting our products for unapproved or “off-label” uses, the FDA’s adverse event reporting requirements and the FDA’s reporting requirements for field correction or product removals. The FDA has recently placed increased emphasis on its scrutiny of compliance with the QSR and these other ~~postmarket~~post-market requirements.

If we, or one of our suppliers, violate the FDA’s requirements or fail to take adequate corrective action in response to any significant compliance issue raised by the FDA, the FDA can take various enforcement actions which could cause our product sales and profitability to suffer.

In addition, most other countries require us and our suppliers to comply with manufacturing and quality assurance standards for medical devices that are similar to those in force in the United States before marketing and selling our products in those countries. If we, or our suppliers, should fail to do so, we would lose our ability to market and sell our products in those countries.

If we cannot obtain and maintain marketing clearance or approval from governmental agencies, we will not be able to sell our products.

Our products are medical devices that are subject to extensive regulation in the United States and in the foreign countries in which they are sold. Unless an exemption applies, each medical device that we wish to market in the United States must receive either 510(k) clearance or ~~premarket approval (PMA)~~Pre-Market Approval (“PMA”) from the FDA before the product can be sold. Either process can be lengthy and expensive. The FDA’s 510(k) clearance procedure, also known as “premarket notification,” is the process we have used for our current products. This process usually takes from four to twelve months from the date the premarket notification is submitted to the FDA, but may take significantly longer. ~~Although we have obtained 510(k) clearances for our current products, our clearances~~Even after a device receives regulatory approval it remains subject to significant regulatory and quality requirements, such as manufacturing, recordkeeping, renewal, recertification or reporting and other post market approval requirements, which may ~~be revoked~~include clinical, laboratory or other studies.

Product approvals by the FDA ~~if safety~~and other foreign regulators can be withdrawn due to failure to comply with regulatory standards or ~~effectiveness~~the occurrence of unforeseen problems ~~develop with the devices.~~following initial approval or may be re-classified to a higher regulatory classification, such as requiring a PMA for a previously cleared 510(k) device. The PMA process is much more costly, lengthy and uncertain. It generally takes from one to three years from the date the application is submitted to, and filed with the FDA, and may take even longer. In addition, any modification to an FDA-cleared medical device that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, requires a new FDA 510(k) clearance or, possibly, a PMA.

Regulatory regimes in other countries similarly require approval or clearance prior to our marketing or selling products in those countries. We rely on our distributors to obtain regulatory clearances or approvals of our products outside of the United

States. If we are unable to obtain additional clearances or approvals needed to market existing or new products in the United States or elsewhere or obtain these clearances or approvals in a timely fashion or at all, or if our existing clearances are revoked, our revenues and profitability may decline.

Modifications to our current products may require new marketing clearances or approvals or require us to cease marketing or recall the modified products until such clearances or approvals are obtained.

Any modification to an FDA-cleared medical device that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, requires a new FDA 510(k) clearance or, possibly, a premarket approval. The FDA requires every manufacturer to make its own determination as to whether a modification requires a new 510(k) clearance or premarket approval, but the FDA may review and disagree with any decision reached by the manufacturer. We have modified aspects of some of our devices since receiving regulatory clearance. We believed that some of these modifications did not require new 510(k) clearance or premarket approval and, therefore, we did not seek new 510(k) clearances or premarket approvals. In the future, we may make additional modifications to our products after they have received FDA clearance or approval and, in appropriate circumstances, determine that new clearance or approval is unnecessary. Regulations in other countries in which we market or sell, or propose to market or sell, our products may also

require that we make judgments about changes to our products and whether or not those changes are such that regulatory approval or clearance should be obtained. In the United States and elsewhere, regulatory authorities may disagree with our past or future decisions not to seek new clearance or approval and may require us to obtain clearance or approval for modifications to our products. If that were to occur for a previously cleared or approved product, we may be required to cease marketing or recall the modified device until we obtain the necessary clearance or approval. Under these circumstances, we may also be subject to significant regulatory fines or other penalties. If any of the foregoing were to occur, our financial condition and results of operations could be negatively impacted.

~~Even after receiving regulatory clearance or approval, our~~Our products may be subject to product recalls, which may harm our reputation and divert managerial and financial resources.

The FDA and similar governmental authorities in other countries have the authority to order mandatory recall of our products or order their removal from the market if there are material deficiencies or defects in design, manufacture, installation, servicing or labeling of the device, or if the governmental entity finds that our products would cause serious adverse health consequences. A government mandated voluntary recall or field action by us could occur as a result of component failures, manufacturing errors or design defects, including labeling defects. Any recall of our products may harm our reputation with customers and divert managerial, engineering and financial resources.

There is no assurance that we will not incur warranty or repair costs, be subject to liability claims for damages related to product defects, or experience manufacturing, shipping or other delays or interruptions as a result of these defects in the future. Our insurance policies may not provide sufficient protection should a claim be asserted. A recall of any of our products could harm our reputation, divert managerial and financial resources and have a material adverse effect on our business, financial condition, results of operations and/or liquidity.

We may be subject to fines, penalties, injunctions or costly investigations if we are determined to be promoting the use of our products for unapproved or “off-label” uses.

If we are incorrect in our belief that our promotional materials and training methods regarding physicians are conducted in compliance with regulations of the FDA and other applicable regulations, and the FDA determines that our promotional materials or training constitutes promotion of an unapproved use, the FDA could request that we modify our training or promotional materials or subject us to regulatory enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. Any of these results could have a material adverse effect on our business, financial ~~position or~~condition, results of ~~operations.~~operations and/or liquidity.

In June 2014 we received a subpoena from the U.S. Department of Justice (the “DOJ”) requesting documents in relation to a criminal and civil investigation the DOJ is conducting regarding BTG International, Inc.’s LC Bead product beginning in 2003. RITA Medical Systems and AngioDynamics, Inc., after our acquisition of RITA, was the exclusive distributor of LC Beads in the United States from 2006 through December 31, 2011. We are cooperating fully with this investigation and at this time are unable to predict its scope, duration or outcome. In April 2015 we received a subpoena from the DOJ requesting documents in relation to a criminal and civil investigation the DOJ is conducting regarding purported promotion of certain of our VenaCure EVLT products for un-cleared indications. As of May 31, 2017 the Company accrued $12.5 million for these matters and in August 2017, the Company agreed in principle with the government to resolve these matters for approximately $12.5 million.

~~If our employees or agents violate the U.S. Foreign Corrupt Practices Act or anti-bribery laws in other jurisdictions, we may incur fines or penalties, or experience other adverse consequences.~~

We are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws in international jurisdictions, including the UK Anti-Bribery Act, which generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Because of the predominance of government-sponsored healthcare systems around the world, many of our customer relationships outside of the United States are with governmental entities and are therefore subject to such anti-bribery laws. Our sales to customers and distributors outside of the United States have been increasing and we expect them to continue to increase in the future. If our employees or agents violate the provisions of the FCPA or other anti-bribery laws, we may incur fines or penalties, we may be unable to market our products in other countries or we may experience other adverse consequences which could have a material adverse effect on our operating results or financial condition.

Laws and regulations governing the export of our products could adversely impact our business.

If the U.S. government imposes strict sanctions on Iran, our revenue could be impacted.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the Bureau of Industry and Security at the U.S. Department of Commerce (BIS), administer certain laws and regulations that restrict U.S. persons and, in some instances, non-U.S. persons, in conducting activities, transacting business with or making investments in certain countries, governments, entities and individuals subject to U.S. economic sanctions. Due to our international operations, we are subject to

such laws and regulations, which are complex, restrict our business dealings with certain countries and individuals, and are constantly changing. Further restrictions may be enacted, amended, enforced or interpreted in a manner that materially impacts our operations.

In fiscal year 2021 we generated $1.5 million of revenue for sales to distributors doing business in Iran. We continuously review our ability to sell products to distributors that conduct business in Iran in accordance with all applicable U.S. laws. If laws, rules or regulations of the United States with respect to doing business in, or with parties that do business in, Iran change to restrict our ability to generate revenue in Iran, our revenue could decline, impacting our results of operations.

From time to time, ~~certain of our subsidiaries~~we have limited business dealings in countries subject to comprehensive sanctions, including Iran, Sudan, Syria, Cuba and those in the region of Crimea. Certain of our subsidiaries sell medical devices and surgical tools, and may provide related services, to distributors and other purchasing bodies in such countries.sanctions. These business dealings ~~represent an insignificant amount of our consolidated revenues and income, but~~may expose us to a heightened risk of violating applicable sanctions regulations. Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts, ~~and~~ revocations or restrictions of licenses, ~~as well as~~and/or criminal fines and imprisonment. We have established policies and procedures designed to assist with our compliance with such laws and regulations. However, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely affect our reputation, business, financial condition, results of operations and cash flows.

~~Changes in reimbursement levels by governmental or other third-party payors for procedures using our products may cause our revenues to decline.~~

Our products are purchased principally by hospitals or physicians which typically bill various third-party payors, such as governmental programs (e.g. Medicare, Medicaid and comparable foreign programs), private insurance plans and managed care plans, for the healthcare services provided to their patients. The ability of our customers to obtain appropriate reimbursement for products and services from third-party payors is critical to the success of medical device companies because it affects which products customers purchase and the prices they are willing to pay. Reimbursement varies by country and can significantly impact the acceptance of new technology. Implementation of healthcare reforms in the United States and in other countries may limit, reduce or eliminate reimbursement for our products and adversely affect both our pricing flexibility and the demand for our products. Even when we develop a promising new product, we may find limited demand for the product unless reimbursement approval is obtained from private and governmental third party payors.

~~Third-party payors have adopted, and are continuing to adopt, a number of healthcare policies intended to curb rising healthcare costs. These policies include:~~

~~controls on government-funded reimbursement for healthcare services and price controls on medical products and services providers;~~

~~challenges to the pricing of medical procedures or limits or prohibitions on reimbursement for specific devices and therapies through other means; and~~

~~the introduction of managed care systems in which healthcare providers contract to provide comprehensive healthcare for a fixed cost per person.~~

We are unable to predict whether federal, state or local healthcare reform legislation or regulation affecting our business may be proposed or enacted in the future, or what effect any such legislation or regulation would have on our business. Changes in healthcare systems in the United States or elsewhere in a manner that significantly reduces reimbursement for procedures using our medical devices or denies coverage for these procedures, or adverse decisions relating to our products by administrators of these systems in coverage or reimbursement issues, would have an adverse impact on the acceptance of our products and the prices which our customers are willing to pay for them.

RISKS RELATED TO INTELLECTUAL PROPERTY

If we fail to adequately protect our intellectual property rights, we may not be able to generate revenues from new or existing products and our business may suffer.

Our success depends in part on obtaining, maintaining and enforcing our patents, trademarks and other proprietary rights, and our ability to avoid infringing the proprietary rights of others. ~~We take precautionary steps to protect our technological advantages and intellectual property.~~ We rely upon patent, trade secret, copyright, know-how and trademark laws, as well as license agreements and contractual provisions, to establish our intellectual property rights and protect our products. However, no assurances can be made that any pending or future patent applications will result in the issuance of patents, that any current or future patents issued to, or licensed by, us will not be challenged or circumvented by our competitors, or that our patents will not be found invalid.

Patent positions of medical device companies, including our Company, are uncertain and involve complex and evolving legal and factual questions. The coverage sought in a patent application can be denied or significantly reduced either before or after the patent is issued. Consequently, there can be no assurance that any of our pending patent applications will result in an issued patent. There is also no assurance that any existing or future patent will provide significant protection or commercial advantage, or whether any existing or future patent will be circumvented by a more basic patent, thus requiring us to obtain a license to produce and sell the product. Generally, patent applications can be maintained in secrecy for at least 18 months after their earliest priority date. In addition, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Therefore, we cannot be certain that we were the first to invent the subject matter covered by each of our pending U.S. patent applications or that we were the first to file non-U.S. patent applications for such subject matter.

Additionally, we rely on trade secret protection for certain unpatented aspects of our proprietary technology. There can be no assurance that others will not independently develop or otherwise acquire substantially equivalent proprietary information or techniques, that others will not gain access to our proprietary technology or disclose such technology, or that we can meaningfully protect our trade secrets. We have a policy of requiring key employees and consultants to execute confidentiality agreements upon the commencement of an employment or consulting relationship with us. Our confidentiality agreements also require our employees to assign to us all rights to any inventions made or conceived during their employment with us. We also generally require our consultants to assign to us any inventions made during the course of their engagement by us. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for us in the event of unauthorized use, transfer or disclosure of confidential information or inventions.

If we are not able to adequately protect our intellectual property, our market share, financial condition and results of operations may suffer.

If third parties claim that our products infringe their intellectual property rights, we may be forced to expend significant financial resources and management time defending against such actions and our financial condition and our results of operations could suffer.

Third parties may claim that our products infringe their patents and other intellectual property rights. Identifying third-party patent rights can be particularly difficult because, in general, patent applications can be maintained in secrecy for at least 18 months after their earliest priority ~~date.~~date, and publication of discoveries in the scientific or patent literature often lag behind actual discoveries. Some companies in the medical device industry have used intellectual property infringement litigation to gain a competitive advantage. If a competitor were to challenge our patents, licenses or other intellectual property rights, or assert that our products infringe its patent or other intellectual property rights, we could incur substantial litigation costs, be forced to make expensive changes to our product design, pay royalties or other fees to license rights in order to continue manufacturing and selling our products, or pay substantial damages. Third-party infringement claims, regardless of their outcome, would not only consume our financial resources but also divert our management’s time and effort. Such claims could also cause our customers or potential customers to purchase competitors’ products or defer or limit their purchase or use of our affected products until resolution of the claim.

See Part I, Item 3 "Legal Proceedings" of this report for additional details on litigation regarding proprietary technology.

RISKS RELATED TO OUR STOCK PRICE

Our future operating results are difficult to predict and may vary significantly from quarter to quarter, which may adversely affect the price of our common stock.

The ongoing introduction of new products and services that affect our overall product mix make the prediction of future operating results difficult. You should not rely on our past results as any indication of future operating results. The price of our common stock will likely fall in the event that our operating results do not meet the expectations of analysts and investors. Comparisons of our quarterly operating results are an unreliable indication of our future performance because they are likely to vary significantly based on many factors, including:

•the level of sales of our products and services in our markets;

•our ability to introduce new products or services and enhancements in a timely manner;

•the demand for and acceptance of our products and services;

•the success of our competition and the introduction of alternative products or services;

•our ability to command favorable pricing for our products and services;

•the growth of the market for our devices and services;

•the expansion and rate of success of our direct sales force in the United States and internationally and our independent distributors internationally;

•actions relating to ongoing FDA compliance;

•our ability to integrate acquired assets or companies;

•the effect of intellectual property disputes;

•the size and timing of orders from independent distributors or customers;

•the attraction and retention of key personnel, particularly in sales and marketing, regulatory, manufacturing and research and development;

•unanticipated delays or an inability to control costs;

•general economic conditions as well as those specific to our customers and markets; and

��seasonal fluctuations in revenue due to the elective nature of some procedures.

Our stock price may be volatile, which may cause the value of our stock to decline or subject us to a securities class action litigation.

The trading price of our common stock price may be volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, ~~including:~~

~~general economic, industry and market conditions;~~

~~actions~~attributable to outside factors and/or unrelated to operating performance. Such factors may include comments by ~~institutional~~securities analysts or other ~~large stockholders;~~

~~the depth~~third parties, including blogs, articles, message boards and ~~liquidity of the market for our common stock;~~

~~volume~~social and ~~timing of orders for our products;~~

~~developments generally affecting medical device companies;~~

~~the announcement of new products or product enhancements by us or our competitors;~~

~~changes in earnings estimates or recommendations by securities analysts;~~

~~investor perceptions of~~other media coverage which may not be attributable to us and ~~our business, including changes in market valuations of medical device companies; and~~may not be reliable or accurate.

~~our results of operations and financial performance.~~

~~In addition, the stock market in general, and the~~The NASDAQ Stock Market and ~~the market for~~ medical devices companies in particular have experienced substantial price and volume volatility that is often seemingly unrelated to the operating performance of ~~particular~~the companies. These broad market fluctuations may cause the trading price of our common stock to decline. In the past, securities class action litigation has often been brought against a company after a period of volatility in the market price of its common stock. We may become involved in this type of litigation in the future. Any securities litigation claims brought against us could result in substantial expense and the diversion of management’s attention from our business.

~~We may not attain the guidance set forth in the three-year plan that was presented to our investors in April 2017 which could have an adverse impact on our stock price.~~

In April 2017, guidance targets for revenue, adjusted earnings per share, adjusted EBITDAS, free cash flow, adjusted gross margin and leverage for the next three years were presented to our investors. If we do not achieve this guidance this could have an adverse effect on our stock price as investors could begin to lose confidence in the performance of the Company and its ability to forecast and execute.



~~Item 1B.~~	~~Unresolved Staff Comments.~~

Item 1B. Unresolved Staff Comments.

None.



~~Item 2.~~	~~Properties.~~

Item 2. Properties.

During the year ended May 31, ~~2017,~~2021, we operated in the following locations:

Location

Purpose

~~Purpose~~

Approx.

Sq. Ft.

Property

Type

Latham, NY

Corporate headquarters

~~55,000~~39,000

Leased

Glens Falls, NY

Manufacturing

~~Manufacturing~~

41,000

~~189,000~~

Owned

Queensbury, NY

Manufacturing and distribution

~~129,000~~194,000

Owned

~~Manchester, GA~~*

Marlborough, MA

Research and development

~~Manufacturing and distribution~~

31,000

~~60,000~~

Leased

~~Marlborough, MA~~Amsterdam, NL

Selling, marketing and administrative

~~Research & Development~~

8,100

~~31,000~~

Leased

~~Denmead, U.K.~~*

Rehovot, IL

Research and development

~~Manufacturing~~

4,300

~~7,500~~

Leased

~~Amsterdam, NL~~

~~Selling, Marketing & Administrative~~

~~10,100~~

~~Leased~~

In addition, we lease sales offices in various other jurisdictions.

*These two locations will be closed as part of the Operational Consolidation strategy during fiscal year 2018.



~~Item 3.~~	~~Legal Proceedings.~~

Item 3. Legal Proceedings.

Information regarding legal proceedings is included in Note 17 to our consolidated financial statements in this Annual Report on Form 10-K.

~~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 our implantable port products infringe on three U.S. patents held by Bard (the "Utah Action"). Bard is seeking unspecified damages and other relief. The Court denied Bard’s motion for pre-trial consolidation with separate actions it filed on the same day against Medical Components, Inc. and Smiths Medical ASD, Inc., but had asked for supplemental briefing on the issue of whether to conduct a common Markman hearing. Meanwhile, we filed petitions for reexamination in the US Patent and Trademark Office ("PTO") which seek to invalidate all three patents asserted by Bard in the litigation. Our petitions were granted and 40 of Bard's 41 patent claims were rejected and, following further proceedings, the Patent Office issued a Final Rejection of all 40 claims subject to reexamination. Thereafter, Bard filed appeals to the PTO Board of Appeals and Interferences for all three reexams. The parties completed briefing on the appeals and oral argument was held on June 18, 2015. The Patent Office issued decisions in the three appeals. In one (issued on March 11, 2016 for US Patent No. 7,785,302), the rejections of six of the ten claims under reexamination were affirmed, but were reversed on four of the ten claims. In the second (issued on March 24, 2016 for U.S. Patent No. 7,959,615), the rejections of eight of the ten claims under reexamination were affirmed but the rejections of the other two of the ten claims were reversed. In the third (issued on March 29 for U.S. Patent No. 7,947.022) the rejections of all twenty claims under reexamination were affirmed. Bard then filed Requests for Rehearing in all three reexamination appeals and the Company filed Requests for Rehearing in two of the reexamination appeals (the ‘302 and ‘615 patent reexaminations). Each party filed comments in Opposition to the other party’s Rehearing Requests,. The PTO has since issued decisions denying all Rehearing Requests - - on February 1, 2017 for the ‘302; on February 17, 2017 for the ‘022; and on February 21, 2017 for the ‘615. In the ‘302 and ‘022, the PTO modified its characterization of one prior art reference. Bard has since filed a Notice of Appeal to the Federal Circuit Court of Appeals in all three reexams and we filed Cross-Appeals in the ‘302 and the ‘615 reexams. The parties are in the process of preparing and filing the various appellate briefs, starting with Bard’s Opening Brief which is currently due on July 31, 2017 and ending with our Reply Brief which is currently due on November 6, 2017.The Utah Action has been stayed pending final resolution of the PTO process. We believe these claims are without merit and intend to defend them vigorously. We have 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, C.R. Bard, Inc. and Bard Peripheral Vascular, Inc. (“Bard”) filed suit in the United States District Court for the District of Delaware claiming certain of our implantable port products infringe on three U.S. patents held by Bard (the “Delaware Action). Bard is seeking unspecified damages and other relief. The patents asserted in the Delaware Action are different than those asserted in the Utah Action. On June 1, 2015, we filed two motions in response to Bard’s Complaint - one sought transfer to the District of Utah where the Utah Action is currently pending, and the other sought dismissal of the entire complaint on grounds that none of the claims in the asserted patents is directed to patent eligible subject matter under Section 101 of the Patent Statute and in light of recent authority from the U. S. Supreme Court. On January 12, 2016, the court issued a decision denying both motions. We have since served an Answer and Counterclaim to which Bard has served a Reply. On March 10, 2016, the Court held a case management conference, and, on March 14, 2016, the court entered a Scheduling Order which set, inter alia, a Markman hearing for March 10, 2017, a summary judgment hearing for December 8, 2017 and trial for March 12, 2018. The parties have served various discovery requests on each other, and have been producing documents to each other; on May 27, 2016 Bard served its Infringement Contentions which identified all the port products accused of infringement; and, on June 24, 2016, we served Invalidity Contentions which detail various grounds for invalidating the three asserted patents. The parties completed briefing on the claim construction issues and the Markman hearing was held on March 10, 2017. A decision is expected on or about May 12, 2017, and the Court issued its Claim Construction Order on May 19, 2017. The Court has since amended the Scheduling Order to provide for the completion of Expert Discovery on October 30, 2017; briefing on Case-Dispositive Motions between November 17, 2017 and January 24, 2018 with oral argument set for February 22, 2018 and trial to commence May 29, 2018.We believe these claims are without merit and intend to defend them vigorously. We have 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, we 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, we allege that Bard has illegally tied the sales of its tip location systems to the sales of its PICCs. We allege that this practice violates the federal antitrust laws and has had, and continues to have, an anti-competitive effect in the market for PICCs. We seek both monetary damages and injunctive relief. The Court has set an initial case management conference for August 29, 2017.

~~Governmental Investigations~~

In April 2015 we received a subpoena from the DOJ requesting documents in relation to a criminal and civil investigation the DOJ is conducting regarding purported promotion of certain of AngioDynamics’ VenaCure EVLT products for un-cleared indications. We are cooperating fully with this investigation.

~~As of May 31, 2017 the Company accrued $12.5 million for these matters and in August 2017, the Company agreed in principle with the government to resolve these matters for approximately $12.5 million.~~



~~Item 4.~~	~~Mine Safety Disclosures.~~

Item 4. Mine Safety Disclosures.

Not applicable.

Part II



~~Item 5.~~	~~Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.~~

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

Our common stock is traded on ~~The~~the Global Select Market tier of ~~The~~the NASDAQ Stock Market LLC, ~~(formerly the Nasdaq National Market),~~ under the symbol “ANGO.”

The following table sets forth, for the fiscal quarters indicated, the high and low sale prices for our common stock as reported by ~~The~~the NASDAQ Stock Market.


						Sale Price
	Sale Price					High		Low
	High		Low
Year ended May 31, 2017
Year ended May 31, 2021					Year ended May 31, 2021
Fourth Quarter	$	17.58	$	15.08	Fourth Quarter	$	25.12	$	20.61
Third Quarter	$	17.81	$	15.89	Third Quarter	$	21.58	$	13.77
Second Quarter	$	17.54	$	15.40	Second Quarter	$	14.38	$	9.10
First Quarter	$	16.83	$	12.16	First Quarter	$	12.01	$	8.26

	Sale Price					Sale Price
	High		Low			High		Low
Year ended May 31, 2016
Year ended May 31, 2020					Year ended May 31, 2020
Fourth Quarter	$	12.72	$	10.76	Fourth Quarter	$	11.75	$	8.33
Third Quarter	$	12.70	$	10.02	Third Quarter	$	16.90	$	11.40
Second Quarter	$	14.87	$	11.24	Second Quarter	$	19.26	$	14.23
First Quarter	$	16.80	$	14.31	First Quarter	$	21.89	$	18.27

As of ~~August 2, 2017,~~July 26, 2021, there were ~~197~~170 holders of record of our common stock.

Dividends

We did not declare any cash dividends on our common stock during our last three fiscal years. We do not anticipate paying any cash dividends on our common stock for the foreseeable future.

Performance Graph

The graph below matches AngioDynamics, Inc.’s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite index, the RDG SmallCap Medical Devices index, and the NASDAQ Medical Equipment index. The graph tracks the performance of a $100 investment in our common stock and in each index

~~(with~~ (with the reinvestment of all dividends) from May 31, ~~2012~~2016 to May 31, ~~2017.~~2021. The stock price performance included in this graph is not necessarily indicative of future stock price performance.



~~Item 6.~~	~~Selected Financial Data.~~

Item 6. Selected Financial Data.

~~You should read the following selected~~Information required by this Item 6 is not included as we are electing to exclude this information pursuant to Regulation S-K Item 301, as amended.

For financial data ~~in conjunction with~~and discussion of our ~~consolidated~~results of operations and financial ~~statements and the related notes and~~position, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” ~~included elsewhere~~and Part II, Item 8 “Financial Statements and Supplementary Data” contained in this Annual Report on Form 10-K.

The consolidated statements of operations data for the fiscal years ended May 31, 2017, May 31, 2016, and May 31, 2015, and the consolidated balance sheet data as of May 31, 2017 and May 31, 2016, are derived from the consolidated financial statements that are included elsewhere in this Annual Report on Form 10-K. The consolidated statements of operations data for the fiscal years ended May 31, 2014 and May 31, 2013, and the consolidated balance sheet data as of May 31, 2015, May 31, 2014 and May 31, 2013, are derived from our audited consolidated financial statements not included in this Annual Report on Form 10-K. Historical results are not necessarily indicative of the results of operations to be expected for future periods. See Note 14 of “Notes to Consolidated Financial Statements” for a description of the method that we used to compute our historical basic and diluted net income per share attributable to common stockholders.

Year ended May 31,
(in thousands, except per share information) 2017 2016 2015 2014 2013
Consolidated Statements of Operations Data:
Net sales $ 349,643
$ 353,890
$ 356,534
$ 354,425
$ 341,916
Gross profit (exclusive of intangible amortization) 176,169
174,316
175,796
180,174
168,514
Operating expenses
Research and development 25,269
25,053
26,594
28,124
26,091
Sales and marketing 78,819
83,743
82,351
85,696
77,790
General and administrative 31,406
30,583
30,031
26,511
25,809
Amortization of intangibles 17,296
17,964
17,966
16,562
16,599
Change in fair value of contingent consideration (15,261 ) 948
(8,096 ) (1,908 ) 1,583
Acquisition, restructuring and other items, net (a) 27,510
12,591
26,257
10,873
13,800
Medical device excise tax (1,837 ) 2,416
4,142
3,829
1,600
Total operating expenses 163,202
173,298
179,245
169,687
163,272
Operating income (loss) 12,967
1,018
(3,449 ) 10,487
5,242
Total other (expenses), net (3,120 ) (4,271 ) (4,682 ) (5,301 ) (6,579 )
Net income (loss) $ 5,008
$ (43,590 ) $ (3,388 ) $ 2,347
$ (1,051 )
Earnings (loss) per share
Basic $ 0.14
$ (1.21 ) $ (0.09 ) $ 0.07
$ (0.03 )
Diluted $ 0.14
$ (1.21 ) $ (0.09 ) $ 0.07
$ (0.03 )


~~(a)~~	Acquisition, restructuring and one-time items include restructuring expenses or expenses incurred as part of M&A, product discontinuance, legal settlements and legal costs that are related to litigation that is not in the ordinary course of business.

As of May 31,
(in thousands) 2017 2016 2015 2014 2013
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities $ 48,759
$ 33,986
$ 20,080
$ 17,914
$ 23,955
Working capital 82,398
79,527
90,283
81,071
71,643
Total assets 707,961
726,194
773,058
798,576
790,561
Long-term debt, including current portion (1)
96,320
120,541
137,660
142,660
142,500
Contingent consideration (2)
12,761
38,275
47,384
67,231
75,049
Total long-term liabilities 121,418
152,239
167,444
195,750
201,317
Total stockholders’ equity 515,027
507,228
545,099
536,885
526,324

~~(1) See Note 1 for adoption of new accounting standard.~~

~~(2) See Note 3 for explanation on the change.~~



~~Item 7.~~	~~Management’s Discussion and Analysis of Financial Conditions and Results of Operations.~~

Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

The following information should be read together with the audited consolidated financial statements and the notes thereto and other information included elsewhere in this annual report on Form 10-K.

~~Forward-Looking Statements~~

This ~~Annual Report on Form 10-K, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contains~~discussion may contain forward-looking statements ~~within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regarding AngioDynamics’ expected~~related to future events and our future financial position, results of operations, cash flows, business strategy, budgets, projected costs, capital expenditures, products, competitive positions, growth opportunities, acquisitions, plans and objectives of management for future operations, as well as statementsperformance that include the words such as “expects,” “reaffirms,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” or variations of such words and similar expressions, are ~~forward-looking statements. These forward looking statements are not guarantees of future performance~~based on current expectation and are subject to risks and uncertainties. ~~Investors are cautioned that~~Our actual ~~events or~~ results may differ materially from our expectations. Factors that may affect the actual results include, without limitation, our ability to develop our existing and new products, future actions by the FDA or other regulatory agencies, resultsthose anticipated in any forward-looking statements as a result of pending or future clinical trials, the results of ongoing litigation, overall economic conditions, general market conditions, market acceptance, foreign currency exchange rate fluctuations, the effects on pricing from group purchasing organizations and competition, the loss of any of our key customers or reduction in the purchase of our products by any such customers, and our ability to integrate acquired businesses as well as the riskmany factors, ~~listed~~including those set forth in Part I, Item 1A, of"Risk Factors" and "Disclosure Regarding Forward-Looking Statements" included in this Annual Report on Form 10-K.

~~Although we believe that the assumptions underlying the forward-looking statements contained herein~~For all periods presented in Management's Discussion and Analysis of Financial Conditions and Results of Operations, all sales, cost of sales, expenses, gains and income taxes are ~~reasonable, any~~exclusive of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Annual Report on Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We disclaim any obligation to update the forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date stated, or if no date is stated, as of the date of this document.

Fluid Management.

EXECUTIVE OVERVIEW

Company and Market

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

Our business operations cross a variety of markets. Our financial performance is impacted by changing market dynamics, which have included an emergence of value-based purchasing by healthcare providers, consolidation of healthcare providers,

the increased role of the consumer in health care decision-making and an aging population, among others. In addition, our growth is impacted by changes within our sector, such as the merging of competitors to gain scale and influence; changes in the regulatory environment for medical device; and fluctuations in the global economy.

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

provide growth opportunities.

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

The COVID-19 global pandemic has impacted our business and may pose future risks. Even with the public health actions that have been taken to reduce the spread of the virus, there may continue to be disruptions with respect to consumer demand, hospital operating procedures and workflow, our ability to continue to manufacture products, the reliability of our supply chain and inflation. Accordingly, management continues to evaluate the Company’s liquidity position, communicate with and monitor the actions of our customers and suppliers, and review our near-term financial performance.

In the third quarter of fiscal year 2021, a benefit of $1.9 million was recorded as a result of the employee retention credit that the Company filed for under the provisions of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act").

In evaluating the operating performance of our business, management focuses on revenue, gross margin, operating income, earnings per share and cash flow from operations. A summary of these key financial metrics for the year ended May 31, 2021 compared to the year ended May 31, 2020 follows:

Year ended May 31, 2021:

•Revenue increased by 10.2% to $291.0 million

•Gross margin as a percentage of sales decreased by 300 bps to 53.9%

•Operating loss decreased by $131.8 million to $35.3 million

•Cash flow from operations increased by $38.6 million to cash provided by operations of $24.1 million

The ongoing recovery from the COVID-19 pandemic has had a varying impact on each of our three businesses. Our Endovascular Therapies and Vascular Access businesses performed the strongest of the businesses during the year. The

number of procedures continued to improve from the COVID-19 lows in the second half of last fiscal year. Our Oncology business continued to face pressure from reductions in procedure volumes due to challenges resulting from the COVID-19 pandemic and the resulting challenging capital spending environment. During fiscal year 2021, we focused on the following areas in responding to the COVID-19 pandemic:

•Supporting and progressing our key growth initiatives (the AngioVac, Auryon and NanoKnife systems);

•Managing operating expenses; and

•Managing our cash and balance sheet.

Strategic Initiatives to Drive Growth

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 high technology products including Auryon, Mechanical Thrombectomy (which includes AngioVac and thrombolytics) and NanoKnife. We will refer to these high technology product lines as our Med Tech business and we will refer to the remainder of the portfolio as our Med Device business.

Throughout the year, we introduced strategic moves designed to streamline our business, improve our overall business operations and position ourselves for growth. Those initiatives included:

~~Introduction of new corporate strategy~~. As outlined in an Investor Day held in New York City in the fourth quarter, leadership introduced a strategic approach that would include portfolio management with product categories designated into “invest” and “maintain” businesses; continued efforts to improve operational performance; international expansion; and an ability to pursue growth through organic and inorganic opportunities through strong cash generation. In addition to introducing the strategy, the company also put forth projected financial metrics anticipated for the 2018, 2019 and 2020 fiscal years.

~~Operational Consolidation~~. •Product development process. The Company announced a planned consolidation of operations from the Manchester, GA and Denmead, UK facilities into the Glens Falls and Queensbury, NY manufacturing facilities in the third quarter. The consolidation will result in streamlined operations, reduced costs, optimized inventory management and gross margin improvement. As part of the plan, the Company expects to incur restructuring expenses, including severance and retention, equipment transfer, set-up and purchases, regulatory expenses, lease termination expenses and other miscellaneous expenses. The plan is expected to be completed in the third quarter of fiscal year 2018.

~~Implementation of a new product development process.~~ ~~The company introduced a robust~~continued its disciplined product development process which is intended to improve the Company’s ability to bring new products to market.

~~Rationalization~~ This included the launch of ~~underperforming or below-cost products. This initiative eliminated more than 900 SKUs~~Auryon and ~~was partnered~~SmartPort+, along with ~~a price increase on products that did not have a profitable cost structure.~~

~~New members of the executive leadership team~~. Following his arrival in April 2016, President and Chief Executive Officer James C. Clemmer welcomed several members to the AngioDynamics leadership team, including Executive Vice President and Chief Financial Officer Michael C. Greiner, Senior Vice President of Quality and Regulatory Affairs Warren G. Nighan, Senior Vice President and General Manager of the Vascular Access Global Business Unit Chad T. Campbell, Senior Vice President and General Manager of the Peripheral Vascular Global Business Unit Robert A. Simpson and Senior Vice President of Human Resources Heather J. Daniels Cariveau.

~~Recent Developments~~

~~In addition to the deliberate actions taken by management as listed above, several significant developments occurred over the course of the fiscal year which impacted our business, including:~~

The Company added two members to the Board of Directors, Eileen Auen and Jan Reed. Auen most recently served as Executive Chairman of Helios, a $1 billion healthcare services firm. Reed most recently was Senior Vice President, General Counsel and Corporate Secretary at Walgreens Boots Alliance.

The Company made the decision to discontinue its investment in the TiLo product that was acquired in August 2013 as part of the Clinical Devices acquisition. This decision resulted in the write-off of the acquired in-processcontinued research and development ~~(IPR&D) of $3.6 million along with a $3.1 million gain from the reduction in the fair~~activities to expand on our Mechanical Thrombectomy portfolio.

•Value Creation. To create value ~~of contingent consideration liability associated with~~and drive future ~~milestones that will no longer be met.~~

The Company revised the sales projections for the AngioVac product as a result of reviews performed by executive management across all products. The adjustments to the sales projections resulted in a $13.4 million gain from the reduction in the fair value of the contingent liability that is based on lower projected sales volume over the contractual earn out period.

~~The Company decided to terminate its agreements with EmboMedics. The termination of these agreements resulted in a write-off of the initial $2.0 million investment in EmboMedics (Note 2).~~

~~The Board of Directors approved a share repurchase program (the “Repurchase Program”) under which they authorized~~growth, the Company ~~the option~~plans to ~~repurchase up~~practice dispassionate portfolio optimization and continue to ~~$25.0 million~~focus on areas of ~~its outstanding common stock during the twenty-four month period ending November 6, 2018. During the second~~compelling unmet needs including those that are patient-centric and ~~fourth quarter of fiscal year 2017,~~evidenced-based. In addition, the Company ~~repurchased a total of 870,000 shares of common stock in the open market at an aggregate cost of $13.6 million under the Repurchase Program.~~

The Company entered into a new credit agreement ("Credit Agreement") which provides for a $100.0 million senior secured term loan facility ("Term Loan") and a $150.0 million senior secured revolving credit facility ("Revolving Facility", and together with the Term Loan, "The Facilities") along with up to a $20.0 million sublimit for letters of credit and a $5.0 million limit for swing line loans. With the proceeds from the Credit Agreement, the existing credit facility that was entered into in September 2013 was paid down in full.

The Company announced to employees an Operational Consolidation strategy which included the consolidation of the Manchester, GA and Denmead, UK facilities into the Glens Falls and Queensbury, NY manufacturing facilities. As part of the plan, the Company expects to incur restructuring expenses, including severance and retention, equipment transfer, set-up and purchases, regulatory expenses, lease termination expenses and other miscellaneous expenses. The plan is ~~expected to be completed in the third quarter of fiscal year 2018.~~

Following completion of the sale of common stock pursuant to the Underwriting Agreement, Avista Capital Partners’ beneficial ownership in AngioDynamics has been reduced to zero as they sold their entire position in AngioDynamics. As a result, in accordance with the terms of his appointment to AngioDynamics’ Board of Directors and the terms of the Stockholders Agreement, David Burgstahler resigned as a director on April 12, 2017.

The Company filed a lawsuit alleging that C.R. Bard has violated federal antitrust laws by illegally tying the sale of its tip location systems to its line of peripherally inserted central catheters. The Company claims that these actions by Bard are preventing competition in the marketplace and limiting patient access to superior technology.

The Company issued a voluntary recall of its Acculis probes that were sold over the past two years. As a result of this voluntary recall, the company decided to also do a voluntary market withdrawal of its Acculis capital systems and discontinue selling the product. The voluntary recall resulted in a deferral of revenue of $2.6 million and an increase of $2.6 million in inventory and hardware asset reserves. The total impact to income before taxes of the recall was $4.5 million. Additional costs will be incurred in fiscal year 2018 related to the market withdrawal of the Acculis capital systems.

~~The Company received notification in the fourth quarter of 2017 that a $1.8 million refund from the Internal Revenue Service related to prior medical device taxes paid would be received.~~

~~Management's Use of Non-GAAP Measures~~

Net sales “on a constant currency basis” is a non-GAAP measure. The Company analyzes net sales on a constant currency basis to better measure the comparability of results between periods. Because changes in foreign currency exchange rates have a non-operating impact on net sales, the Company believes that evaluating growth in net sales on a constant currency basis provides an additional and meaningful assessment of net sales to both management and the company’s investors. Constant currency growth rates are calculated by subtracting the current period's local currency sales at the prior period’s exchange rate from the current period’s local currency sales at the current period’s exchange rate.

Constant currency growth rates are not indicative of changes in corresponding cash flows. The limitation of these non-GAAP measures is that they do not reflect results on a standardized reporting basis. Non-GAAP measures are intended to supplement the applicable GAAP disclosures and should not be viewed as replacements of GAAP results.

pursuing targeted global expansion opportunities.

Critical Accounting Policies and Use of Estimates

Our significant accounting policies are summarized in Note 1 ~~to Notes to~~"Basis of Presentation, Business Description and Summary of Significant Accounting Policies" in the Consolidated Financial Statements included ~~elsewhere~~ in ~~this Annual Report on~~our Form 10-K. While all of these significant accounting policies affect the reporting of our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require us to use a greater degree of judgment and/or estimates. Actual results may differ from those estimates. ~~The accounting policies identified as critical are as follows:~~

Revenue Recognition

WeUnder ASC 606, 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 contracts with its customers based on customer purchase orders, which in ~~accordance~~many cases are governed by master purchasing agreements. The Company’s contracts with customers are generally ~~accepted accounting principles~~for product only, and do not include other performance obligations such as ~~outlined~~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 prices of products are typically based on contracted rates. Product revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the ~~SEC’s authoritative guidance~~transaction price utilizing the expected value method. As such, revenue is recorded net of rebates, returns and other deductions.

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 ~~revenue recognition which requires that four criteria be met before revenue can be recognized: (i) persuasive evidence that an arrangement exists; (ii)~~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 ~~fixed~~sold separately. Contracts with our customers typically include a single performance obligation related to the sale of our products.

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 ~~determinable; (iii) collectability~~delivery to the customer’s named location, based on the contractual shipping terms of a contract. In determining whether control has transferred, the Company considers if there is ~~reasonably assured;~~a present right to payment from the customer and ~~(iv)~~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. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

The Company enters into agreements to place placement and evaluation units (“units”) at customer sites, but the Company retains title to the units. The duration of these agreements are typically a year and the customer has the right to use the unit at no upfront charge in connection with the customer’s ongoing purchase of disposables. These types of agreements include an embedded operating lease for the right to use the units. In these arrangements, revenue recognized for the sale of the disposables is not allocated between the disposal revenue and lease revenue due to the insignificant value of the units in relation to the total agreement value.

Revenues from product ~~delivery has occurred or services have been rendered. Decisions relative to criterion (iii) regarding collectability~~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 ~~upon our judgments,~~on the amounts earned or to be claimed on the related sales and are classified as ~~discussed under “Accounts Receivable” in Note 1, and should conditions change~~a current liability.

A receivable is recognized in the ~~future and cause us to determine this criterion is not met; our results of operations may be affected. We recognize revenue, net of sales taxes assessed by any governmental authority, as products~~period the Company ships the product. Payment terms on invoiced amounts are ~~shipped,~~ based on ~~F.O.B. shipping point~~contractual terms ~~when title~~with each customer and ~~risk~~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 ~~loss passes~~the product has not yet transferred to ~~customers. We negotiate shipping~~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 Company provides certain customers with rebates and ~~credit terms~~allowances that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. The Company establishes a liability 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 and administrative fees the Company is required to pay to group purchasing organizations.

The Company generally offers customers a ~~customer-by-customer basis and products are shipped at an agreed upon price. All product~~limited right of return. Product returns after 30 days must be pre-approved by usthe 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 12twelve months remaining prior to its expiration date. ~~Charges for discounts, returns, rebates~~The Company estimates the amount of its product sales that may be returned by its customers and ~~other allowances are recognized~~records this estimate as a ~~deduction from~~reduction of revenue ~~on an accrual basis~~ in the period ~~in which~~ the related product revenue is ~~recorded.~~recognized. The ~~accrual for~~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 year ended May 31, 2021, such product returns ~~discounts and other allowances is~~were not material.

Inventory

Inventories are stated at the lower of cost or net realizable value based on the ~~Company’s history.~~

~~Income Taxes~~

~~We calculate income tax expense~~first-in, first-out cost method and consist of raw materials, work in process and finished goods. Appropriate consideration is given to deterioration, obsolescence, expiring and other factors in evaluating net realizable value. When we evaluate inventory for ~~each jurisdiction~~excess quantities and obsolescence, we utilize historical product usage experience and expected demand for establishing our reserve estimates. Our actual product usage may vary from the historical experience and estimating demand is inherently difficult which may result in ~~which we operate. This involves estimating actual current taxes due plus assessing temporary differences arising from differing treatment for tax~~us recording excess and ~~accounting purposes~~obsolete inventory amounts that ~~are recorded as deferred tax assets and liabilities. We periodically evaluate deferred tax assets, capital loss carryforwards and tax credit carryforwards~~do not match the required amounts. An increase to determine their recoverability based primarily on our ability to generate future taxable income and capital gains. Where it is more-likely-than-not these will not be recovered, we estimate a valuation allowance and recordinventory reserves results in a corresponding ~~additional tax expense~~increase in ~~our statement~~cost of ~~operations.~~

~~We file income tax returns in~~revenue. Inventories are written off against the ~~U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we~~reserve when they are subject to examination by taxing authorities throughout the world. Fiscal years 2014 through 2017 remain open to examination by the various tax authorities. We analyzed filing positions in all of the Federal and state jurisdictions where we are required to file income taxes, as well as all open tax years in these jurisdictions and believe that our income tax filing positions and deductions will be sustained on audit and we do not anticipate any adjustments will result in a material adverse effect on our financial condition, results of operations or cash flows.

physically disposed.

Acquisitions and Contingent Consideration

~~In a business combination,~~The Company allocates the ~~acquisition method~~purchase price of ~~accounting requires that~~acquired companies to the ~~identifiable~~tangible and intangible assets acquired and liabilities assumed ~~be measured at~~based on their estimated fair values. The estimates used to value ~~with goodwill being~~ the ~~excess value~~net assets acquired are based in part on

historical experience and information obtained from the management of ~~consideration paid over~~ the ~~fair~~acquired company. The Company generally values the identifiable intangible assets acquired using a discounted cash flow model. The significant estimates used in valuing certain of the intangible assets include, but are not limited to: future expected cash flows of the asset, discount rates to determine the present value of the future cash flows, attrition rates of customers, royalty rates and expected technology life cycles. The Company also estimates the useful lives of the intangible assets based on the expected period over which the Company anticipates generating economic benefit from the asset.

The Company’s estimates of fair value are based on assumptions believed to be reasonable at that time. If management made different estimates or judgments, material differences in the fair values of the net ~~identifiable~~ assets ~~acquired. IP R&D~~acquired may result.

Certain of the Company’s business combinations involve potential payment of future consideration that is ~~capitalized and recorded as an indefinite-lived intangible asset at~~contingent upon the ~~acquisition date,~~achievement of certain product development milestones and/or contingent on the acquired business reaching certain performance milestones. The Company records contingent consideration ~~is recorded~~ at fair value at the date of acquisition ~~date, and transaction costs are expensed~~based on the consideration expected to be transferred, estimated as ~~incurred. When~~ the ~~Company acquires net assets that are not accounted for as a business combination, no goodwill is recognized.~~

probability weighted future cash flows, discounted back to present value. The fair value of ~~the liability for~~ contingent consideration ~~recorded~~is measured using projected payment dates, discount rates, probabilities of payment, and projected revenues (for revenue-based considerations). Projected revenues are based on the ~~acquisition date is based on probability weighted estimated cash flow streams, discounted back to present value using a~~Company’s most recent internal operational budgets and long-range strategic plans. The discount rate used is determined at the time of measurement in accordance with accepted valuation ~~methods. The liability for contingent~~methodologies. Changes in projected revenues, probabilities of payment, discount rates, and projected payment dates may result in adjustments to the fair value measurements. Contingent consideration is remeasured ~~to fair value at~~ each reporting period ~~with changes recorded~~using Level 3 inputs, and the change in ~~earnings until~~fair value, including accretion for the ~~contingency~~passage of time, is ~~resolved.~~

recognized as income or expense within operating expenses in the consolidated statements of income. Contingent consideration payments made soon after the acquisition date are classified as investing activities in the consolidated statements of cash flows. Contingent consideration payments not made soon after the acquisition date that are related to the acquisition date fair value are reported as financing activities in the consolidated statements of cash flows, and amounts paid in excess of the original acquisition date fair value are reported as operating activities in the consolidated statements of cash flows.

Goodwill and Intangible Assets

Intangible assets other than goodwill, indefinite lived intangible assets and in process research and development ("IP R&D") are amortized over their estimated useful lives, which range between two to eighteen years, on either a straight-line

basis over the expected period of benefit or as ~~revenues are~~revenue is earned from the sales of the related ~~products. We~~product. The Company periodically ~~review~~reviews the estimated useful lives of ~~our~~ intangible assets and ~~review~~reviews such assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Such conditions could include significant adverse changes in the business climate, current-period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. When testing for impairment of definite-lived intangible assets held for use, the Company groups assets at the lowest level for which cash flows are separately identifiable. The Company operates as a single asset group. If a triggering event is deemed to exist, the Company performs an undiscounted operating cash flow analysis to determine if an impairment exists. If an intangible asset 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.

Acquired IP R&D is not amortized until completion and development of the project, at which time the IP R&D becomes an amortizable asset with an appropriate useful life and an amortization method is determined. If the related project is not completed in a timely manner or the project is terminated or abandoned, we may have an impairment related to the IP R&D, calculated as the excess of the asset’s carrying value over its fair value.

Our policy defines IP R&D as the value assigned to those projects for which the related products have not received regulatory approval and have no alternative future use. Determining the portion of the purchase price allocated to IP R&D requires us to make significant estimates. The amount of the purchase price allocated to IP R&D is determined by estimating the future cash flows of each project or technology and discounting the net cash flows back to their present values. The discount rate used is determined at the time of measurement in accordance with accepted valuation methods. These methodologies include consideration of the risk of the project not achieving commercial feasibility.

Goodwill and other intangible assets that have indefinite useful lives are not amortized, but rather, are 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. Goodwill and intangible assets have been recorded at either incurred or allocated cost. Allocated costs were based on respective fair market values at the date of acquisition.

For goodwill, the impairment test requires a comparison of the estimated fair value of the reporting unit to which the goodwill is assigned to the ~~sum of the~~ carrying value of the assets and liabilities of that reporting unit. The determination of reporting units also requires management judgment. ~~We consider~~The Company considers whether a reporting unit exists within a reportable segment based on the availability of discrete financial ~~information that is regularly reviewed by~~information. The Company operates as a single operating segment ~~management.~~with one reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. If ~~the sum of~~ the carrying value of the ~~assets and liabilities of a~~ reporting unit exceeds the fair value of the reporting unit, the carrying value ~~of the reporting unit’s goodwill~~ is reduced to its ~~implied~~ fair value through an adjustment to the goodwill balance, resulting in an impairment charge. ~~The Company utilizes either discounted cash flow models or other valuation models, such as comparative transactions and market multiples, to determine~~

Determining the fair value of ~~our~~a reporting ~~unit. We must make~~unit is judgmental and requires the use of significant estimates and assumptions, ~~about future cash flows, future~~including revenue growth rates, operating ~~plans,~~margins, discount rates ~~comparable companies,~~and future market ~~multiples, purchase price premiums~~conditions, among others. Changes in assumptions or estimates could materially affect the estimated fair value, and ~~other factors~~therefore could affect the likelihood and amount of a potential impairment.

As detailed in ~~those models. Different assumptions~~Note 9, "Goodwill and ~~judgment determinations could yield different conclusions that would result~~Intangible Assets" in the Consolidated Financial Statements including on our Form 10-K, during the fourth quarter of fiscal year 2021, the Company made the decision to abandon the OARtrac product technology and trademark. This resulted in an impairment charge ~~to income in~~of $14.0 million. In the ~~period that such change or determination was made.~~

~~Contingencies~~

~~We are involved, both~~fourth quarter of fiscal year 2020, the Company recorded a goodwill impairment loss of $158.6 million as ~~a plaintiff and a defendant, in various legal proceedings that arise in~~ the ordinary course of business, including patent infringement and product liability, as further discussed in Note 15 to our consolidated financial statements. Accruals recorded for various contingencies including legal proceedings, self insurance and other claims, are based on judgment, the probability of losses and, where applicable, the consideration of opinions of internal and/or external legal counsel, internal and/or external technical consultants and actuarially determined estimates. When a range is established but a best estimate cannot be made, we record the minimum loss contingency amount, which could be zero. An estimate is often initially developed substantially earlier than the ultimate loss is known and is reevaluated each accounting period. As information becomes known, additional loss provision is recorded when either a best estimate can be made or the minimum loss amount is increased. When events result in an expectation of a more favorable outcome than previously expected, our best estimate is changed to a lower amount. We record receivables from third-party insurers up to the amountfair value of the ~~related liability when we have determined that existing insurance policies will provide reimbursement. In making this determination, we consider applicable deductibles, policy limits and~~reporting unit was less than its carrying value. There were no adjustments to goodwill for the ~~historical payment experience of the insurance carriers. Receivables are not netted against the related liabilities for financial statement presentation.~~year ended May 31, 2021 other than foreign currency translation adjustments.

Results of Operations for the years ended May 31, ~~2017~~2021 and ~~2016~~

2020

For the fiscal year ended May 31, ~~2017,~~2021, we reported net ~~income~~loss from continuing operations of ~~$5.0~~$31.5 million, or ~~$0.14 income per diluted share, on net sales of $349.6 million compared to a fiscal 2016 net loss of $43.6 million, or $1.21~~$0.82 loss per diluted share, on net sales of ~~$353.9~~$291.0 million compared to a fiscal year 2020 net loss of $166.8 million, or $4.39 loss per diluted share, on net sales of $264.2 million.

Net Sales

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

Net sales for the year ended May 31, ~~2017~~2021 and ~~2016~~2020 were:


	For the year ended May 31,								Year ended May 31,
(in thousands)	2017		2016		% Growth	Currency Impact (Pos) Neg	Constant Currency Growth Non-GAAP	(in thousands)	2021		2020		% Change
Net Sales by Product Category								Net Sales by Product Category
Peripheral Vascular	$	208,602	$	205,620	1%
Endovascular Therapies								Endovascular Therapies	$	135,079	$	112,706	19.9	%
Vascular Access	96,481		99,375		(3)%			Vascular Access	101,310		94,299		7.4	%
Oncology/Surgery	44,560		48,895		(9)%			Oncology/Surgery	54,621		57,152		(4.4)	%
Total	349,643		353,890		(1)%	0%	(1)%	Total	$	291,010	$	264,157	10.2	%

Net Sales by Geography								Net Sales by Geography
United States	$	282,168	$	285,824	(1)%	0%	(1)%	United States	$	237,043	$	207,980	14.0	%
International	67,475		68,066		(1)%	2%	1%	International	53,967		56,177		(3.9)	%
Total	$	349,643	$	353,890	(1)%	0%	(1)%	Total	$	291,010	$	264,157	10.2	%

For the year ended May 31, ~~2017,~~2021, net sales ~~decreased $4.2~~increased $26.9 million to ~~$349.6~~$291.0 million compared to the year ended May 31, ~~2016.~~2020. The prior year net sales numbers, specifically in the fourth quarter, were significantly impacted by the COVID-19 global pandemic.

Endovascular Therapies

~~Consolidated~~•Total Endovascular Therapies sales increased $22.4 million or 19.9%. Auryon, which was acquired as part of the Eximo acquisition in the second quarter of fiscal year 2020, contributed $11.1 million in disposable sales. The AngioVac business grew $8.0 million as the Company continued to see increased case volumes in AngioVac, which increased 39% from the prior year. Additionally, Core Peripheral product sales increased $5.6 million. EVLT remained consistent with the prior year.

•U.S. Endovascular Therapies net sales increased $22.5 million due to increased case volume in AngioVac, increased Core Peripheral product sales and ~~U.S.~~$11.1 million in sales of Auryon. These increases were partially offset by decreased sales volume in EVLT.

•International Endovascular Therapies net sales decreased ~~from~~$0.1 million.

Vascular Access

•Total Vascular Access sales increased $7.0 million due to increased sales of PICCs, Ports, Midlines and Dialysis of $2.5 million, $1.3 million, $3.1 million and $0.1 million, respectively. These increases are partially the result of a large order in the United Kingdom related to the COVID-19 pandemic for $5.2 million in the first quarter of fiscal year 2021 along with the distribution agreement with MedComp for the sale of certain PICC products. BioFlo product lines comprised 52% of overall Vascular Access sales compared to 51% in the prior year.

•U.S. Vascular Access net sales increased $4.3 million primarily due to increased PICCs, Ports and Midline sales of $1.1 million, $1.4 million and $1.5 million, respectively. These increases are attributed to a group purchasing

organization agreement that was signed in the third quarter of the prior fiscal year, new strategic relationships and the launch of SmartPort+.

•International Vascular Access net sales increased by $2.7 million primarily as a result of ~~decreased net sales from Vascular Access and Oncology Surgery.~~a large order in the United Kingdom related to the COVID-19 pandemic for $5.2 million. This ~~decrease~~ was partially offset by 1%decreased PICC sales in Latin America of $1.6 million.

Oncology/Surgery

•Total Oncology/Surgery sales decreased $2.5 million year over ~~year growth~~year. The sales were significantly impacted by the challenging capital spending environment as a result of the COVID-19 pandemic, as Microwave and NanoKnife capital sales decreased $4.2 million. Of this decrease, $2.1 million is due to a large NanoKnife distributor order in ~~our Peripheral Vascular franchise.~~the Asia-Pacific region ("APAC") in the prior year. Radiofrequency Ablation sales also decreased $1.6 million, Balloon product sales decreased by $1.1 million and other sales decreased $0.7 million. These decreases were partially offset by increased Microwave and NanoKnife disposable sales of $2.1 million and $1.2 million, respectively, and increased BioSentry sales of $2.0 million.

~~Peripheral Vascular~~

~~Total Peripheral Vascular~~•U.S. Oncology net sales increased ~~$3.0~~by $2.3 million primarily ~~attributable~~due to increased NanoKnife disposable sales ~~volume~~ of ~~Angiographic~~$1.5 million, BioSentry sales of $2.0 million and ~~Core products~~Microwave disposable sales of ~~$9.9~~$1.3 million. ~~This~~The increased NanoKnife disposable sales ~~volume~~is the result of the increased capital base that was developed in the prior year along with increased case volumes as hospitals have begun to lift restrictions on procedures. This was partially offset by ~~a decrease~~decreased NanoKnife capital sales of ~~volume in Fluid Management, Venous~~$1.1 million and ~~AngioVac~~Balloon product sales of ~~$5.6~~$1.1 million. The decrease in Fluid Management was attributed to a discontinuance of our inflation device and automation challenges in the European markets. Although AngioVac procedures were up year over year, AngioVac unit

•International Oncology sales decreased ~~by $1.4 million due to available inventory already in the market place.~~

US Peripheral Vascular sales increased $2.8 million and international Peripheral Vascular sales increased $0.2 million which was primarily due to increased sales volume of Angiographic catheters. This increased sales volume was offset by a decrease in volume in Fluid Management, Venous and AngioVac.

~~Vascular Access~~

~~Total Vascular Access sales decreased $2.9 million primarily in our non-BioFlo businesses. Our BioFlo product line grew by~~ $4.8 ~~million primarily driven by growth in Midlines.~~

~~US Vascular Access sales declined by 5% due to softness across the portfolio offset by Midline and BioFlo dialysis which continued to gain traction in the marketplace.~~

~~International Vascular Access sales increased 15% due to the market penetration of BioFlo PICCs.~~

~~Oncology/Surgery~~

~~Total Oncology/Surgery sales decreased $4.3~~ million year over year primarily due to fewer sales of capital units in Microwave and NanoKnife as well as the $2.6 million deferral of revenue related to the Acculis probe recall that was announced in the fourth quarter of fiscal year 2017.

~~U.S. Oncology/Surgery declined by 8%, driven primarily through lower capital and disposable sales in Radio Frequency and Microwave offset by NanoKnife growth.~~year. The decrease ~~is also attributed to a $1.4 million deferral of revenue related to the Acculis probe recall that~~ was ~~announced in the fourth quarter of fiscal year 2017.~~

~~International Oncology/Surgery sales decreased 10% year over year as a result of~~driven by lower NanoKnife capital and disposable sales of $3.0 million and decreased Radiofrequency Ablation sales of $2.1 million as a ~~$1.2~~result of market pressures and hospital restrictions due to the COVID-19 pandemic. Of the $3.0 million ~~deferral of revenue~~decrease in NanoKnife capital and disposable sales, $2.1 million was related to ~~the Acculis probe recall that was announced~~a NanoKnife distributor order in APAC in the ~~fourth quarter of fiscal year 2017.~~

prior year.

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


	Year ended May 31,
(in thousands)	2021			2020			% Change
Gross profit (exclusive of intangible amortization)	$	156,788		$	150,272		4.3	%
Gross profit % of sales	53.9		%	56.9		%
Research and development	$	36,390		$	29,682		22.6	%
% of sales	12.5		%	11.2		%
Selling and marketing	$	81,306		$	78,634		3.4	%
% of sales	27.9		%	29.8		%
General and administrative	$	35,918		$	37,872		(5.2)	%
% of sales	12.3		%	14.3		%

For the year ended May 31,
(in thousands) 2017 2016 % Change
Gross profit (exclusive of intangible amortization) $ 176.2
$ 174.3
1.1 %
Gross profit % of sales 50.4 % 49.3 %
Research and development $ 25.3
$ 25.1
0.8 %
% of sales 7.2 % 7.1 %
Selling and marketing $ 78.8
$ 83.7
(5.9 )%
% of sales 22.5 % 23.7 %
General and administrative $ 31.4
$ 30.6
2.6 %
% of sales 9.0 % 8.6 %

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

~~Gross~~While gross profit increased by ~~$1.9~~$6.5 million compared to the prior ~~year. The increase is attributable to the following:~~

~~In fiscal~~ year, ~~2017, a net charge of $4.5 million was recorded as a result of the Acculis probe recall.~~

~~In fiscal year 2016, a $5.9 million charge related to the write-off of Celerity inventory on hand and hardware assets after the business decision to no longer pursue the Celerity Navigation project.~~

~~The remaining increase is driven by net productivity offset by price and mix of products.~~

~~The increase in~~ gross profit as a percentage of ~~1.1%~~sales decreased 300 basis points. The change is ~~attributed~~primarily attributable to the ~~factors noted above.~~following:

•Sales volume positively impacted gross profit by $16.6 million year over year;

•Net productivity negatively impacted gross profit by $10.0 million primarily as a result of under absorption, and to a lesser extent inflation, of $5.1 million and start-up costs of $4.0 million related to the Auryon launch. The under absorption in manufacturing operations was due to the Company maintaining staffing levels during the COVID-19 global pandemic to mitigate risk, along with a focus on working capital management through inventory reduction;

•Mix negatively impacted gross margin by $0.8 million as a result of the large order in the United Kingdom for lower gross margin products and decreased NanoKnife capital sales. This was partially offset by increased AngioVac sales; and

•A benefit of $0.7 million was recorded to gross profit which represents a portion of the employee retention credit that the Company filed for under the provisions of the CARES Act in the third quarter of the current year.

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

R&D expense increased ~~$0.2~~$6.7 million compared to the prior year. The increase is primarily attributable to the following:

•AngioVac platform expansion, the NanoKnife DIRECT© study and the Pathfinder study increased $3.6 million and Auryon related expenses increased by $2.7 million;

~~Increased headcount~~•Outside consultant expense and other expense increased $0.5 million and travel expenses decreased $0.5 million;

•Compensation and benefits increased $0.7 million, of which $0.4 million related to variable compensation; and

•A benefit of $0.3 million was recorded to R&D expense which represents a portion of the employee retention credit that the Company filed for under the provisions of the CARES Act in the ~~R&D department compared to~~third quarter of the ~~prior year resulted in $1.2 million in additional expense as well as expenses associated with consultants of $0.6 million and severance of $0.4 million.~~current year.

~~These increases were partially offset by less project spend of $1.2 million, $0.6 million in samples and $0.2 million in travel and other expenses.~~

~~R&D expense as a percentage of sales remained consistent year over year.~~

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

S&M expense ~~decreased~~increased by ~~$4.9~~$2.7 million compared to the prior year. The ~~decrease~~increase is primarily attributable to the following:

•Expense related to the build-out of the Auryon sales and marketing teams to prepare for full product launch of $7.7 million;

~~There was a decrease in headcount from the prior year which resulted in a $2.5~~•Travel expense decreased $2.4 million ~~decrease in salaries and benefits.~~

~~The decrease in headcount along with a focus on reduced~~due to less travel ~~spend resulted in a decrease in travel expenses of $1.3 million.~~

~~There was a $0.7 million decrease in trade shows and meeting expenses along with a $0.7 million decrease in samples~~ as a result of the COVID-19 pandemic. In addition, tradeshow and other expense decreased $1.2 million primarily due to the cancellation of events;

•Compensation and benefits decreased $0.7 million due to decreased salaries as a ~~focus on reducing expenses.~~

~~These decreases were~~result of open roles partially offset by ~~severance~~increased variable compensation and commissions; and

•A benefit of ~~$0.8 million.~~

~~As a result of these decreases in S&M expenses, the percentage of S&M~~$0.9 million was recorded to sales ~~decreased 1.2%.~~and marketing expense which represents a portion of the employee retention credit that the Company filed for under the provisions of the CARES Act in the third quarter of the current year.

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

G&A expense ~~increased~~decreased by ~~$0.8~~$2.0 million compared to the prior year. The ~~increase~~decrease is primarily attributable to the following:

•Legal and professional fees relating to ongoing litigation that is within the normal course of business decreased $3.7 million;

~~Increased~~•Compensation and benefits increased approximately $2.1 million primarily as a result of increased variable compensation and stock based compensation expense; and

•Decreased consulting and other expense ~~related to the new grant for the CEO along with two new board members~~ of ~~$1.7 million. Along with the stock based compensation increase, bonus for fiscal year 2017 was accrued at a higher rate than the prior year which resulted in a $1.0~~$0.1 million ~~increase to G&A expense.~~

~~Along with the appointment~~and decreased travel expense of ~~new members in the executive leadership team, recruiting and relocation expenses resulted in an increase of $0.5 million from the prior year~~

~~There was also an increase in professional fees of $0.3 million related to audit fees and director fees partially offset by a decrease in legal fees.~~

~~These increases were partially offset by decreases in compensation benefits of $0.5~~$0.2 million as a result of a reduction in benefit claims, depreciation expense of $0.8 million, $0.2 million in facilities expenses including insurance, lease expenses and utilities, bad debt favorability of $0.4 million and other miscellaneous decreases in expenses of $0.4 million.the COVID-19 pandemic.


	Year ended May 31,
(in thousands)	2021		2020		$ Change
Amortization of intangibles	$	18,136	$	18,121	$	15
Goodwill impairment	$	—	$	158,578	$	(158,578)
Change in fair value of contingent consideration	$	89	$	(11,531)	$	11,620
Acquisition, restructuring and other items, net	$	20,232	$	6,014	$	14,218

Other expense	$	(769)	$	(1,037)	$	268

For the year ended May 31,
(in thousands) 2017 2016 $ Change
Amortization of intangibles $ 17.3
$ 18.0
$ (0.7 )
Change in fair value of contingent consideration $ (15.3 ) $ 0.9
$ (16.2 )
Acquisition, restructuring and other items, net $ 27.5
$ 12.6
$ 14.9
Medical device excise tax $ (1.8 ) $ 2.4
$ (4.2 )
Other expense $ (3.1 ) $ (4.3 ) $ 1.2

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

•Amortization expense remained consistent compared to the prior year.

Goodwill Impairment - Represents the impairment charge taken on goodwill.

•The ~~decrease~~Company recorded a non-cash goodwill impairment charge of ~~$0.7~~$158.6 million ~~is primarily related~~for the year ended May 31, 2020 as the fair value of the reporting unit was less than its carrying value. There were no adjustments to ~~intangible assets that became fully amortized.~~goodwill for the year ended May 31, 2021 other than foreign currency translation adjustments.

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

•The ~~decrease~~change is primarily due to ~~a write-off of $13.4 million that was taken on the AngioVac product as a result of decreases in future~~RadiaDyne revised sales projections ~~that eliminated any payments above minimums~~ and a ~~write-off of $3.1 million on the TiLo product as the~~technical milestone ~~will~~that would not be achieved. This resulted in a $9.2 million and $2.7 million reduction in the fair value of the contingent liability in the prior year.

•During the current year, a decision was ~~partially~~made to no longer pursue the final RadiaDyne technical milestone, which resulted in a reduction in the liability of $0.8 million. This reduction in the fair value was offset by normal amortization of the present value ~~discount on~~of the Eximo contingent ~~liabilities.~~consideration recorded in the second quarter of fiscal year 2020.

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

Acquisition, restructuring and other items, net increased by ~~$14.9~~$14.2 million compared to the prior year. The increase is attributable to the following:

~~In Q2~~•Legal expense, related to litigation that is outside of the normal course of business, of $6.2 million was recorded in fiscal year ~~2017,~~2021 compared to $2.7 million in the ~~intangible assets~~prior year. Included in legal for fiscal year 2021, is a $1.0 million settlement expense;

•There was no M&A expense incurred in fiscal year 2021 compared to $0.8 million in the prior year;

•In fiscal year 2021, the Company incurred $0.4 million of expense to move manufacturing facilities as a result of the sale of the Fluid Management business compared to $2.8 million in the prior year;

•As part of the sale of the Fluid Management business, the Company entered into a transition services agreement with Medline for certain legal, human resource, tax, accounting and information technology services from the Company for a period not to exceed 24 months. As a result of the transition services agreement, the Company invoiced Medline $1.0 million in fiscal year 2021 compared to $1.8 million in the prior year;

•Other expenses of $0.8 million consists of severance associated with ~~TiLo were written off for $3.6~~organizational changes, compared to $1.5 million in the prior year; and

•A $14.0 million impairment charge was recorded in fiscal year 2021 as a result of the decision to ~~discontinue our investment in~~abandon the ~~TiLo~~OARtrac product ~~along with a $2.0 million write-off of the investment in Embomedics due to termination of the agreement. The prior year had asset impairments of $0.4 million.~~technology and trademark.

~~There was $1.3 million of~~

Other expense related to the plant consolidation which consisted mainly of severance and start-up costs to move the product lines including equipment transfer expenses, accelerated depreciation for assets that will not be transferred, validation and other start up costs. The prior year had accelerated depreciation related to the Operational Excellence program of $1.0 million along with $0.5 million in other expenses.

~~A litigation settlement accrual for $12.5 million was recorded in the fourth quarter of fiscal year 2017.~~

~~Legal expenses of $7.0 million which was a decrease of $0.5 million from the prior year.~~

Other miscellaneous items decreased $2.2 million from the prior year primarily attributable to a decrease in M&A expenses of $2.5 million offset by a gain in the prior year of $0.7 million related to the modification of stock based compensation awards for the former CEO.

~~Medical device excise tax~~ ~~- Medical device excise tax is assessed on our U.S. product sales subject to exclusions and adjustments.~~

The Medical Device Excise Tax was suspended on January 1, 2016 therefore, fiscal year 2016 had seven months of the tax. In the current year, there is a $1.8 million refund from the Internal Revenue Service related to prior medical device taxes paid.

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

•The decrease in other ~~expenses~~expense from the prior year of ~~$1.2~~$0.3 million ~~was~~is primarily due to ~~lower interest expense on lower outstanding debt and lower interest rates under the Credit Agreement along with unrealized~~ foreign currency unrealized gains ~~from re-measurement offset by~~of $0.4 million and the ~~write off~~prior year write-off of ~~the~~ deferred financing fees ~~from~~associated with the ~~original credit facility.~~

old Credit Facility of $0.6 million. This was partially offset by increased interest expense of $0.2 million for the $20.0 million outstanding on the Revolving Facility at the end of fiscal year 2021 compared to $40.0 million outstanding in the prior year. In addition, interest income decreased by $0.3 million.

Income Tax ~~Provision (Benefit)~~Benefit

For year ended May 31,
(in thousands) 2017 2016
Income tax expense (benefit) $ 4.8
$ 40.3
Effective tax rate including discrete items 49 % (1,240 )%


	Year ended May 31,
(in thousands)	2021			2020
Income tax benefit	$	(4,504)		$	(1,348)
Effective tax rate	12		%	1		%

Our effective tax rate was ~~49%~~a benefit of 12% for fiscal ~~2017~~year 2021 compared with ~~(1,240)%~~an effective tax rate benefit of 1% for the prior year. The current year effective tax rate ~~reflects expense of $4.8 million~~differs from the U.S. statutory rate primarily ~~driven by~~due to the impact of the US 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 prior year effective tax rate differs from the ~~deferred~~U.S. Federal statutory tax ~~liability related~~rate of 21% primarily due to ~~intangibles that have an indefinite reversal period and cannot be used~~no tax benefit being recorded on the goodwill impairment of $158.6 million.

The Company regularly assesses its ability to ~~support the~~realize its deferred tax assets. ~~The prior year rate primarily reflects income tax expense~~Assessing the realization of ~~$40.4 million related to full valuation allowance on our US net~~ deferred tax assets ~~that was established during fiscal 2016 and the deferred tax liability related to intangibles that have an indefinite reversal period and cannot be used to support the deferred tax assets.~~

~~At May 31, 2017, we had a net deferred tax liability of $26.1 million, after a valuation allowance on our US~~requires significant management judgment. In determining whether its deferred tax assets ~~of $48.3 million. The increase in the valuation allowance during fiscal 2017 was $6.1 million.~~

~~A valuation allowance is provided if based upon the weight of available evidence, it is~~are more likely than not ~~that some or all of~~realizable, the deferred tax assets will not be realized. After careful consideration and weighing of all the available positive and negative evidence, the weight given to the three year cumulative loss and lack of a recent history of core earnings was difficult to overcome and a full valuation allowance related to the U.S. deferred tax assets was established in the period ending May 31, 2016. Management consideredCompany evaluated all available positive and negative evidence, atand weighted the evidence based on its objectivity.

Evidence the Company considered included its history of net operating losses, which resulted in the Company recording a full valuation allowance for its deferred tax assets in fiscal year 2016, except the naked credit deferred tax liability.

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 May 31, ~~2017, and considering~~2021. The Company will continue to assess the ~~cumulative loss in the U.S. over the three year period, determined that~~level of the valuation allowance ~~is still~~ required. ~~Management will continue~~If sufficient positive evidence exists in future periods to ~~reevaluate the positive and negative evidence at each reporting period and if future results as projected in the U.S. and the Company's tax planning strategies are favorable,~~support a release of some or all of the valuation allowance, ~~may be removed, which could~~such a release would likely have a ~~favorable~~ material impact on the ~~Company's~~Company’s results of ~~operations in the period in which it is recorded.~~

~~Results of Operations for the years ended May 31, 2016 and 2015~~

For the fiscal year ended May 31, 2016, we reported net loss of $43.6 million, or $1.21 loss per basic and diluted common share, on net sales of $353.9 million compared to a fiscal 2015 net loss of $3.4 million, or $0.09 per basic and diluted common share, on net sales of $356.5 million.

~~Net Sales~~

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

~~Net sales for the year ended May 31, 2016 and 2015 were:~~

For the year ended May 31,
(in thousands) 2016 2015 % Growth Currency Impact (Pos) Neg Constant Currency Growth Non-GAAP
Net Sales by Product Category
       Peripheral Vascular $ 205,620
$ 196,890
4%
       Vascular Access 99,375
107,754
(8)%
       Oncology/Surgery 48,895
51,890
(6)%
Total 353,890
356,534
(1)% 3% 2%

Net Sales by Geography
       United States $ 285,824
$ 284,122
1% —% 1%
       International 68,066
72,412
(6)% 4% (2)%
Total $ 353,890
$ 356,534
(1)% 1% —%

For year ended May 31, 2016, net sales decreased $2.6 million to $353.9 million compared to the year ended May 31, 2015. As shown in the table above, while consolidated net sales decreased by 1% excluding the negative impact from fluctuations in currency exchange rates, our sales were flat year over year. The decline in net sales from vascular access and oncology surgery was partially offset by 4% year over year growth in our peripheral vascular franchise. Our international sales were significantly impacted by unfavorable movement in currency exchange rates, particularly the Euro, British pound and Canadian dollar

Peripheral Vascular sales increased $8.7 million primarily attributable to increased sales of AngioVac, Core and Venus products. While Vascular Access sales decreased $8.4 million primarily in our non-BioFlo businesses, our BioFlo line of products continued to gain traction in the marketplace. Oncology/Surgery sales decreased $3.0 million primarily due to fewer capital sales across all product lines compared to prior year. This was partially offset by increases in the sales of disposables in our Microwave and NanoKnife product lines.

U.S. sales increased $1.7 million due to growth in the Peripheral Vascular products, offset by a reduction in Vascular Access and Oncology/Surgery sales. While total US Vascular Access sales declined by $6.2 million overall, we saw growth in our U.S. BioFlo product lines of 18% year over year. U.S. Oncology/Surgery declined by $1.6 million, driven primarily through lower capital sales offset by growth in disposables. International sales decreased 2% on a constant-currency basis, due to a decline in Thermal Ablation and in the Vascular Access product lines.

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

For the year ended May 31,
(in thousands) 2016 2015 % Change
Gross profit $ 174.3
$ 175.8
(0.9 )%
Gross profit % of sales 49.3 % 49.3 %
Research and development $ 25.1
$ 26.6
(5.6 )%
% of sales 7.1 % 7.5 %
Selling and marketing $ 83.7
$ 82.4
1.6 %
% of sales 23.7 % 23.1 %
General and administrative $ 30.6
$ 30.0
2.0 %
% of sales 8.6 % 8.4 %

~~Gross profit~~ - Gross profit consists of net sales less the cost of goods sold, which includes the costs of materials, products purchased from third parties and sold by us, manufacturing personnel, royalties, freight, business insurance, depreciation of property and equipment and other manufacturing overhead. The $1.5 million decrease compared to 2015 is primarily attributable to a $5.9 million charge related to the write-off of Celerity inventory on hand and hardware assets after the business decision to no longer pursue the Celerity Navigation project. The prior year gross profit included a $4.8 million charge related to the voluntary Morpheus recall.

~~Research and development expenses~~ - Research and development (“R&D”) expenses include internal and external costs to develop new products, enhance existing products, validate new and enhanced products, manage clinical, regulatory and medical affairs. The decrease in R&D costs for the year ended May 31, 2016 is due to reductions in project spend and restructuring. As a percentage of net sales, R&D expenses were 7.1% for fiscal 2016, compared to 7.5% for fiscal 2015.

~~Sales and marketing expenses~~ - Sales and marketing (“S&M”) expenses consist primarily of salaries, commissions, travel and related business expenses, attendance at medical society meetings, product promotions and marketing activities. Increases in S&M expense for the year ended May 31, 2016 is the result of investments made in the US sales force focused around retention and improved sales performance along with an increase in credit card fees. As a percentage of net sales, S&M expenses were 23.7% for fiscal 2016 compared to 23.1% for fiscal 2015.

~~General and administrative expenses~~ - General and administrative (“G&A”) expenses include executive management, finance, information technology, human resources, business development, legal, and the administrative and professional costs associated with those activities. Increases in G&A expenses for the year ended May 31, 2016 are primarily the result of increased legal and audit fees.

For the year ended May 31,
(in thousands) 2016 2015 $ Change
Amortization of intangibles $ 18.0
$ 18.0
$ —
Change in fair value of contingent consideration $ 0.9
$ (8.1 ) $ 9.0
Acquisition, restructuring and other items, net $ 12.6
$ 26.3
$ (13.7 )
Medical device excise tax $ 2.4
$ 4.1
$ (1.7 )
Other expense $ (4.3 ) $ (4.7 ) $ 0.4

~~Amortization of intangibles~~ ~~- Amortization of intangibles for the year ended May 31, 2016 remained consistent with the prior year.~~

~~Change in fair value of contingent consideration~~ - Represents changes in contingent consideration driven by changes to estimated future payments on earn-out liabilities created through acquisitions and amortization of present value discounts on long-term contingent consideration. The decrease from the prior year is due to a $10.5 million gain recognized as a result of reducing the estimated present value of future payments due on earn-outs in the prior year compared to $1 million in gains in 2016. These gains were partially offset in each period by amortization of the present value discount on the contingent liabilities.

~~Acquisition, restructuring and other items, net~~ - Expense for fiscal 2016 consists of $7.5 million of litigation expense, $2.5 million of M&A related expenses, $1.9 million of severance, $0.7 million of a gain related to the modification of stock based compensation awards for the former CEO and $1.0 million of accelerated depreciation associated with our operational excellence program, and other miscellaneous items. Expense for fiscal 2015 consists of $9.1 million of fixed and long-term asset impairments, $6.4 million of impairment on the NAMIC trademark, other costs associated with litigation, the recall of Morpheus, our operational excellence program, and other miscellaneous items. The impairment charges were primarily driven by a change in strategy within our fluid management product development pipeline, as we moved away from our planned design of an Automated Power Injector.

~~Medical device excise tax~~ - Medical device excise tax is assessed on our U.S. product sales subject to exclusions and adjustments. The decrease as compared to the prior year is attributable to the suspension of the medical device excise tax as of January 1, 2016.

~~Other expenses~~ - Other expenses include interest expense, foreign currency impacts, bank fees, and amortization of deferred financing costs. The increase in other expenses was primarily related to foreign currency losses.

~~Income Tax Provision (Benefit)~~

For year ended May 31,
(in thousands) 2016 2015
Income tax expense (benefit) $ 40.3
$ (4.7 )
Effective tax rate including discrete items (1,240 )% 58 %

Our effective tax rate was (1,240)% for fiscal 2016 compared with 58% for the prior year. The current year rate reflects expense of $40.4 million related to a full valuation allowance on our US net deferred tax assets. The prior year rate reflects the benefit of $9.2 million nontaxable adjustment to the contingent liabilities related to Vortex Medical and Clinical Devices, and a seven month benefit from the R&D tax credit that expired on December 31, 2014, offset by non-deductible interest expense related to contingent payments, true-ups of our fiscal year 2014 US income tax returns and the impact of the elimination of the ASC 718 APIC pool.

~~At May 31, 2016, we had a net deferred tax liability of $21.7 million, after recording a valuation allowance of $42.2 million. The increase in the valuation allowance was $40.4 million.~~

While the net deferred tax asset at May 31, 2016 before the valuation allowance was $19.9 million, the Company was required to record a valuation allowance of $40.4 million due to deferred tax liabilities related to intangibles of $20.5 million that have an indefinite reversal period and can not be used to support the deferred tax asset.

operations.

Liquidity and Capital Resources

We regularly review our liquidity and anticipated capital requirements in light of the significant uncertainty created by the COVID-19 global pandemic. We believe that our current cash on hand and availability under our Revolving Facility provide sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months. We are closely monitoring receivables and payables.

Our cash and cash equivalents totaled ~~$47.5~~$48.2 million as of May 31, ~~2017,~~2021, compared with ~~$32.3~~$54.4 million as of May 31, ~~2016. Marketable securities totaled $1.2 million and $1.7 million as of May 31, 2017 and 2016, respectively, and consist of auction rate securities.~~2020. As of May 31, ~~2017,~~2021, total debt outstanding related to the Revolving Facility was ~~$97.5 million comprised of a term loan. The net debt to Consolidated EBITDA, as defined by the Credit Agreement (Note 11), is 1.4x.~~$20.0 million. The fair value of the contingent consideration liability as of May 31, ~~2017~~2021 was ~~$12.8~~$15.7 million.

The table below summarizes our cash flows for the years ended May 31, ~~2017, 2016~~2021 and ~~2015:~~2020:


	For the year ended May 31,										Year ended May 31,
(in thousands)	2017			2016			2015			(in thousands)	2021		2020
Cash provided by (used in):										Cash provided by (used in):
Operating activities	$	55,745		$	45,216		$	25,685		Operating activities	$	24,093	$	(14,554)
Investing activities	(2,551		)	(7,569		)	(12,736		)	Investing activities	(13,711)		(63,345)
Financing activities	(37,983		)	(23,663		)	(10,465		)	Financing activities	(16,986)		(95,242)
Effect of exchange rate changes on cash and cash equivalents	—			(42		)	(198		)	Effect of exchange rate changes on cash and cash equivalents	330		(65)
Net change in cash and cash equivalents	$	15,211		$	13,942		$	2,286		Net change in cash and cash equivalents	$	(6,274)	$	(173,206)

During the ~~twelve months~~years ended May 31, ~~2017~~2021 and ~~2016,~~2020, cash flows consisted of the following:

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

Year ended 2021:

•Net ~~income was~~loss of $31.5 million, plus the non-cash items, primarily driven by ~~higher gross margins, lower sales~~depreciation and ~~marketing expenses as well as~~amortization and share-based compensation, along with the ~~medical device tax refund. Also impacting net income, were~~changes in working capital below, contributed to cash provided by operations of $24.1 million.

•In fiscal year 2021, working capital was favorably impacted by decreased inventory on hand of $11.5 million and increased accounts payable and accrued liabilities of $4.9 million. This was partially offset by increased accounts receivable of $4.2 million.

Year ended 2020:

•Net loss of $166.8 million plus the non-cash items, ~~which consisted~~primarily driven by the goodwill impairment, depreciation and amortization and share-based compensation, along with the changes in working capital below, contributed to cash used in operations of ~~$15.3~~$14.6 million.

•Working capital was negatively impacted by increased inventory on hand of $18.8 million and decreased accounts payable and accrued liabilities of ~~contingent consideration gains, $2.0~~$15.5 million. Accounts receivable had a favorable impact of $11.9 million on working capital as a result of the sale of the Fluid Management business and decreased sales in the ~~write-off~~fourth quarter as a result of the ~~Embomedics investment and $3.6 million in intangible write-offs related to TiLo. In addition, the prior year net income included a full valuation allowance on the Company's net operating losses.~~impact from COVID-19.

With regards to working capital, the Company focused on optimizing both DSO and DPO which contributed to $15.2 million of working capital improvement. With respect to inventory, the $2.4 million reserve for Acculis inventory partially offset the inventory build related to the plant consolidation.

Cash used in investing ~~activities~~activities:

Year ended 2021:

•$~~3.0~~5.2 million of cash was used for fixed asset additions and $8.5 million of Auryon placement and evaluation units.

Year ended 2020:

•$45.8 million payment to acquire Eximo Medical Ltd. and $10.0 million payment to acquire the C3 Wave tip location asset from Medical Components, Inc. Refer to Note 2 of the financial statements; and

•$7.2 million in fixed asset additions ~~compared to fixed asset additions of $2.3 million in the prior year.~~

~~$0.5 million in proceeds from an auction rate security that was called during fiscal year 2017.~~

~~The prior year also had $2.0 million in warrant additions~~primarily related to ~~EmboMedics and $3.3 million in intangible asset additions related to the Merz Distribution Agreement.~~

building improvements along with maintenance of equipment.

Cash used in financing ~~activities~~activities:

Year ended 2021:

~~Net $23.9~~•$20.0 million in ~~repayments~~payments on ~~long-term debt after~~ the ~~proceeds from the Credit Agreement and repayment of the old credit agreement compared to $16.3 million~~Revolving Facility in ~~repayments in the prior year. The increase from the prior year is due to the fact that the revolver was paid down in full as of the third quarter of~~ fiscal year ~~2017.~~2021; and

•$~~1.3 million in deferred financing fees related to the new credit agreement.~~

~~$10.7~~3.0 million of proceeds from stock option and ESPP ~~activity compared~~activity.

Year ended 2020:

•$132.5 million repayment of long-term debt in conjunction with the new Credit Agreement that was entered into at the beginning of the first quarter of fiscal year 2020. Refer to ~~$2.4~~Note 12 of the financial statements;

•$40.0 million indraw on the ~~prior year. The large increase is related to the exercise~~Revolving Facility;

•$0.8 million of outlays from stock ~~based awards from executive management turnover that took place over the past year.~~option and ESPP activity; and

•$~~9.9~~1.2 million payment on earn-out ~~liabilities which is consistent~~liabilities.

On June 3, 2019 and in connection with the ~~prior year.~~

~~$13.6 million from~~completion of the ~~repurchase of common shares in fiscal 2017.~~

~~On November 7, 2016,~~Fluid Management divestiture, the Company repaid all amounts outstanding under its existing Credit Agreement and entered into a new Credit Agreement. The Credit Agreement ~~that~~ provides for a ~~$100.0~~$125.0 million ~~senior~~ secured ~~term loan facility and a $150.0 million senior secured revolving credit facility,~~Revolving Facility, which includes upan uncommitted expansion feature that allows the Company to increase the total revolving commitments and/or add new tranches of term loans in an aggregate amount not to exceed $75.0 million. The Credit Agreement includes customary representations, warranties and covenants, and acceleration, indemnity and events of default provisions, including, among other things, two financial covenants. One financial covenant requires us to maintain a ~~$20.0~~fixed charge coverage ratio of not less than 1.25 to 1.00. The other financial covenant requires us to maintain a total leverage ratio of not greater than 3.00 to 1.00. The total leverage ratio is based upon our trailing twelve months total adjusted EBITDA (as defined in the Credit Agreement). The amount that we can borrow under our Credit Agreement is directly based on our leverage ratio. The interest rate on the Revolving Facility at May 31, 2021 was 1.36%.

On December 17, 2019, the Company made a $15.0 million ~~sublimit for letters~~draw on the Revolving Facility as part of ~~credit~~the acquisition of the C3 Wave tip location asset from Medical Components Inc. that is described Note 2 to the financial statements. In the fourth quarter of fiscal year 2020, the Company made an additional $25.0 million draw on the Revolving Facility. In December 2020 and ~~a $5.0~~March 2021, payments of $10.0 million ~~sublimit for swingline loans.~~

each were made on the Revolving Facility. We believe that our current cash ~~and investment balances,~~balance, together with cash generated from operations and access to our ~~revolving credit facility,~~Revolving Facility, will provide sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months. If we seek to make ~~significant~~ acquisitions of other businesses or technologies in the future for cash, we may require external financing.

Our contractual obligations as of May 31, ~~2017~~2021 are set forth in the table below (in thousands). We have no variable interest entities or other off-balance sheet obligations.


	Cash Payments Due By Period as of May 31, 2017											Cash payments due by period as of May 31, 2021
(in thousands)	Total		Less than One Year		1-3 Years		3-5 Years		After 5 Years		(in thousands)	Total		Less than One Year		1-3 Years		3-5 Years		After 5 Years
Contractual Obligations:											Contractual Obligations:
Long term debt and interest	$	106,469	$	7,372	$	29,935	$	69,162	$	—	Long term debt and interest	$	21,008	$	504	$	20,504	$	—	$	—
Operating leases (1)	9,717		2,214		4,951		2,552		—		Operating leases (1)	10,724		2,923		5,032		2,598		171
Purchase obligations (1)	49,762		8,443		26,597		9,189		5,533
Acquisition-related future obligations (2)	13,058		9,750		3,308		—		—
Purchase obligations (2)											Purchase obligations (2)	4,697		4,697		—		—		—
Acquisition-related future obligations (3)											Acquisition-related future obligations (3)	20,000		—		15,000		5,000		—

Royalties	44,000		2,500		10,000		10,500		21,000		Royalties	47,700		3,800		7,600		7,600		28,700
Other	834		167		500		167		—
Litigation matters											Litigation matters	975		975		—		—		—
	$	223,840	$	30,446	$	75,291	$	91,570	$	26,533
												$	105,104	$	12,899	$	48,136	$	15,198	$	28,871

(1) Operating leases include short-term leases that are not recorded on our consolidated balance sheet under ASU No. 2016-02.


~~(1)~~	The non-cancelable operating leases and inventory purchase obligations are not reflected on our consolidated balance sheets under accounting principles generally accepted in the United States of America.

~~(2)~~

Acquisition-related future obligations include scheduled minimum payments and contingent payments based upon achievement of performance measures or milestones such as sales or profitability targets, the achievement of research and development objectives or the receipt of regulatory approvals. The amount represents the undiscounted value of contingent liabilities recorded on the balance sheet. Timing of payments are as contractually scheduled, or where contingent, the Company's best estimate of payment timing.

(2) The inventory purchase obligations are not reflected on our consolidated balance sheets under accounting principles generally accepted in the United States of America.

(3) Acquisition-related future obligations include scheduled minimum payments and contingent payments based upon achievement of performance measures or milestones such as sales or profitability targets, the achievement of research and development objectives or the receipt of regulatory approvals. The amount represents the undiscounted value of contingent liabilities recorded on the balance sheet. Timing of payments are as contractually scheduled, or where contingent, the Company's best estimate of payment timing.

Results of Operations for the years ended May 31, 2020 and 2019

For management discussion and analysis of our 2020 financial results and liquidity compared with 2019, see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended May 31, 2020 filed on August 10, 2020.

Recent Accounting Pronouncements

Refer to Note 1 of the Notes to the Consolidated Financial Statements for Recently ~~issued~~Issued Accounting Pronouncements.



~~Item 7A.~~	~~Quantitative and Qualitative Disclosures about Market Risk.~~



~~Item 8.~~	~~Financial Statements and Supplementary Data.~~

Item 8. Financial Statements and Supplementary Data.

Financial statements and supplementary data required by Part II, Item 8 are included in Part IV of this report asand indexed asunder Item 15 (a) (1) and (2) of this report, and are incorporated by reference into this Item 8.



~~Item 9.~~	~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.~~

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.



~~Item 9A.~~	~~Controls and Procedures.~~

Item 9A. Controls and Procedures.

Evaluation of disclosure controls and procedures

As of the end of the period covered by this report, our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended. Based on

that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our Company. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our ~~board~~Board of ~~directors,~~Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States and includes those policies and procedures that:

•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of our management and members of our ~~board~~Board of ~~directors;~~Directors; and

•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management has assessed the effectiveness of our internal control over financial reporting as of May 31, ~~2017.~~2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of May 31, ~~2017.~~

2021.

The effectiveness of our internal control over financial reporting as of May 31, ~~2017~~2021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting for the fiscal quarter ended May 31, ~~2017 other than items described below related to our remediation actions,~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~Remediation of Prior Material Weakness in Internal Control Over Financial Reporting~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~Management of the Company previously identified and disclosed the following material weakness that existed as of May 31, 2016.~~

We did not design and maintain effective internal controls over the accounting for the annual goodwill impairment test. Specifically, we did not design and maintain effective controls to review in sufficient detail the cash flow projections and significant valuation model assumptions used in the goodwill impairment test as of December 31, 2015.

~~During 2017, management of the Company was actively engaged in remediation efforts to address the material weakness noted above. The following actions were taken:~~

The design of the annual goodwill impairment test control was updated to ensure the sufficiency of the control procedures. Specifically, if the discounted cash flow method is required for performing the goodwill impairment test, detailed procedures over the cash flow projections and valuation model assumptions are appropriately detailed to instruct the operating effectiveness of the control.

~~Sufficient documentation was prepared, reviewed and retained over the goodwill impairment test performed as of December 31, 2016.~~

Based upon the significant actions taken and the testing and evaluation of the effectiveness of our internal control over financial reporting, management of the Company has concluded the material weakness in the Company’s controls no longer existed as of May 31, 2017.

~~Report of Independent Registered Public Accounting Firm~~

To the Shareholders and the Board of Directors ~~and Stockholders~~ of

AngioDynamics, Inc.

Latham, New York

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of AngioDynamics, Inc. and subsidiaries (the ~~"Company"~~“Company”) as of May 31, ~~2017,~~2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway ~~Commission.~~ Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended May 31, 2021, of the Company and our report dated July 27, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The ~~Company's~~Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the ~~Company's~~Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A ~~company's~~company’s internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A ~~company's~~company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the ~~company's~~company’s assets that could have a material effect on the financial statements.

Because of ~~the~~its inherent limitations, of internal control over financial reporting ~~including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud~~ may not ~~be prevented~~prevent or ~~detected on a timely basis.~~detect misstatements. Also, projections of any evaluation of ~~the~~ effectiveness ~~of the internal control over financial reporting~~ to future periods are subject to the risk that ~~the~~ controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2017, based on the criteria established in~~ ~~Internal Control - Integrated Framework (2013)~~ ~~issued by the Committee of Sponsoring Organizations of the Treadway Commission.~~

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended May 31, 2017 of the Company and our report dated ~~August 4, 2017~~ ~~expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.~~

/s/ Deloitte & Touche LLP

Boston, Massachusetts

~~August 4, 2017~~

July 27, 2021



~~Item 9B.~~	~~Other Information.~~

Item 9B. Other Information.

None.

Part III

Certain information required by Part III is omitted from this Annual Report on Form 10-K because we will file a definitive proxy statement within 120 days after the end of our fiscal year end pursuant to Regulation 14A (the “Proxy Statement”) for our ~~annual meeting~~Annual Meeting of Stockholders, currently scheduled for October ~~2017.~~2021. The information included in the Proxy Statement under the respective headings noted below is incorporated herein by reference.



~~Item 10.~~	~~Directors, Executive Officers and Corporate Governance.~~

Item 10. Directors, Executive Officers and Corporate Governance.

Information required in this Annual Report on Form 10-K with respect to Executive Officers is contained in the discussion titled “Executive Officers of the Company” in Part I of this Annual Report on Form 10-K. The balance of the information required by Item 10 is incorporated herein by reference to our Proxy Statement under the heading “Election of Directors”.



~~Item 11.~~	~~Executive Compensation.~~

Item 11. Executive Compensation.

The information required by Item 11 is incorporated herein by reference to our Proxy Statement under the heading “Executive Compensation”.



~~Item 12.~~	~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.~~

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this caption is incorporated herein by reference to our Proxy Statement under the heading “Ownership of Securities”.



~~Item 13.~~	~~Certain Relationships and Related Transactions, and Director Independence.~~

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this caption is incorporated herein by reference to our Proxy Statement under the heading “Certain Relationships and Related Transactions”.



~~Item 14.~~	~~Principal Accounting Fees and Services.~~

Item 14. Principal Accounting Fees and Services.

The information required by this caption is incorporated herein by reference to our Proxy Statement under the headings “Audit Matters—Principal Accounting Fees and Services and—Policy on Audit Committee Pre-approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm”.

Part IV



~~Item 15.~~	~~Exhibits, Financial Statement Schedules.~~

Item 15. Exhibits, Financial Statement Schedules.

(a)(1)Financial Statements

The following consolidated financial statements and supplementary data of Registrant and its subsidiaries required by Part II, Item 8, are included in Part IV of this report:

(2)Financial Statement Schedules

The following consolidated financial statement schedule is included in Part IV of this report:



Schedule II—Valuation and qualifying accounts			9384

All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto.



(b) Exhibits			9585

~~Report of Independent Registered Public Accounting Firm~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors ~~and Stockholders~~ of

AngioDynamics, Inc.

Latham, New York

Opinion on the Financial Statements

We have audited the accompanying consolidated balance ~~sheet~~sheets of AngioDynamics, Inc. and subsidiaries (the "Company") as of May 31, ~~2017,~~2021 and 2020, the related consolidated ~~statement~~statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the ~~year~~three years in the period ended May 31, ~~2017. Our audit also included~~2021, and the ~~financial statement~~related notes and the schedule ~~for the year ended May 31, 2017~~ listed in the Index at Item ~~15. These consolidated~~15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial ~~statement schedule~~reporting as of May 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 27, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on ~~these consolidated~~the Company’s financial statements ~~and financial statement schedule~~ based on our ~~audit.~~

audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our ~~audit~~audits in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material ~~misstatement. An audit includes~~misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence ~~supporting~~regarding the amounts and disclosures in the financial statements. ~~An audit~~Our audits also ~~includes assessing~~included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall ~~financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.~~

~~In our opinion, such consolidated financial statements present fairly, in all material respects,~~presentation of the financial position of AngioDynamics, Inc. and subsidiaries as of May 31, 2017, and the results of their operations and their cash flows for the year ended May 31, 2017, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of May 31, 2017, based on the criteria established in ~~Internal Control - Integrated Framework (2013)~~ ~~issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated~~ ~~August 4, 2017~~ ~~expressed an unqualified opinion on the Company's internal control over financial reporting.~~

~~/s/ Deloitte & Touche LLP~~

~~Boston, Massachusetts~~

~~August 4, 2017~~

~~Report of Independent Registered Public Accounting Firm~~

To~~the Board of Directors and Stockholders of AngioDynamics, Inc.~~

In our opinion, the consolidated balance sheet as of May 31, 2016 and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity, and of cash flows for each of the two years in the period ended May 31, 2016 present fairly, in all material respects, the financial position of AngioDynamics, Inc. and its subsidiaries (the Company) as of May 31, 2016 and the results of their operations and their cash flows for each of the two years in the period ended May 31, 2016, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) for each of the two years in the period ended May 31, 2016 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventories – Excess Quantities and Obsolescence — Refer to Notes 1 & 6

Critical Audit Matter Description

The Company evaluates inventory each reporting period for excess quantities and obsolescence, establishing reserves when necessary based upon historical experience, assessment of economic conditions, and expected demand. Once recorded, these reserves are considered permanent adjustments to the carrying value of inventory. As of May 31, 2021, the Company has inventories of $48.6 million, net of excess quantities and obsolescence reserves.

We identified the reserve for excess quantities and obsolete inventory as a critical audit matter because of the significant estimates and assumptions management makes to quantify and to record the reserve, including the determination of expected demand. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the methodology and the reasonableness of assumptions including expected demand.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the reserve for excess quantities and obsolete inventory including management’s estimate of expected demand, included the following, among others:

•We tested the effectiveness of controls over inventory, including those over the estimation of reserves for excess quantities and obsolescence.

•We evaluated the reasonableness of the Company's excess and obsolete inventory policy, considering historical experience and the underlying assumptions.

•We tested the calculation of the excess and obsolete reserve pursuant to the Company's policy, on a sample basis, including the completeness and accuracy of the data used in the calculation.

•We performed a retrospective review by comparing management’s prior year projections of future demand by product, with actual product sales in the current year to identify potential bias in the inventory reserve.

•We held discussions with senior financial and operating management to determine whether any strategic, regulatory, or operational changes in the business were consistent with the projections of future demand that were utilized as the basis for the reserves recorded.

•We considered the existence of contradictory evidence based on consideration of internal communication to management and the board of directors, Company press releases, and analysts' reports, as well as any changes within the business.

/s/ ~~PricewaterhouseCoopers~~Deloitte & Touche LLP

Boston, Massachusetts

~~August 1, 2016~~July 27, 2021

We have served as the Company’s auditor since 2016.

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)


	Year ended May 31,
	2021		2020		2019
Net sales	$	291,010	$	264,157	$	270,634
Cost of sales (exclusive of intangible amortization)	134,222		113,885		114,634
Gross profit	156,788		150,272		156,000
Operating expenses
Research and development	36,390		29,682		28,258
Sales and marketing	81,306		78,634		76,829
General and administrative	35,918		37,872		34,902
Amortization of intangibles	18,136		18,121		17,056
Goodwill impairment	0		158,578		0
Change in fair value of contingent consideration	89		(11,531)		(6,776)
Acquisition, restructuring and other items, net	20,232		6,014		15,127

Total operating expenses	192,071		317,370		165,396
Operating loss	(35,283)		(167,098)		(9,396)
Other expenses

Interest expense, net	(861)		(907)		(5,099)
Other income (expense), net	92		(130)		(207)
Total other expenses, net	(769)		(1,037)		(5,306)
Loss from continuing operations before income tax benefit	(36,052)		(168,135)		(14,702)
Income tax benefit	(4,504)		(1,348)		(3,556)
Net loss from continuing operations	(31,548)		(166,787)		(11,146)
Income from discontinued operations, net of income tax	0		0		72,486
Net income (loss)	$	(31,548)	$	(166,787)	$	61,340

Loss per share - continuing operations
Basic	$	(0.82)	$	(4.39)	$	(0.30)
Diluted	$	(0.82)	$	(4.39)	$	(0.30)
Income per share - discontinued operations
Basic	$	0	$	0	$	1.93
Diluted	$	0	$	0	$	1.93
Income (loss) per share
Basic	$	(0.82)	$	(4.39)	$	1.64
Diluted	$	(0.82)	$	(4.39)	$	1.64
Weighted average shares outstanding
Basic	38,342		37,961		37,485
Diluted	38,342		37,961		37,485

Year ended May 31,
2017 2016 2015
Net sales $ 349,643
$ 353,890
$ 356,534
Cost of sales (exclusive of intangible amortization) 173,474
179,574
180,738
Gross profit 176,169
174,316
175,796
Operating expenses
Research and development 25,269
25,053
26,594
Sales and marketing 78,819
83,743
82,351
General and administrative 31,406
30,583
30,031
Amortization of intangibles 17,296
17,964
17,966
Change in fair value of contingent consideration (15,261 ) 948
(8,096 )
Acquisition, restructuring and other items, net 27,510
12,591
26,257
Medical device excise tax (1,837 ) 2,416
4,142
Total operating expenses 163,202
173,298
179,245
Operating income (loss) 12,967
1,018
(3,449 )
Other (expenses) income
Interest expense, net (2,839 ) (3,385 ) (3,193 )
Other expense (281 ) (886 ) (1,489 )
Total other expenses, net (3,120 ) (4,271 ) (4,682 )
Income (loss) before income tax expense (benefit) 9,847
(3,253 ) (8,131 )
Income tax expense (benefit) 4,839
40,337
(4,743 )
Net income (loss) $ 5,008
$ (43,590 ) $ (3,388 )
Earnings (loss) per share
Basic $ 0.14
$ (1.21 ) $ (0.09 )
Diluted $ 0.14
$ (1.21 ) $ (0.09 )
Weighted average shares outstanding
Basic 36,617
36,161
35,683
Diluted 36,959
36,161
35,683

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

6051

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)


	Year ended May 31,
	2021		2020		2019
Net income (loss)	$	(31,548)	$	(166,787)	$	61,340
Other comprehensive income (loss), before tax:
Unrealized gain on marketable securities	0		0		33

Reclassification adjustment for gains included in net income	0		0		(116)
Foreign currency translation gain (loss)	4,494		11		(317)
Other comprehensive income (loss), before tax	4,494		11		(400)
Income tax benefit (expense) related to items of other comprehensive income (loss)	0		0		0
Other comprehensive income (loss), net of tax	4,494		11		(400)
Total comprehensive income (loss), net of tax	$	(27,054)	$	(166,776)	$	60,940

Year ended May 31,
2017 2016 2015
Net income (loss) $ 5,008
$ (43,590 ) $ (3,388 )
Other comprehensive income (loss), before tax:
Unrealized gain (loss) on marketable securities 12
(11 ) (120 )
Unrealized gain (loss) on interest rate swap —
257
296
Foreign currency translation gain (loss) (545 ) (112 ) (264 )
Other comprehensive income (loss), before tax (533 ) 134
(88 )
Income tax benefit (expense) related to items of other comprehensive income (loss) —
(92 ) (64 )
Other comprehensive income (loss), net of tax (533 ) 42
(152 )
Total comprehensive income (loss), net of tax $ 4,475
$ (43,548 ) $ (3,540 )

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

6152

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	May 31, 2021		May 31, 2020
Assets
Current Assets
Cash and cash equivalents	$	48,161	$	54,435


Accounts receivable, net of allowances of $1,919 and $2,150, respectively	35,405		31,263
Inventories	48,614		59,905

Prepaid expenses and other	8,699		7,310

Total current assets	140,879		152,913
Property, plant and equipment, net	37,073		28,312
Intangible assets, net	168,977		197,136
Goodwill	201,316		200,515
Other assets	13,193		15,338



Total Assets	$	561,438	$	594,214
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	19,630	$	19,096
Accrued liabilities	35,459		29,380


Current portion of contingent consideration	0		836
Other current liabilities	2,495		2,133

Total current liabilities	57,584		51,445

Long-term debt	20,000		40,000
Deferred income taxes	19,955		24,057
Contingent consideration, net of current portion	15,741		14,811
Other long-term liabilities	8,701		9,029

Total Liabilities	121,981		139,342
Commitments and Contingencies (Note 17)	0		0
Stockholders’ Equity
Preferred stock, par value $0.01 per share, 5,000,000 shares authorized; 0 shares issued and outstanding	0		0
Common stock, par value $0.01 per share, 75,000,000 shares authorized; 38,920,951 and 38,448,536 shares issued and 38,550,951 and 38,078,536 shares outstanding at May 31, 2021 and 2020, respectively	377		374
Additional paid-in capital	573,507		561,871
Accumulated deficit	(131,866)		(100,318)
Treasury stock, 370,000 shares, at cost at May 31, 2021 and 2020, respectively	(5,714)		(5,714)
Accumulated other comprehensive loss	3,153		(1,341)
Total Stockholders' Equity	439,457		454,872
Total Liabilities and Stockholders' Equity	$	561,438	$	594,214

May 31,
2017 May 31,
2016
Assets
Current Assets
Cash and cash equivalents $ 47,544
$ 32,333
Marketable securities, at fair value 1,215
1,653
Accounts receivable, net of allowances of $2,945 and $4,372, respectively 44,523
52,867
Inventories 54,506
55,370
Prepaid income taxes 336
788
Prepaid expenses and other 5,790
3,243
Total current assets 153,914
146,254
Property, plant and equipment, net 45,234
48,284
Other assets 1,886
3,827
Intangible assets, net 145,675
166,577
Goodwill 361,252
361,252
Total Assets $ 707,961
$ 726,194
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 18,087
$ 15,616
Accrued liabilities 38,804
21,942
Current portion of long-term debt 5,000
16,250
Current portion of contingent consideration 9,625
12,919
Total current liabilities 71,516
66,727
Long-term debt, net of current portion 91,320
104,291
Deferred income taxes 26,112
21,684
Contingent consideration, net of current portion 3,136
25,356
Other long-term liabilities 850
908
Total Liabilities 192,934
218,966
Commitments and Contingencies (Note 15)

Stockholders’ Equity
Preferred stock, par value $.01 per share, 5,000,000 shares authorized; no shares issued and outstanding —
—
Common stock, par value $.01 per share, 75,000,000 shares authorized; 37,210,091 and 36,420,403 shares issued and 36,840,091 and 36,278,098 shares outstanding at May 31, 2017 and 2016, respectively 367
363
Additional paid-in capital 532,705
525,775
Accumulated deficit (11,007 ) (16,015 )
Treasury stock, 370,000 and 142,305 shares, at cost at May 31, 2017 and 2016, respectively (5,714 ) (2,104 )
Accumulated other comprehensive loss (1,324 ) (791 )
Total Stockholders' Equity 515,027
507,228
Total Liabilities and Stockholders' Equity $ 707,961
$ 726,194

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

6253

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

~~Year ended May 31, 2017, 2016 and 2015~~

(in thousands, except share data)


	Common Stock			Additional paid in capital		Retained earnings (accumulated deficit)		Accumulated other comprehensive income (loss)		Treasury Stock			Total
	Shares	Amount								Shares	Amount
Balance at May 31, 2018	37,594,493	$	370	$	543,762	$	5,129	$	(952)	(370,000)	$	(5,714)	$	542,595
Net income						61,340							61,340
Exercise of stock options	134,253	1		1,525									1,526
Issuance/cancellation of restricted stock units	177,538			(667)									(667)
Issuance of performance share units	5,235												0
Purchase of common stock under Employee Stock Purchase Plan	72,863	1		1,171									1,172
Stock-based compensation				9,249									9,249
Other comprehensive loss, net of tax								(400)					(400)
Balance at May 31, 2019	37,984,382	$	372	$	555,040	$	66,469	$	(1,352)	(370,000)	$	(5,714)	$	614,815
Net loss						(166,787)							(166,787)
Exercise of stock options	50,636	1		560									561
Issuance/cancellation of restricted stock units	312,951			(2,537)									(2,537)

Purchase of common stock under Employee Stock Purchase Plan	100,567	1		1,216									1,217
Stock-based compensation				7,592									7,592


Other comprehensive income, net of tax								11					11
Balance at May 31, 2020	38,448,536	$	374	$	561,871	$	(100,318)	$	(1,341)	(370,000)	$	(5,714)	$	454,872
Net loss						(31,548)							(31,548)
Exercise of stock options	123,536	1		1,929									1,930
Issuance/cancellation of restricted stock units	184,685			(223)									(223)

Purchase of common stock under Employee Stock Purchase Plan	164,194	2		1,305									1,307
Stock-based compensation				8,625									8,625
Other comprehensive income, net of tax								4,494					4,494
Balance at May 31, 2021	38,920,951	$	377	$	573,507	$	(131,866)	$	3,153	(370,000)	$	(5,714)	$	439,457

Common Stock
Additional
paid in
capital

Retained
earnings (accumulated deficit)

Accumulated
other
comprehensive
loss
Treasury Stock Total
Shares Amount Shares Amount
Balance at May 31, 2014 35,442,004
$ 353
$ 508,354
$ 30,963
$ (681 ) (142,305 ) $ (2,104 ) $ 536,885
Net loss (3,388 ) (3,388 )
Exercise of stock options 341,446
3
4,335
4,338
Issuance/cancellation of restricted stock units 141,274
2
—
2
Purchase of common stock under Employee Stock Purchase Plan 119,001
2
1,414
1,416
Stock-based compensation 5,998
5,998
Other comprehensive income (loss), net of tax (152 ) (152 )
Balance at May 31, 2015 36,043,725
$ 360
$ 520,101
$ 27,575
$ (833 ) (142,305 ) $ (2,104 ) $ 545,099
Net loss (43,590 ) (43,590 )
Exercise of stock options 101,040
1
1,296
1,297
Issuance/cancellation of restricted stock units 137,681
1
(332 ) (331 )
Purchase of common stock under Employee Stock Purchase Plan 137,957
1
1,470
1,471
Stock-based compensation 3,240
3,240
Other comprehensive income (loss), net of tax 42
42
Balance at May 31, 2016 36,420,403
$ 363
$ 525,775
$ (16,015 ) $ (791 ) (142,305 ) $ (2,104 ) $ 507,228
Net income 5,008
5,008
Exercise of stock options 751,062
7
9,858
9,865
Issuance/cancellation of restricted stock units 158,341
1
(587 ) (586 )
Issuance of performance share units 23,405
—
—
—
Purchase of common stock under Employee Stock Purchase Plan 129,185
1
1,418
1,419
Stock-based compensation 6,183
6,183
Treasury stock retirement (642,305 ) (2 ) (9,942 ) 642,305
9,944
—
Common stock repurchased 370,000
(3 ) (870,000 ) (13,554 ) (13,557 )
Other comprehensive income (loss), net of tax (533 ) (533 )
Balance at May 31, 2017 37,210,091
$ 367
$ 532,705
$ (11,007 ) $ (1,324 ) (370,000 ) $ (5,714 ) $ 515,027

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

6354

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Year ended May 31,										Year ended May 31,
	2017			2016			2015				2021		2020		2019
Cash flows from operating activities:										Cash flows from operating activities:
Net income (loss)	$	5,008		$	(43,590	)	$	(3,388	)	Net income (loss)	$	(31,548)	$	(166,787)	$	61,340
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:										Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	24,811			28,115			29,861			Depreciation and amortization	25,916		23,805		25,880
Non-cash lease expense										Non-cash lease expense	2,456		2,070		0

Goodwill impairment										Goodwill impairment	0		158,578		0
Stock based compensation										Stock based compensation	8,625		7,592		9,249
Gain on disposition										Gain on disposition	0		0		(46,592)
Transaction costs for disposition										Transaction costs for disposition	0		0		(4,030)
Change in fair value of contingent consideration										Change in fair value of contingent consideration	89		(11,531)		(6,776)
Deferred income tax provision	4,428			39,983			(5,123		)	Deferred income tax provision	(4,805)		(1,568)		(2,655)
Stock based compensation	6,183			3,240			5,998
Changes in accounts receivable allowances	(313		)	2,377			1,448			Changes in accounts receivable allowances	207		429		(202)
Write-off of other assets	2,685			—			—
Change in fair value of contingent consideration	(15,261		)	948			(8,096		)
Loss on impairment/disposal of long-term assets	3,930			806			9,381
Loss on impairment of intangible assets	—			384			6,400
Asset impairments and disposals										Asset impairments and disposals	14,228		1,321		2,495

Other	(586		)	90			181			Other	(147)		86		(5)
Changes in operating assets and liabilities, net of effects of acquisitions:
Changes in operating assets and liabilities:										Changes in operating assets and liabilities:
Accounts receivable	8,479			3,131			2,095			Accounts receivable	(4,162)		11,918		(3,177)
Inventories	687			11,976			(5,648		)	Inventories	11,539		(18,845)		(1,428)
Prepaid expenses and other	(3,520		)	712			(1,170		)	Prepaid expenses and other	(3,181)		(6,155)		(1,871)
Accounts payable, accrued liabilities and other long-term liabilities	19,214			(2,956		)	(6,254		)
Net cash provided by operating activities	55,745			45,216			25,685
Accounts payable, accrued and other liabilities										Accounts payable, accrued and other liabilities	4,876		(15,467)		5,212
Net cash provided by (used in) operating activities										Net cash provided by (used in) operating activities	24,093		(14,554)		37,440
Cash flows from investing activities:										Cash flows from investing activities:
Additions to property, plant and equipment	(3,001		)	(2,326		)	(11,383		)	Additions to property, plant and equipment	(5,187)		(7,235)		(3,118)
Acquisition of intangible assets	—			(3,268		)	(1,353		)
Acquisition of warrants	—			(2,000		)	—
Proceeds from sale or maturity of marketable securities	450			25			—
Net cash used in investing activities	(2,551		)	(7,569		)	(12,736		)
Additions to placement and evaluation units										Additions to placement and evaluation units	(8,524)		0		0
Proceeds from disposition of discontinued operations										Proceeds from disposition of discontinued operations	0		0		169,242
Cash paid for acquisitions										Cash paid for acquisitions	0		(55,760)		(84,920)
Acquisition of intangibles										Acquisition of intangibles	0		(350)		0

Proceeds from sale of marketable securities										Proceeds from sale of marketable securities	0		0		1,350
Net cash provided by (used in) investing activities										Net cash provided by (used in) investing activities	(13,711)		(63,345)		82,554
Cash flows from financing activities:										Cash flows from financing activities:

Repayment of long-term debt	(140,381		)	(16,250		)	(20,000		)	Repayment of long-term debt	(20,000)		(132,500)		(15,000)
Proceeds from issuance of and borrowings on long-term debt	116,471			—			15,000
Proceeds from exercise of stock options and ESPP	10,698			2,437			5,757
Proceeds from borrowings on long-term debt										Proceeds from borrowings on long-term debt	0		40,000		55,000
Deferred financing costs on long-term debt										Deferred financing costs on long-term debt	0		(775)		0
Payment of acquisition related contingent consideration	(9,850		)	(9,850		)	(11,222		)	Payment of acquisition related contingent consideration	0		(1,208)		(8,100)
Deferred financing costs on long-term debt	(1,364		)	—			—
Repurchase of common stock	(13,557		)	—			—
Net cash used in financing activities	(37,983		)	(23,663		)	(10,465		)

Proceeds (outlays) from exercise of stock options and employee stock purchase plan										Proceeds (outlays) from exercise of stock options and employee stock purchase plan	3,014		(759)		2,031

Net cash provided by (used in) financing activities										Net cash provided by (used in) financing activities	(16,986)		(95,242)		33,931
Effect of exchange rate changes on cash and cash equivalents	—			(42		)	(198		)	Effect of exchange rate changes on cash and cash equivalents	330		(65)		(380)
Increase in cash and cash equivalents	15,211			13,942			2,286
(Decrease) increase in cash and cash equivalents										(Decrease) increase in cash and cash equivalents	(6,274)		(173,206)		153,545
Cash and cash equivalents at beginning of year	32,333			18,391			16,105			Cash and cash equivalents at beginning of year	54,435		227,641		74,096
Cash and cash equivalents at end of year	$	47,544		$	32,333		$	18,391		Cash and cash equivalents at end of year	$	48,161	$	54,435	$	227,641

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

6455

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

(in thousands)

Year ended May 31,
2017 2016 2015
Supplemental disclosures of cash flow information:
Supplemental disclosure of non-cash investing and financing activities:
Contractual obligations for purchase of fixed assets $ 26
$ 75
$ 140
Contractual obligations for tax basis adjustment —
—
779
Cash paid (received) during the year for:
Interest $ 2,969
$ 3,063
$ 3,151
Income taxes (102 ) 332
699


	Year ended May 31,
	2021		2020		2019
Supplemental disclosure of non-cash investing and financing activities:
Increase (decrease) in accounts payable for purchases of fixed assets	$	(139)	$	224	$	(114)
Fair value of contingent consideration for acquisitions	0		14,900		25,100
Fair value of acquisition consideration included in accrued expenses	0		0		4,650
Cash paid during the year for:
Interest	$	731	$	413	$	5,115
Income taxes	313		682		426

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

6556

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION, BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Description of Business

The consolidated financial statements include the accounts of AngioDynamics, Inc. and its wholly owned subsidiaries, (collectively, "us", "we", or the “Company”).

The Company designs, manufactures and sells 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 in oncology and surgical settings. The devices are generally used in minimally invasive, image-guided procedures. Most of the Company's products are intended to be used once and then discarded, or they may be temporarily implanted for short- or long-term use.

On May 31, 2019, the Company completed the sale of the Fluid Management business and all of the assets used primarily in connection with the Fluid Management business (Note 3). As the disposal of this business represents a strategic shift with a major effect on the Company's operations, for all periods presented in the Consolidated Statements of Operations and Comprehensive Income, all sales, costs, expenses, gains and income taxes attributable to Fluid Management have been reported under the captions, “Income from Discontinued Operations, Net of Income Tax.” Cash flows used in or provided by Fluid Management have been reported in the Consolidated Statements of Cash Flows under operating and investing activities.

Accounting Principles

The consolidated financial statements and accompanying notes have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP").

Principles of Consolidation

The consolidated financial statements include the accounts of AngioDynamics and itits subsidiaries (all of which are wholly owned). All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

~~Reclassifications~~

Certain reclassifications have been made to conform the prior year consolidated financial statements and notes to the current year presentation. These include a reclassification of bad debt expense from Sales and Marketing to General and Administrative. The amount of the reclassification related to fiscal year 2016 is $1.0 million and fiscal year 2015 is $0.9 million. The adoption of ASC Update No. 2015-03 resulted in a reclassification of $0.9 million from other assets to long-term debt in the Company's consolidated balance sheet as of May 31, 2016.

Cash and Cash Equivalents

The Company considers all unrestricted highly liquid investments with an initial maturity of less than three months at the date of purchase to be cash equivalents. The Company maintains cash and cash equivalent balances with financial institutions in the United States in excess of amounts insured by the Federal Deposit Insurance Corporation.

~~Marketable Securities~~

Marketable securities, which include auction rate investments, are classified as “available-for-sale securities” and are reported at fair value, with unrealized gains and losses excluded from operations and reported as a component of accumulated other comprehensive income (loss), net of the related tax effects, in stockholders’ equity. Cost is determined using the specific identification method. The Company holds investments in auction rate securities in order to generate higher than typical money market rate investment returns. Auction rate securities typically are high credit quality, generally achieved with municipal bond insurance. As of May 31, 2017 and 2016, the Company had $1.2 million and $1.7 million, respectively, in investments in two auction rate securities issued by New York state and local government authorities that failed auctions. The authorities are current in their interest payments on the securities.

Fair Value Instruments

The carrying amount of the Company's cash and cash equivalents, accounts receivable, accounts payable and long-term debt approximates fair value due to the short-term nature or market interest rates of these items. The Company bases the fair value of short-term investments on quoted market prices or other relevant information generated by market transactions involving identical or comparable assets. The Company measures and records derivative financial instruments at fair value. See Note 35 for further discussion of financial instruments that are carried at fair value on a recurring and nonrecurring basis.

Accounts Receivable

Accounts receivable, principally trade receivables, are generally due within 30 to 90 days and are stated at amounts due from customers, net of an allowance for estimated sales returns and doubtful accounts. The Company performs ongoing credit evaluations of customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness, as determined by a review of their current credit information. The Company continuously monitors aging reports, collections and payments from customers, and a provision for estimated credit losses is maintained based upon historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been within expectations

and the provisions established, the Company cannot guarantee that the same credit loss rates will be experienced in the future. The Company writes off accounts receivable when they are determined to be uncollectible.

Inventories

Inventories are stated at the lower of cost ~~(using~~or net realizable value based on the first-in, first-out ~~method)~~cost method and consist of raw materials, work in process and finished goods. The standard cost of finished goods and work-in-process inventory is composed of material, labor and manufacturing overhead, which approximates actual cost. In addition to stating inventory at the lower of cost or ~~market. Appropriate consideration is given to deterioration, obsolescence, expiring and other factors in evaluating~~ net realizable ~~value.~~value, we also evaluate inventory each reporting period for excess quantities and obsolescence, establishing reserves when necessary based upon historical experience, assessment of economic conditions and expected demand. Once recorded, these reserves are considered permanent adjustments to the carrying value of inventory An increase to inventory reserves results in a corresponding increase in cost of revenue. Inventories are written off against the reserve when they are physically disposed.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Placement and evaluation units represent capital equipment placed at customer locations under placement or evaluation agreements for which depreciation expense is included in cost of sales on the Consolidation Statements of Operations. Refer below for useful lives by category:



		Estimated useful lives
Building and building improvements		4 to 39 years
Computer software and equipment	3 to 5 years
Machinery and equipment		35 to 8 years
~~Computer software~~Placement and ~~equipment~~evaluation units		~~3 to 10~~5 years

The Company evaluates property, plant and equipment for impairment periodically to determine if changes in circumstances or the occurrence of events suggest the carrying value of the asset or asset group may not be recoverable. Expenditures for repairs and maintenance are charged to expense as incurred. Renewals and betterments are capitalized.

Goodwill and Intangible Assets

Intangible assets other than goodwill, indefinite lived intangible assets and ~~acquired~~ in process research and development ("IP R&D&D") are amortized over their estimated useful lives, which range between two ~~and~~ to eighteen years, on either a straight-line basis over the expected period of benefit or as ~~revenues are~~revenue is earned from the sales of the related ~~products.~~product. The Company periodically reviews the estimated useful lives of intangible assets and ~~review~~reviews such assets or asset groups for impairment whenever events or changes in circumstances indicate that the carrying value of the ~~asset~~assets may not be recoverable. Such conditions could include significant adverse changes in the business climate, current-period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group ~~is not recoverable.~~will be disposed of before the end of its useful life. When testing for impairment of definite-lived intangible assets held for use, the Company groups assets at the lowest level for which cash flows are separately identifiable. The Company ~~determines~~operates as a single asset group. If a triggering event is deemed to exist, the ~~fair value of the reporting unit based on the market valuation approach or the income approach.~~Company performs an undiscounted operating cash flow analysis to determine if an impairment exists. 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.

Acquired IP R&D has an indefinite life and is not amortized until completion of the development of the project, at which time the IP R&D becomes an amortizable asset. If the related project is not completed in a timely manner or the project is terminated or abandoned, the Company may have an impairment related to the IP R&D, calculated as the excess of the asset’s carrying value over its fair value.

The Company's policy defines IP R&D as the value assigned to those projects for which the related products have not received regulatory approval and have no alternative future use. Determining the portion of the purchase price allocated to IP R&D requires us to make significant estimates. The amount of the purchase price allocated to IP R&D is determined by estimating the future cash flows of each project or technology and discounting the net cash flows back to their present values.

The discount rate used is determined at the time of measurement in accordance with accepted valuation methods. These methodologies include consideration of the risk of the project not achieving commercial feasibility.

~~Goodwill is the amount by which the cost of acquired net assets in a business combination exceeded the fair value of net identifiable assets on the date of purchase.~~ Goodwill and other intangible assets that have indefinite useful lives are not amortized, but rather, are 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. Goodwill and intangible assets have been recorded at either incurred or allocated cost. Allocated costs were based on respective fair market values at the date of acquisition.

For goodwill, the impairment test requires a comparison of the estimated fair value of the reporting unit to which the goodwill is assigned to the carrying value of the assets and liabilities of that reporting unit. The determination of reporting units also requires management judgment. The Company considers whether a reporting unit exists within a reportable segment based on the availability of discrete financial information. The Company operates as a single operating segment with 1 reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, the carrying value ~~of the reporting unit’s goodwill~~ is reduced to its ~~implied~~ fair value through an adjustment to the goodwill balance, resulting in an impairment charge. The Company utilizes either discounted cash flow models or other valuation models, such as comparative transactions and market multiples, to determine the fair value of our reporting unit. The Company makes assumptions about future cash flows, future operating plans, discount rates, comparable companies, market multiples, purchase price premiums and other factors in those models. Different assumptions and judgment determinations could yield different conclusions that would result in an impairment charge to income in the period that such change or determination was made.

Contingent Consideration

The fair value of the liability for contingent consideration recorded on the acquisition date for a business combination is based on probability weighted estimated cash flow streams, discounted back to present value using a discount rate determined in accordance with accepted valuation methods and reflective of the risk associated with the estimated cash flow streams. The liability for contingent consideration is remeasured to fair value at each reporting period with changes recorded in earnings until the contingency is resolved.

Revenue Recognition

The Company recognizes revenue when the following four criteria has been met: (i) persuasive evidence that an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurredit transfers control of promised goods or services ~~have been rendered. The Company recognizes revenue, net of sales taxes assessed by any governmental authority, as products are shipped, based on shipping terms, and when title and risk of loss passes~~ to ~~customers. The Company negotiates shipping and credit terms on a customer-by-customer basis and products are shipped at~~its customers in an ~~agreed upon price. All product returns must be pre-approved by~~amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods 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. Charges~~services. See Note 4, “Revenue from Contracts with Customers” for ~~discounts, returns, rebates and other allowances are recognized as a deduction from revenue~~further discussion on ~~an accrual basis in the period in which the revenue is recorded. The accrual for product returns, discounts and other allowances is based on the Company’s history.~~revenue.

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

Research and Development

Research and development costs, including salaries, consulting fees, building costs, utilities and administrative expenses that are related to developing new products, enhancing existing products, validating new and enhanced products, managing clinical, regulatory and medical affairs are expensed as incurred.

Income Taxes

The Company calculates income tax expense for each jurisdiction in which it operates. This involves estimating actual current taxes due plus assessing temporary differences arising from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities. The Company periodically evaluates deferred tax assets, capital loss carryforwards and tax credit carryforwards to determine their recoverability based primarily on the Company's ability to generate future taxable income and capital gains. Where it is more-likely-than-not these will not be recovered, the Company estimates a valuation allowance and records a corresponding additional tax expense in the consolidated statement of operations.

The Company recognizes and measures uncertain tax positions taken or expected to be taken in a tax return utilizing a two-step approach. The Company first determines if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is that the Company measures the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement. The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes on the consolidated statements of operations.

~~Warranty Costs~~

~~The Company makes periodic provisions for expected warranty costs. Historically, warranty costs have been insignificant.~~

~~Stock Based~~Stock-Based Compensation

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant service period. The expense recognized includes the impact of forfeitures as they occur. The Company estimates the fair value of each stock-based award on the measurement date using either the current market price of the stock, the Black-Scholes option valuation model, or the Monte Carlo Simulation valuation model. The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of options or restricted stock units, a risk-free interest rate and dividend yield. The Company recognizes stock-based compensation expense related to options, restricted stock units and market based performance stock units on a straight-line basis over the service period of the award, which is generally 4 years for options and restricted stock units and 3 years for market based performance stock units.

Foreign Currency Translation

The functional currency ~~of most~~ of the Company's foreign subsidiaries is the local currency in which the subsidiary operates. For foreign operations where the local currency is considered to be the functional currency, the Company translates assets and liabilities into U.S. dollars at the exchange rate on the balance sheet date. The Company translates income and expense items at average rates of exchange prevailing during each period. The Company accumulates translation adjustments in accumulated other comprehensive loss, a component of stockholders’ equity.

For foreign operations where the U.S. dollar is considered to be the functional currency, the Company remeasures monetary assets and liabilities into U.S. dollars at the exchange rate on the balance sheet date and non-monetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. The Company translates income and expense items at average rates of exchange prevailing during each period. The Company recognizes remeasurement adjustments as a component of other expense in the consolidated statements of operations.

Transaction gains or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other expense in the statements of operations as incurred.

Derivative Financial Instruments

The Company is exposed to market risks, including changes in foreign currency and interest rates. The Company periodically enters into certain derivative financial instruments to hedge the underlying economic exposure.

Derivative instruments are presented in the consolidated financial statements at their fair value. Changes in the fair value of derivative financial instruments are either recognized periodically in income or in stockholders’ equity as a component of accumulated other comprehensive income (loss) depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value or cash flow hedge. Generally, the changes in the fair value of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair value of hedged items that relate to the hedged risks. Changes in the fair value of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in accumulated other comprehensive income (loss). There were no derivative instruments held by the Company as of May 31, 2021 and 2020.

Contingencies

The Company is subject to various legal proceedings that arise in the ordinary course of business, including patent infringement and product liability matters. The Company records accruals for contingencies when it is probable the liability has been incurred and the amount can be reasonably estimated. Legal fees are expensed as incurred. Insurance recoveries related to potential claims are recognized up to the amount of the recorded liability when coverage is confirmed and the estimated recoveries are probable of payment. These recoveries are not netted against the related liabilities for financial statement presentation.

Recently Issued Accounting Pronouncements ~~- Adopted~~

~~In April 2015, the Financial Accounting Standards Board ("FASB") issued ASC Update No. 2015-03,~~ ~~Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs~~. Update No. 2015-03 requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Update No. 2015-03 is effective for annual reporting periods beginning after December 15, 2015 and interim periods within those reporting periods. This was adopted in the first quarter of fiscal 2017 and the Company reclassified $0.9 million from other assets to long-term debt, net in the balance sheet as of May 31, 2016.

~~Recently Issued Accounting Pronouncements - Not Yet Applicable or Adopted~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (ASU 2014-09). ASU 2014-09~~The following table provides a ~~single, comprehensive~~description of recent accounting ~~model for revenues arising from contracts with customers~~pronouncements that ~~supersedes most of~~may have a material effect on the existing revenue recognition guidance, including industry-specific guidance. Under this model, revenue is recognized at an amount that an entity expects to be entitled to upon transferring control of goods or services to a customer, as opposed to when risks and rewards transfer to a customer under existing revenue recognition guidance. ASU 2014-09 is effective for the Company beginning in its fiscal year 2019, and may be applied retrospectively to all prior periods presented or through a cumulative adjustment to the opening retained earnings balance in the year of adoption. The Company is currently in the process of evaluating the impact of ASU 2014-09 on itsCompany's consolidated financial ~~statements.~~statements:

~~In July 2015, the FASB~~


Recently Issued Accounting Pronouncements - Adopted
Standard	Description	Date Adopted	Effect on the Consolidated Financial Statements


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


Recently Issued Accounting Pronouncements - Not Yet Applicable or Adopted

There are no new accounting pronouncements issued ~~ASC Update No. 2015-11,~~ ~~Inventory (Topic 330): Simplifying the Measurement of Inventory~~. Update No. 2015-11 more closely aligns the measurement of inventory in U.S. GAAP with the measurement of inventory in International Financial Reporting Standards by requiring companies using the first-in, first-out and average costs methods to measure inventory using the lower of cost and net realizable value, where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Update No. 2015-11 is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years. Update No. 2015-11 should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of Update No. 2015-11 is notthat are expected to have a material impact on our consolidated financial statements.

2. ACQUISITIONS

C3 Wave Tip Location Acquisition

On December 17, 2019, the Company acquired the C3 Wave tip location asset from Medical Components Inc.("MedComp") for an aggregate purchase price of $10.0 million with $5.0 million of potential future contingent consideration related to technical milestones. This acquisition filled a gap in the Vascular Access portfolio and supports the Company's strategic plan. The Company accounted for this acquisition as an asset purchase. The Company recorded the amount paid at closing as inventory of $0.6 million and intangible assets of a trademark of $0.9 million and product technology of $8.5 million. The intangible assets will be amortized over 15 years. The contingent consideration is comprised of technical milestones and will be accounted for when the contingency is resolved or becomes probable and reasonably estimable.

Eximo Acquisition

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

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

The Company has not disclosed the amount of revenue and earnings for sales of Eximo products since acquisition, nor proforma information, because these amounts are not significant to the Company's financial ~~position or results of operations.~~

~~In February 2016,~~statements. Acquisition-related costs associated with the ~~FASB issued ASU 2016-02,~~ ~~Leases (Topic 842). ASU 2016-02 increases transparency~~Eximo acquisition, which are included in "acquisition, restructuring and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. For leases with a term or twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and early application is permitted. The Company is currentlyother items, net" in the ~~process~~accompanying Consolidated Statements of ~~evaluating the impact of ASU 2016-02 on its consolidated financial statements.~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Based Compensation (Topic 718: Improvements to Employee Share-Based Payment Accounting)~~. ASU 2016-09 simplifies and improves various aspects of ASC 718 for share-based payments, including income tax items and the classification of these items on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 31, 2016 and early application is permitted. The Company is currently in the process of evaluating the impact of ASU 2016-09 on its consolidated financial statements.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15)~~. ASU 2016-15 identifies how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows under Topic 230. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. ASU 2016-15 should be applied retrospectively and early adoption is permitted, including adoption in an interim period. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350), which simplifies the subsequent measurement of goodwill by eliminating steps from the goodwill impairment test. ASU 2017-04 should be adopted for annual or interim goodwill impairment tests~~Operations, were approximately $0.6 million in fiscal ~~years beginning after December 15, 2019. ASU 2017-04 should be applied prospectively and early adoptions is permitted, including adoption in an interim period.~~year 2020. The ~~Company is currently evaluating~~following table summarizes the ~~impact of ASU 2017-04 on its consolidated financial statements.~~final aggregate purchase price allocated to the net assets acquired:

~~2. OTHER ASSETS~~

In 2015, the Company filed an 8-K stating that it executed a non-binding letter of intent to enter into a strategic relationship with privately-held EmboMedics Inc., which develops injectable and resorbable embolic microspheres.


(in thousands)	Final allocation
Accounts receivable	$	50
Inventory	150
Prepaid and other current assets	54
Long-term deposits	51
Property, plant and equipment	397
Intangible assets:
Product technology	60,300
Goodwill	11,427
Total assets acquired	$	72,429
Liabilities assumed
Accounts payable	$	84
Other current liabilities	615
Deferred tax liabilities	11,070
Total liabilities assumed	$	11,769
Net assets acquired	$	60,660

The Company made an initial $2.0 million purchase of non-transferable warrants in a subsidiary of EmboMedics which become exercisable upon a change of control of EmboMedics. The Company did not have significant influence, or controlfinalized the allocation of the ~~subsidiary. This initial investment was recorded at cost~~purchase price to the assets acquired and liabilities assumed in the ~~Company reviewed for impairment at each balance sheet date.~~

~~In the second~~fourth quarter of fiscal year ~~2017,~~2020.

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

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

RadiaDyne Acquisition

On September 21, 2018, the Company acquired RadiaDyne, a privately held medical diagnostic and device company that designs and develops patient dose monitoring technology to improve cancer treatment outcomes. The ~~termination~~aggregate purchase price of $75.0 million included an upfront payment of $47.9 million, contingent consideration with an estimated fair value of $22.3 million, an indemnification holdback of $4.6 million and a purchase price holdback of $0.2 million. The fair value of contingent consideration of $22.3 million was comprised of $16.5 million for the revenue milestones and $5.8 million for the technical milestones. The indemnification holdback was recorded in accrued liabilities at May 31, 2020 and was released during fiscal year 2021.

This acquisition expanded the Company’s growing Oncology business by adding RadiaDyne’s oncology solutions, including the IsoLoc/ImmobiLoc and Alatus balloon stabilizing technologies.

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

The Company has not disclosed the amount of revenue and earnings for sales of RadiaDyne products since acquisition, nor proforma information, because these ~~agreements~~amounts are not significant to the Company's financial statements. Acquisition-related costs associated with the RadiaDyne acquisition, which are included in "acquisition, restructuring and other items, net" in the accompanying Consolidated Statements of Operations, were approximately $1.6 million in fiscal year 2019. The following table summarizes the final aggregate purchase price allocated to the net assets acquired:


(in thousands)	Final allocation
Accounts receivable	$	900
Inventory	732
Prepaid and other current assets	98
Property, plant and equipment	133
Intangible assets:
RadiaDyne trademark	400
OARtrac trademark	200
RadiaDyne legacy product technology	1,500
OARtrac product technology	18,900
RadiaDyne customer relationships	4,600
Goodwill	47,982
Total assets acquired	$	75,445
Liabilities assumed
Accounts payable	$	352
Accrued expenses	106
Total liabilities assumed	$	458
Net assets acquired	$	74,987

The Company finalized the allocation of the purchase price to the assets acquired and liabilities assumed in the fourth quarter of fiscal year 2019.

The values assigned to the RadiaDyne and OARtrac trademark and product technologies were derived using the relief-from-royalties method under the income approach. This approach is used to estimate the cost savings that accrue for the owner of an intangible asset who would otherwise have to pay royalties or licensing fees on revenues earned through the use of the asset if they had not owned the rights to use the assets. The net after-tax royalty savings are calculated for each year in the remaining economic life of the intangible asset and discounted to present value. The trademarks were deemed to have a useful life of five to seven years and the product technologies were deemed to have a useful life of seven to ten years. Both are amortized on a straight-line basis over their useful life.

The value assigned to customer relationships was derived using the multi-period excess earnings method under the income approach. This approach estimates the excess earnings generated over the lives of the customers that existed as of the acquisition date and discounts such earnings to present value. Customer relationships are amortized on a straight-line basis over fifteen years.

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

During the fourth quarter of fiscal year 2021, the Company made the decision to abandon the OARtrac product technology and trademark. This resulted in ~~a write-off~~an impairment charge of $14.0 million. The impairment charge is recorded in "Acquisition, restructuring and other items, net", on the Consolidated Statement of Operations (see Note 19). At May 31, 2021, the fair value of the ~~initial $2.0~~contingent liability for RadiaDyne is zero (see Note 5).

BioSentry Acquisition

On August 14, 2018, the Company acquired the BioSentry product from Surgical Specialties, LLC (“SSC”), for an aggregate purchase price of $39.8 million ~~investment~~of which $37.0 million was paid on August 14, 2018 and $2.8 million was recorded as contingent consideration. The contingent consideration liability was recorded at fair value and was paid in ~~EmboMedics~~the fourth quarter of fiscal year 2019 upon fulfillment of hydrogel orders by SSC.

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

The Company has not disclosed the amount of revenue and earnings for sales of BioSentry products since acquisition, nor proforma information, because these amounts are not significant to the Company's financial statements. Acquisition-related costs associated with the BioSentry acquisition, which isare included in acquisition, restructuring and other ~~items,~~expenses, net in the accompanying Consolidated Statements of Operations, were approximately $1.0 million in fiscal year 2019. The following table summarizes the final purchase price allocated to the net assets acquired:


(in thousands)	Final allocation
Inventory	$	50
Property, plant and equipment	10
Intangible assets:
BioSentry trademark	2,500
BioSentry product technology	20,900
Customer relationships	2,600
Goodwill	13,740
Net assets acquired	$	39,800

The Company finalized the allocation of the purchase price to the assets acquired and liabilities assumed in the fourth quarter of fiscal year 2019.

The values assigned to the BioSentry trademark and product technologies were derived using the relief-from-royalties method under the income approach. This approach is used to estimate the cost savings that accrue for the owner of an intangible asset who would otherwise have to pay royalties or licensing fees on revenues earned through the use of the asset if they had not owned the rights to use the assets. The net after-tax royalty savings are calculated for each year in the remaining economic life of the intangible asset and discounted to present value. The trademark and product technologies are deemed to have a fifteen year useful life and are amortized on a straight-line basis over their useful life.

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

3. DIVESTITURES

Fluid Management

On May 31, 2019, the Company completed the sale of the NAMIC Fluid Management business (the “Divestiture”) and all of the assets used primarily in connection with the Fluid Management business to Medline Industries, Inc. (“Medline”) pursuant to an asset purchase agreement dated April 17, 2019 (the “Asset Purchase Agreement”). Total consideration received by the Company for the Divestiture in the fourth quarter of fiscal year 2019 was $169.2 million in cash and resulted in a gain of $46.6 million after working capital adjustments of $0.6 million. The gain is recorded in discontinued operations. On June 3, 2019, a portion of the net proceeds were used to retire the outstanding balance on the Term Loan and Revolving Facility and the remaining net proceeds will continue to be invested in the business.

Pursuant to a transition services agreement entered into and effective on the closing of the transaction, the Company supplied certain services to Medline. Medline received certain legal, human resource, tax, accounting and information technology services from the Company which ended in the fourth quarter of fiscal year 2021.

As a result of the Divestiture, the results of operations from the Fluid Management business are reported in the accompanying consolidated statements of ~~operations.~~operations as “Income from discontinued operations, net of income tax” for the year ended May 31, 2019.

The following table summarizes the financial results of discontinued operations:



(in thousands)	May 31, 2019
Net sales	$	88,850
Cost of sales (exclusive of amortization)	52,978
Gross profit	35,872

Operating expenses
Research and development	1,177
Sales and marketing	4,129
General and administrative	271
Amortization of intangibles	2,716
Total operating expenses	8,293
Operating income	27,579


Gain on divestiture	46,592


Income from discontinued operations before income taxes	74,171
Income tax expense	(1,685)
Income from discontinued operations	$	72,486

In accordance with GAAP, only expenses specifically identifiable and related to a business to be disposed may be allocated to discontinued operations. As such, the selling and marketing, research and development and general and administrative expenses recorded in discontinued operations include corporate costs incurred directly in support of the Fluid Management portfolio.

3.The Company applied the “Intraperiod Tax Allocation” rules under ASC 740, which requires the allocation of an entity’s total annual income tax provision among continuing operations and, in the Company’s case, discontinued operations. Included in the $1.6 million income tax expense for fiscal year 2019 is $0.6 million tax expense related to the gain on the Divestiture. The taxes on the gain were calculated using various state statutory tax rates and are partially offset by the utilization of historical state net operating losses. There are no current federal taxes on the gain due to utilization of historical net operating losses which had a corresponding valuation allowance.

The table below provides a reconciliation of the gain recorded on the sale of the Fluid Management business:


(in thousands)
Proceeds received from Divestiture	$	169,242
Working capital adjustment	(612)

Fluid Management assets:
Inventories	11,029
Property, plant and equipment, net	16,624
Intangible assets, net	15,047
Goodwill	75,308
Total Fluid Management assets	118,008





Transaction costs for Divestiture (1)	4,030

Gain on sale of the Fluid Management business before income taxes	$	46,592

(1) Costs include advisory fees, legal fees and professional fees

Proceeds from the sale of Fluid Management have been presented in the Consolidated Statements of Cash Flows under investing activities for the fiscal year ended May 31, 2019. Total operating and investing cash flows of discontinued operations for the fiscal year ended May 31, 2019 is comprised of the following, which exclude the effect of income taxes:


(in thousands)	2019
Net cash provided by operating activities	$	2,245
Net cash provided by investing activities	982

4. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition

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

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

Disaggregation of Revenue

The following tables summarize net product revenue by Global Business Unit and geography for the years ended May 31, 2021, 2020 and 2019:


	Year ended May 31, 2021						Year ended May 31, 2020
(in thousands)	United States		International		Total		United States		International		Total
Net sales
Endovascular Therapies	$	121,427	$	13,652	$	135,079	$	98,965	$	13,741	$	112,706
Vascular Access	81,088		20,222		101,310		76,768		17,531		94,299
Oncology	34,528		20,093		54,621		32,247		24,905		57,152

Total	$	237,043	$	53,967	$	291,010	$	207,980	$	56,177	$	264,157


	Year ended May 31, 2019
(in thousands)	United States		International		Total
Net sales
Endovascular Therapies	$	106,767	$	13,134	$	119,901
Vascular Access	79,611		15,119		94,730
Oncology	30,579		25,424		56,003

Total	$	216,957	$	53,677	$	270,634

Net Product Revenue

The Company's products consist of a wide range of medical, surgical and diagnostic devices used by professional healthcare providers for vascular access, for the treatment of peripheral vascular disease and for use in oncology and surgical settings. The Company's devices are generally used in minimally invasive, image-guided procedures. Most of the Company's products are intended to be used once and then discarded, or they may be implanted for short or long term use. The Company sells its products to its 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

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

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.

Sales, value added, 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 and administrative fees the Company is required to pay to group purchasing organizations.

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

Contract Balances with Customers

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

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


(in thousands)	May 31, 2021		May 31, 2020
Receivables	$	35,405	$	31,263
Contract assets	$	0	$	0
Contract liabilities	$	426	$	545

During the years ended May 31, 2021 and 2020, the Company had additions to contract liabilities of $1.0 million and $2.1 million, respectively. This was offset by $1.2 million and $2.2 million in revenue that was recognized during the years ended May 31, 2021 and 2020, respectively.

Costs to Obtain or Fulfill a Customer Contract

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

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

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:

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

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

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

The Company's financial instruments include cash and cash equivalents, marketable securities, accounts receivable, ~~marketable securities,~~ 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 ~~marketable securities, which are comprised of auction rate securities, and~~ contingent consideration liabilities.

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:
(in thousands)	Level 1		Level 2		Level 3		Fair Value at May 31, 2021









Financial Liabilities

Contingent consideration for acquisition earn outs	$	0	$	0	$	15,741	$	15,741
Total Financial Liabilities	$	0	$	0	$	15,741	$	15,741


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









Financial Liabilities

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

Fair Value Measurements
using inputs considered as:

(in thousands) Level 1 Level 2 Level 3 Fair Value at May 31, 2017
Financial Assets
Marketable securities $ —
$ —
$ 1,215
$ 1,215
Total Financial Assets $ —
$ —
$ 1,215
$ 1,215
Financial Liabilities
Contingent liability for acquisition earn outs $ —
$ —
$ 12,761
$ 12,761
Total Financial Liabilities $ —
$ —
$ 12,761
$ 12,761

Fair Value Measurements
using inputs considered as:

(in thousands) Level 1 Level 2 Level 3 Fair Value at May 31, 2016
Financial Assets
Marketable securities $ —
$ —
$ 1,653
$ 1,653
Total Financial Assets $ —
$ —
$ 1,653
$ 1,653
Financial Liabilities
Contingent liability for acquisition earn outs $ —
$ —
$ 38,275
$ 38,275
Total Financial Liabilities $ —
$ —
$ 38,275
$ 38,275

There were no transfers in and out of Level 1, 2 and 3 measurements for the years ended May 31, ~~2017~~2021 and ~~2016.~~

~~The table below presents the changes in fair value components of Level 3 instruments in the year ended May 31, 2017 (in thousands of dollars):~~

Financial Assets Financial Liabilities
(in thousands) Fair Value Measurements
Using Significant
Unobservable Inputs
(Level 3) Fair Value Measurements
Using Significant
Unobservable Inputs (Level 3)
Balance at May 31, 2016 $ 1,653
$ 38,275
Change in fair value of contingent consideration, net (1) —
(15,261 )
Currency (gain) loss from remeasurement —
(153 )
Fair market value adjustments 12
—
Sale of securities (450 ) —
Contingent consideration payments —
(10,100 )
Balance at May 31, 2017 $ 1,215
$ 12,761

The Company made the decision to discontinue its investment in the TiLo product that was acquired in August 2013 as part of the Clinical Devices acquisition. This decision resulted in the write-off of the acquired in-process research and development (IPR&D) of $3.6 million along with a $3.1 million gain from the reduction in the fair value of contingent consideration liability associated with future milestones that will no longer be met. The write-off of the IPR&D is included in acquisition, restructuring and other, net on the consolidated statement of operations.

~~The Company decided to terminate its agreement with EmboMedics which resulted in a $2.0 million write-off of our investment in EmboMedics (Note 2).~~

2020.

The table below presents the changes in fair value components of Level 3 instruments infor the year ended May 31, ~~2016 (in thousands of dollars):~~2021:

Financial Assets Financial Liabilities
(in thousands) Fair Value Measurements
Using Significant
Unobservable Inputs
(Level 3) Fair Value Measurements
Using Significant
Unobservable Inputs (Level 3)
Balance at May 31, 2015 $ 1,689
$ 47,384
Change in fair value of contingent consideration (1) —
948
Currency (gain) loss from remeasurement —
43
Fair market value adjustments (36 ) —
Contingent consideration payments —
(10,100 )
Balance at May 31, 2016 $ 1,653
$ 38,275


	Financial Liabilities
(in thousands)	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance at May 31, 2020	$	15,647

Change in present value of contingent consideration (1)	89
Currency (gain) loss from remeasurement	5



Balance at May 31, 2021	$	15,741

(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~~Company performance and amortization of the present value discount.

~~Marketable Securities~~The table below presents the changes in fair value components of Level 3 instruments for the year ended May 31, 2020:


	Financial Liabilities
(in thousands)	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance at May 31, 2019	$	13,486
Contingent consideration liabilities recorded as a result of the acquisitions (Note 2)	14,900
Change in fair value of contingent consideration (1)	(11,531)





Contingent consideration payments	(1,208)
Balance at May 31, 2020	$	15,647

~~Marketable securities consist solely~~(1) Change in the fair value of ~~an auction rate security. Assumptions associated with the auction rate security include the interest rate benchmarks, the probability~~contingent consideration is included in earnings and comprised of ~~full repayment~~changes in estimated earn out payments based on projections of Company performance and amortization of the ~~principal considering~~present value discount.

During fiscal year 2020, the ~~credit quality and guarantees~~Company revised the sales projections for RadiaDyne products as a result of reviews performed by executive management. The adjustments to the sales projections over the contractual earn-out period resulted in ~~place, and~~a $9.2 million reduction in the ~~rate~~fair value of ~~return required by investors to own such securities given~~ the ~~current liquidity risk.~~

contingent liability. It was also determined that one of the technical milestones would not be achieved, which resulted in an additional reduction in the liability of $2.7 million. At May 31, 2021, there are no remaining amounts payable for the RadiaDyne contingent consideration.

Contingent Liability for Acquisition Earn Outs

~~Certain~~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 ~~and/~~or various other ~~favorable operating~~performance conditions. Payment of the additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified revenue levels or ~~achieving~~ product development targets. Contingent consideration is recorded at the estimated fair value of the contingent ~~milestone~~ payments on the acquisition date. The fair value of the contingent ~~milestone~~ 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 ~~statement~~statements of ~~operations.~~income.

~~Contingent consideration liabilities will be remeasured to~~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 ~~each reporting period using projected net sales, discount rates, probabilities of payment and projected payment dates. Projected contingent payment amounts are discounted back to the current period~~measurements which is determined using a discounted cash flow ~~model.~~model applied to projected net sales, using probabilities of achieving projected net sales and projected payment dates. Projected net sales are based on internal projections and extensive analysis of the target market and the sales potential. Increases in projected net sales and probabilities of payment may result in higher fair value measurements in the future. Increases in discount rates and the projected time to payment may result in lower fair value measurements in the future. 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 May 31, ~~2017:~~2021:

(in thousands)

Fair value at

May 31, 2017

Valuation

Technique

Unobservable

Input

Range

(in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

Revenue based payments

12,761

Discounted cash flow

Discount rate
Probability of payment
Projected fiscal year of payment

4%
100%
2018 - 2022

Revenue based payments

15,741

Discounted cash flow

Discount rate

Probability of payment

66% - 100%

Projected fiscal year of payment

2024 - 2025

At May 31, ~~2017,~~2021, the ~~estimated potential~~ amount of undiscounted future contingent consideration that the Company expects to pay as a result of all completed acquisitions is approximately ~~$13.1~~$20.0 million. The milestones, including revenue projections and technical milestones, associated with the contingent consideration must be reached in future periods ranging from fiscal years 2021 to 2025 in order for the associated consideration to be paid.

Items Measured at Fair Value on a Nonrecurring Basis

During the fourth quarter of fiscal year 2021, the Company made the decision to abandon the OARtrac product technology and trademark. This resulted in an impairment charge of $14.0 million. The Company recorded a goodwill impairment charge of $158.6 million ~~which represents the remaining contractual minimum payments.~~

~~4. MARKETABLE SECURITIES~~

Asas of May 31, ~~2017, marketable securities~~2020 to write down the carrying value of the reporting unit to fair value using Level 3 inputs.

There were no other items measured at fair value on a nonrecurring basis during the year ended May 31, 2020 or May 31, 2021.

6. INVENTORIES

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

Amortized
cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
(in thousands)
Available-for-sales securities
New York State government agency obligations $ 1,350
$ —
$ (135 ) $ 1,215
$ 1,350
$ —
$ (135 ) $ 1,215

~~As of May 31, 2016, marketable securities consisted of the following:~~

Amortized
cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
(in thousands)
Available-for-sales securities
New York State government agency obligations $ 1,800
$ —
$ (147 ) $ 1,653
$ 1,800
$ —
$ (147 ) $ 1,653

The amortized cost and fair value of marketable securities as of May 31, 2017, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Amortized
cost

Fair
Value
(in thousands)
As of May 31, 2017:
Due in one year or less $ —
$ —
Due after one through five years —
—
Due after five through twenty years (1)
1,350
1,215
$ 1,350
$ 1,215

~~(1) This auction rate security represents investments available for current operations and are classified as current in the consolidated balance sheets.~~

~~5. INVENTORIES~~

~~As of May 31, 2017 and 2016, inventories consisted of the following:~~


	May 31, 2017		May 31, 2016
(in thousands)					(in thousands)	May 31, 2021		May 31, 2020
Raw materials	$	17,563	$	21,669	Raw materials	$	22,925	$	23,308
Work in process	12,602		10,700		Work in process	8,022		8,318
Finished goods	24,341		23,001		Finished goods	17,667		28,279
Total	$	54,506	$	55,370	Total	$	48,614	$	59,905

The Company periodically reviews its 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 May 31, ~~2017~~2021 and ~~2016~~2020 was ~~$7.3~~$3.8 million and ~~$12.6~~$4.7 million, respectively. Of the $7.3 million, $2.4 million relates to the inventory reserve for Acculis inventory as a result of the recall (Note 10). Of the $12.6 million in the prior year, $5.8 million relates to the reserve of Celerity inventory on-hand at May 31, 2016.

6.7. PREPAID EXPENSES AND OTHER

~~As of May 31, 2017 and 2016, prepaid~~Prepaid expenses and other consisted of the following:


(in thousands)	May 31, 2021		May 31, 2020
Deposits	$	2,795	$	689
Employee Retention Tax Credit	1,911		0
Software licenses	1,286		1,002
TSA receivable	2		2,911
License fees	166		203
Trade shows	132		296
Rent	268		246
Other prepaid taxes	379		414
Other	1,760		1,549
Total	$	8,699	$	7,310

May 31, 2017 May 31, 2016
(in thousands)
Software licenses $ 582
$ 282
License fees 118
108
Trade shows 162
278
Rent 121
127
Other prepaid taxes 208
160
Medical device excise tax receivable 1,837
—
Other 2,762
2,288
Total $ 5,790
$ 3,243

7.8. PROPERTY, PLANT AND EQUIPMENT, NET

~~As of May 31, 2017 and 2016, property,~~Property, plant and equipment are summarized as follows:


	May 31, 2017			May 31, 2016
(in thousands)							(in thousands)	May 31, 2021		May 31, 2020
Building and building improvements	$	40,597		$	39,585		Building and building improvements	$	28,979	$	27,119
Computer software and equipment							Computer software and equipment	26,302		24,730
Machinery and equipment	25,434			24,078			Machinery and equipment	14,208		13,602
Computer software and equipment	25,668			24,691
Placement and evaluation units							Placement and evaluation units	9,530		0
Construction in progress	1,464			1,743			Construction in progress	3,217		3,050
	93,163			90,097				82,236		68,501
Less accumulated depreciation and amortization	(49,652		)	(43,536		)
Less accumulated depreciation							Less accumulated depreciation	(45,635)		(40,661)
	43,511			46,561				36,601		27,840
Land and land improvements	1,723			1,723			Land and land improvements	472		472
	$	45,234		$	48,284			$	37,073	$	28,312

Depreciation expense for fiscal ~~2017, 2016~~years 2021, 2020 and ~~2015~~2019 was ~~$6.0~~$5.7 million, ~~$8.2~~$3.3 million and ~~$9.8~~$3.1 million, respectively.

9. GOODWILL AND INTANGIBLE ASSETS

Intangible assets other than goodwill are amortized over their estimated useful lives on either a straight-line basis or proportionately to the benefit being realized. Useful lives range from two to eighteen years. The Company periodically reviews the estimated useful lives of intangible assets and review 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.

Goodwill

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

The Company's annual testing for impairment of goodwill was completed as of December 31, ~~2016.~~2020. The Company operates as a single operating segment with ~~one~~1 reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. The Company determines the fair value of the reporting unit based on the market valuation approach and concluded that it was not more-likely-than-not that the fair value of the Company's reporting unit was less than its carrying value.

Even though the Company determined that there was no0 goodwill impairment as of December 31, ~~2016,~~2020, the future occurrence of a potential indicator of impairment, such as a significant adverse change in legal, regulatory, business or economic conditions or a more-likely-than-not expectation that the reporting unit or a significant portion of the reporting unit will be sold or disposed of, would require an interim assessment for the reporting unit prior to the next required annual assessment as of December 31, ~~2017. The Company continued to assess for potential impairment through May 31, 2017 and noted no events that would be considered a triggering event.~~ 2021.

There were no adjustments to goodwill for the year ended May 31, 2021 other than foreign currency translation adjustments. For the year ended May 31, 2020 the Company recorded a goodwill impairment charge of $158.6 million to write down the carrying value of the reporting unit to fair value.

Definite Lived Intangible Assets

Definite lived intangible assets consist primarily of product technologies and customer relationships and are amortized over their estimated useful lives, which range between two to eighteen years, on either a straight-line basis over the expected period of benefit or as revenues are earned from the sales of the related product. Amortization expense was $18.1 million, $18.1 million and $17.1 million for fiscal years 2021, 2020 and 2019, respectively. During the fourth quarter of fiscal year 2021, the Company made the decision to abandon the OARtrac product technology and trademark. This resulted in an impairment charge of $14.0 million. The impairment charge is recorded in "Acquisition, restructuring and other items, net", on the Consolidated Statement of Operations (see Note 19). There were no impairment charges on definite lived intangible assets for the years ended May 31, ~~2017~~2020 and ~~2016.~~2019.

~~As of May 31, 2017 and 2016, intangible~~Intangible assets consisted of the following:


	May 31, 2021
(in thousands)	Gross carrying value		Accumulated amortization		Net carrying value
Product technologies	$	236,907	$	(97,343)	$	139,564
Customer relationships	60,291		(34,164)		26,127
Trademarks	9,950		(6,905)		3,045
Licenses	6,087		(5,846)		241
	$	313,235	$	(144,258)	$	168,977


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


	$	327,966	$	(130,830)	$	197,136

May 31, 2017

Gross carrying
value

Accumulated
amortization

Net carrying
value
(in thousands)
Product technologies $ 147,172
$ (59,696 ) $ 87,476
Customer relationships 56,375
(19,194 ) 37,181
Trademarks 28,400
(9,069 ) 19,331
Licenses 4,487
(3,821 ) 666
Distributor relationships 1,250
(229 ) 1,021
$ 237,684
$ (92,009 ) $ 145,675

May 31, 2016

Gross carrying
value

Accumulated
amortization

Net carrying
value
(in thousands)
Product technologies $ 148,387
$ (51,313 ) $ 97,074
Customer relationships 88,389
(47,133 ) 41,256
Trademarks 28,470
(6,242 ) 22,228
Licenses 7,931
(6,716 ) 1,215
Distributor relationships 2,150
(946 ) 1,204
In process R&D 3,600
—
3,600
$ 278,927
$ (112,350 ) $ 166,577

~~Amortization~~Expected future amortization expense ~~was $17.3 million, $18.0 million and $18.0 million for fiscal years 2017, 2016 and 2015, respectively.~~

~~Annual amortization of these~~related to the intangible assets ~~is expected to approximate the following amounts~~ for each of the ~~next five~~following fiscal ~~years:~~years is as follows:


(in thousands)
2022	$	15,156
2023	15,595
2024	14,111
2025	15,131
2024	16,138
2025 and thereafter	92,846
	$	168,977

(in thousands)
2018 $ 16,500
2019 16,132
2020 14,578
2021 13,627
2022 12,952
2023 and thereafter 71,886
$ 145,675

9.10. INCOME TAXES

The components of ~~income (loss)~~loss from continuing operations before income tax ~~expense (benefit) for the years ended May 31~~benefit are as follows:

2017 2016 2015
(in thousands)
Income (loss) before tax expense:

US $ 8,825
$ (4,444 ) $ (8,965 )
Non-US 1,022
1,191
834
$ 9,847
$ (3,253 ) $ (8,131 )


	Year ended May 31,
(in thousands)	2021		2020		2019
Loss from continuing operations before tax expense:
U.S.	$	(31,595)	$	(166,984)	$	(15,593)
Non-U.S.	(4,457)		(1,151)		891
	$	(36,052)	$	(168,135)	$	(14,702)

Income tax ~~expense (benefit)~~benefit is comprised of the following:


	Year ended May 31,
(in thousands)	2021		2020		2019
Current

U.S.	100		96		128
Non U.S.	201		124		289
	301		220		417
Deferred
U.S.	(3,375)		(1,122)		(3,948)
Non U.S.	(1,430)		(446)		(25)
	(4,805)		(1,568)		(3,973)

Income tax benefit	$	(4,504)	$	(1,348)	$	(3,556)

2017 2016 2015
(in thousands)
Current

Federal $ —
$ 34
$ (242 )
State and local 141
103
205
Non U.S. 270
217
417
411
354
380
Deferred 4,428
39,983
(5,123 )
Income tax expense (benefit) $ 4,839
$ 40,337
$ (4,743 )

In the fiscal years 2017 and 2016 income tax expense, the Company recorded tax expense of $4.8 million and $40.3 million, respectively, primarily driven by the impact of recording a deferred tax liability related to the amortization of intangibles, for tax purposes, that have an indefinite reversal period and cannot be used to support the deferred tax assets in fiscal 2017 and recording a valuation allowance of $40.4 million on the U.S. deferred tax assets in fiscal 2016.

In the fiscal year 2015 income tax benefit, the Company recorded a tax benefit of $4.7 million, primarily driven by a benefit of the $9.2 million nontaxable adjustment to the contingent liabilities related to Vortex Medical and Clinical Devices, and a seven month benefit from the R&D tax credit that expired on December 31, 2014, offset by non-deductible interest expense related to contingent payments, true-ups of our fiscal year 2014 US income tax returns and the impact of the elimination of the ASC 718 APIC pool.

Temporary differences that give rise to deferred tax assets and liabilities are summarized as follows:

May 31, 2017 May 31, 2016
(in thousands)
Deferred tax assets

Net operating loss carryforward $ 55,975
$ 52,593
Stock-based compensation 2,653
4,135
Federal and state R&D tax credit carryforward 2,548
2,145
Inventories 2,407
4,535
Expenses incurred not currently deductible 6,522
3,018
Accrued liabilities 1,289
339
Gross deferred tax asset 71,394
66,765
Deferred tax liabilities

Excess tax over book depreciation and amortization 49,158
46,240
49,158
46,240
Valuation Allowance (48,348 ) (42,209 )
Net deferred tax liability $ (26,112 ) $ (21,684 )

The Company's Federal net operating loss carryforwards as of May 31, 2017 after considering IRC Section 382 limitations are $161.6 million. The expiration of the Federal net operating loss carryforwards are as follows: $29.8 million between 2017 and 2023 and $131.8 million between 2027 and 2037.

~~The Company's state net operating loss carryforwards as of May 31, 2017 after considering remaining IRC Section 382 limitations are $32.7 million which expire in various years from 2017 to 2037.~~

As a result of certain realization requirements of ASC 718, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of May 31, 2017 and 2016 that arose directly from tax deductions related to equity compensation greater than compensation recognized for financial reporting. Equity will be increased by $0.6 million if and when such excess tax benefits are ultimately realized.

A valuation allowance is provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. After careful consideration and weighing of all the available positive and negative evidence, the weight given to the three year cumulative loss and lack of a recent history of core earnings was difficult to overcome and a full valuation allowance related to the U.S. deferred tax assets was established in the period ending May 31, 2016. Management considered all available positive and negative evidence at May 31, 2017, and considering the cumulative loss in the U.S. over the three year period, determined that the valuation allowance is still required. Management will continue to reevaluate the positive and negative evidence at each reporting period and if future results as projected in the U.S. and the Company's tax planning strategies are favorable, the valuation allowance may be removed, which could have a favorable material impact on the Company's results of operations in the period in which it is recorded.


(in thousands)	May 31, 2021		May 31, 2020
Deferred tax assets
Net operating loss carryforward	$	31,564	$	26,697
Stock-based compensation	3,556		2,923
Federal and state R&D tax credit carryforward	6,715		5,412
Inventories	884		1,071
Expenses incurred not currently deductible	3,091		1,927
Accrued liabilities	73		95
Gross deferred tax asset	45,883		38,125
Deferred tax liabilities
Depreciation and amortization	48,744		49,023

	48,744		49,023
Valuation allowance	(17,035)		(13,114)
Net deferred tax liability	$	(19,896)	$	(24,012)

The net deferred tax liability in the U.S. as of May 31, ~~2017~~2021 and ~~2016~~2020 principally relates to tax amortization of intangibles that have an indefinite reversal period for book purposes, ~~and~~also known as a “naked credit deferred tax liability”, that cannot be ~~used~~considered as a source of income to ~~support~~recover the deferred tax asset. In addition, during the fiscal year ended May 31, 2020 a net deferred tax liability of $11.0 million was recorded in purchase accounting related to the stock acquisition of Eximo Medical Ltd. primarily related to book intangibles offset by tax net operating losses.

The Company's U.S. Federal net operating loss carryforwards as of May 31, 2021 after considering IRC Section 382 limitations are $134.6 million. The expiration of the Federal net operating loss carryforwards are as follows: $8.6 million between 2022 and 2023, $79.4 million between 2028 and 2037 and $46.6 million indefinitely.

The Company's state net operating loss carryforwards as of May 31, 2021 after considering remaining IRC Section 382 limitations are $20.0 million which expire in various years from 2029 to 2041. The Company has Israel tax net operating losses of $13.5 million that can be carried forward indefinitely.

Beginning in 2018, except for the Global Intangible Low-Taxed Income, the Company will no longer record United States federal income tax on its share of the income of its foreign subsidiaries, nor will it record a benefit for foreign tax credits related to that income. Upon distribution of these earnings in the form of dividends or otherwise, the Company would be subject to withholding taxes payable, where applicable, to foreign countries, but would have no further federal income tax liability. The Company intends to indefinitely reinvest the unremitted foreign earnings of all other subsidiaries as of May 31, 2021, as well as all subsequent earnings generated by all of our foreign subsidiaries. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practical.

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. Evidence the Company considered included its history of net operating losses, which resulted in the Company recording a full valuation allowance for its deferred tax assets in fiscal year 2016, except the naked credit deferred tax liability.

The Company's consolidated income tax expense has differed from the amount that would be provided by applying the U.S. Federal statutory income tax rate to the Company's income before income taxes for the following reasons:


	Year ended May 31,
(in thousands)	2021		2020		2019
Income tax benefit at federal statutory tax rate of 21.0%, 21.0% and 28.6%, respectively	$	(7,571)	$	(35,308)	$	(3,087)

State income taxes, net of Federal tax benefit	(462)		(40)		(177)
Impact of Non-U.S. operations	(293)		(100)		76
Research and development tax credit	(1,303)		(1,152)		(936)

Meals and entertainment	116		171		190
Goodwill impairment	0		33,301		0


Change in valuation allowance	3,921		1,426		175
Effect of elimination of stock compensation APIC pool	526		162		0

Other	562		192		203
Income tax benefit	$	(4,504)	$	(1,348)	$	(3,556)

For the year ended May 31,
2017 2016 2015
(in thousands)
Income tax expense (benefit) at statutory tax rate of 35% $ 3,447
$ (1,139 ) $ (2,845 )
Effect of graduated tax rates (98 ) 33
81
State income taxes, net of Federal tax benefit (22 ) (215 ) (21 )
Impact of Non-US operations 403
(162 ) 133
Research and development tax credit (403 ) (499 ) (604 )
Meals and entertainment 266
329
—
Non-deductible interest on contingent payments 174
262
265
Non-taxable gain on revaluation of contingent consideration liability (5,576 ) (170 ) (3,102 )
Tax law changes —
—
(454 )
Change in valuation allowance 6,139
40,685
—
Effect of elimination of stock compensation APIC pool 1,380
739
1,253
IPR&D intangible write-off (1,224 ) —
—
Other nondeductible expenses 219
207
498
Over (under) accrual of prior year Federal and State taxes (3 ) 356
38
Other 137
(89 ) 15
Income tax expense (benefit) $ 4,839
$ 40,337
$ (4,743 )

During fiscal year 2020, the Company recorded a goodwill impairment of $158.6 million. The Company has made the tax accounting policy election to first allocate the impairment to the Company’s nondeductible goodwill based on the Company’s pre-impairment nondeductible goodwill balance.

The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits:


								Year ended May 31,
(in thousands)							(in thousands)	2021		2020		2019
Unrecognized tax benefits balance at June 1							Unrecognized tax benefits balance at June 1	$	464	$	464	$	464

	For the year ended May 31,
	2017		2016		2015
(in thousands)
Unrecognized tax benefits balance at June 1	$	899	$	—	$	—
Increase in gross amounts of tax positions related to prior years	—		899		—
Decrease in gross amounts of tax positions related to prior years due to U.S. tax reform							Decrease in gross amounts of tax positions related to prior years due to U.S. tax reform	0		0		0
Decrease due to lapse in statute of limitations							Decrease due to lapse in statute of limitations	0		0		0
Unrecognized tax benefits balance at May 31	$	899	$	899	$	—	Unrecognized tax benefits balance at May 31	$	464	$	464	$	464

The table above includes unrecognized tax benefits associated with the calculation of limitations placed on the utilization of tax attributes related to an acquired company. If recognized, ~~$0.1 million of the balance of unrecognized tax benefits as of May 31, 2017 would affect the effective tax rate and the balance of $0.8~~$0.5 million would result in adjustments to other tax accounts.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. There are no0 accrued interest and penalties recognized in the consolidated balance sheet as of May 31, ~~2017~~2021 and May 31, ~~2016.~~2020.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities throughout the world. Fiscal years ~~2014~~2018 through ~~2017~~2020 remain open to examination by the various tax authorities.

The Company does not anticipate that the amount of unrecognized tax benefits will significantly change in the next twelve months.

The accumulated undistributed earnings of the Company’s foreign operations were approximately $5.3 million, and are intended to remain indefinitely invested in foreign operations. Accordingly, no taxes have been provided on these earnings as of

May 31, 2017. If these earnings were distributed, the Company would be subject to both foreign withholding taxes and U.S. income taxes that may not be fully offset by foreign tax credits. A reasonable estimate of the deferred tax liability on these earnings is not practicable at this time.

~~10.~~11. ACCRUED LIABILITIES

~~As of May 31, 2017 and 2016, accrued~~Accrued liabilities consist of the following:


(in thousands)	May 31, 2021		May 31, 2020
Payroll and related expenses	$	20,408	$	13,059
Outside services	4,256		2,222
Royalties	2,663		2,392
Accrued severance	548		794
Sales and franchise taxes	631		634


Litigation matters	975		0
Indemnification holdback	0		5,000

Other	5,978		5,279
Total	$	35,459	$	29,380

May 31,
2017

May 31,
2016
(in thousands)
Payroll and related expenses $ 11,383
$ 9,414
Royalties 2,885
2,489
Accrued severance 2,075
1,524
Sales and franchise taxes 856
565
Outside services 1,622
2,063
Litigation matters (Note 15) 12,500
—
Acculis recall liability 2,563
—
Other 4,920
5,887
Total $ 38,804
$ 21,942
12. LONG-TERM DEBT

InOn June 3, 2019 and in connection with the ~~fourth quarter~~completion of ~~fiscal year 2017,~~the Fluid Management divestiture, the Company ~~issued a voluntary recall of~~repaid all amounts outstanding under its ~~Acculis probes that were sold over the past two years. As a result of this voluntary recall, the Company decided to also do a voluntary market withdrawal of its Acculis capital systems~~existing Credit Agreement and discontinue selling the product. The voluntary recall resulted in a deferral of revenue of $2.6 million and an increase of $2.6 million in inventory and hardware asset reserves. The total impact to income before taxes of the recall was $4.5 million.

~~11. LONG-TERM DEBT~~

~~On November 7, 2016, the Company~~ entered into a new Credit Agreement with the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Bank of America, N.A. and ~~Keybank~~KeyBank National Association, as co-syndication ~~agents, and JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Keybank National Association as joint bookrunners and joint lead arrangers.~~agents.

The Credit Agreement provides for a ~~$100.0~~$125.0 million ~~senior secured term loan facility and a $150.0 million senior~~ secured revolving credit facility (the “Revolving Facility”), which includes ~~up to a $20.0 million sublimit for letters of credit and a $5.0 million sublimit for swingline loans.~~

~~On November 7, 2016,~~an uncommitted expansion feature that allows the Company ~~borrowed $100.0 million under~~to increase the ~~Term Loan and approximately $16.5 million under the Revolving Facility~~total revolving commitments and/or add new tranches of term loans in an aggregate amount not to repay the balance of $116.5 million under the former credit agreement. In February 2017 the revolver was paid off in full. As of May 31, 2017 and 2016 the carrying value of long-term debt approximates its fair market value.

exceed $75.0 million. The proceeds ~~of the Revolving Facility~~ may be used ~~for general corporate purposes~~to refinance certain existing indebtedness of the Company and its subsidiaries, to finance the working capital needs, and for general corporate purposes (including permitted acquisitions), of the Company and its subsidiaries.

The ~~Facilities have~~Credit Agreement has a five year maturity. Interest on ~~both~~ the ~~Term Loan and Revolving Facility are~~facility is based, at the Company’s option, on either a base rate of LIBOR or ~~Eurodollar~~alternate base rate, plus an applicable margin ~~which increases as~~tied to the Company’s total leverage ratio ~~increases, with the~~and having ranges between 0.25% and 0.75% for base rate loans and ~~Eurodollar rate having ranges of 0.50% to~~between 1.25% and ~~1.50% to 2.25% respectively. In case of~~1.75% for LIBOR loans. After default, the interest rate may be increased by 2.0%. The ~~Revolving Facility~~facility also carries a commitment fee of 0.20% to ~~0.35%~~0.25% per annum on the unused portion. ~~The interest rate on the Term Loan at May 31, 2017 was 2.55%.~~

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

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

•~~maximum~~Maximum leverage ratio of consolidated total indebtedness* to consolidated EBITDA* of not greater than ~~3.50~~3.00 to 1.00~~(during~~ (during certain periods following material acquisitions the ratio shall be increased to ~~3.75~~3.50 to 1.00).

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

* The definitions of consolidated total indebtedness, consolidated EBITDA, consolidated capital expenditures and consolidated ~~EBITDA~~interest expense are ~~maintained~~specifically defined in the credit agreement included as an exhibit to Form ~~8-k~~8-K filed on ~~November 10, 2016.~~June 6, 2019.

As of May 31, 2021 there was $20.0 million outstanding on the Revolving Facility. As of May 31, 2021 and May 31, 2020, the carrying value of long-term debt approximated its fair market value.

The interest rate on the Revolving Facility at May 31, 2021 was 1.36%.

The Company was in compliance with ~~both~~the Credit Agreement covenants as of May 31, ~~2017.~~2021.

~~The Company's maturities of principal obligations under the credit agreement are as follows, as of May 31, 2017:~~

(in thousands)
2018 $ 5,000
2019 5,000
2020 7,500
2021 11,250
2022 68,750
     Total term loan 97,500
Revolving facility —
     Total debt 97,500
Less: Unamortized debt issuance costs (1,180 )
     Total 96,320
Less: Current portion of long-term debt (5,000 )
     Total long-term debt, net of current portion $ 91,320

~~12.~~13. RETIREMENT PLANS

The Company has a 401(k) plan under which eligible employees can defer a portion of their compensation, part of which is matched by the Company. Matching contributions were ~~$4.2~~$3.8 million, ~~$3.7~~$3.2 million and ~~$3.7~~$3.6 million in ~~2017, 2016~~2021, 2020 and ~~2015,~~2019, respectively. There are also various immaterial foreign retirement plans.

~~13.~~14. STOCKHOLDERS’ EQUITY

Capitalization

On October 29, 2014, the Board of Directors approved the Amended and Restated Certificate of Incorporation (the “Amended Certificate”). Under the Amended Certificate, the authorized capital stock is 80,000,000 shares, consisting of 75,000,000 shares of common stock, par value $.01 per share and 5,000,000 shares of preferred stock, par value $.01 per share.

The holders of common stock are entitled to ~~one~~1 vote for each share held. Subject to preferences applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably dividends, if any, as may be declared by the Board of Directors out of funds legally available for dividend payments. If the Company liquidates, dissolves, or winds up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no pre-emptive rights or rights to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to

the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that the Company may designate in the future.

The ~~board~~Board of ~~directors~~Directors has the authority to (i) issue the undesignated preferred stock in one or more series, (ii) determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly un-issued series of undesignated preferred stock and (iii) fix the number of shares constituting any series and the designation of the series, without any further vote or action by the Company's stockholders.

Stock Options

~~2004 Stock and Incentive Award Plan~~

~~The 2004~~On October 13, 2020, the Company's shareholders approved the 2020 Stock and Incentive Award Plan (the ~~“2004~~“2020 Plan”). The 2020 Plan provides for the grant of incentive stock options, ~~to employees and for the grant of~~ 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. A total of ~~7,000,000~~2.4 million shares of common stock have been reserved for issuance under the ~~2004 Plan, of which up~~2020 Plan.

Prior to ~~800,000 shares may be issued upon~~ the ~~exercise of incentive stock options. The compensation committee~~adoption of the ~~Board of Directors administers the 2004 Plan. The committee determines vesting terms and the exercise price of options granted~~2020 Plan, equity awards were issued under the 2004 Plan, but for all incentive stock options the exercise price must at least be equal to the fair market value of common stock on the date of grant. The term of an incentive stock option may not exceed ten years.

~~On October 25, 2016, the Company amended~~ the 2004 Stock and Incentive Award Plan ~~to increased~~(the “2004 Plan”). The adoption of the ~~shares~~2020 Plan did not impact the administration of ~~common stock reserved for issuance by 250,000 shares.~~

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.

As of May 31, ~~2017,~~2021, there remained approximately ~~2.4~~2.3 million shares available for granting under the ~~2004~~2020 Plan.

The following table summarizes information about stock option activity for the fiscal year ended May 31, ~~2017.~~2021:


									Shares	Weighted average exercise price		Weighted average remaining contractual life	Aggregate intrinsic value (in thousands)
	2017
	Shares		Weighted- average exercise price		Weighted average remaining contractual life	Aggregate intrinsic value (in thousands)
Outstanding at beginning of year	2,281,618		$	14.45
Outstanding at beginning of year - June 1, 2020								Outstanding at beginning of year - June 1, 2020	1,938,753	$	16.89
Granted	667,691		$	16.83				Granted	528,809	$	11.41
Exercised	(826,286	)	$	13.45				Exercised	(137,237)	$	16.45
Forfeited	(342,924	)	$	16.03				Forfeited	(132,895)	$	18.38
Expired	(112,656	)	$	19.08				Expired	(50,470)	$	12.33
Outstanding at end of year	1,667,443		$	15.01	4.66	$	1,513
Outstanding at end of year - May 31, 2021								Outstanding at end of year - May 31, 2021	2,146,960	$	15.59	6.24	$	16,176
Options exercisable at year-end	659,463		$	14.26	2.88	$	913	Options exercisable at year-end	1,067,686	$	16.26	3.91	$	7,324
Options expected to vest in future periods	884,906		$	15.50	5.83	$	527	Options expected to vest in future periods	1,079,274	$	14.92	8.53	$	8,852

Stock options are granted at exercise prices equal to the quoted market price of common stock at the date of the grant. Options vest 25% per year over four years for ~~employees and 100% after one year for consultants. Grants to directors vest 33.33% per year over three years.~~employees. Stock options granted prior to May 1, 2007 and after June 1, 2017 expire on the tenth anniversary of the grant date. Stock options granted ~~on or after~~between May 1, 2007 through May 31, 2017 expire on the seventh anniversary of the grant date.

The Company measures the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value of options granted during the years ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015~~2019 was ~~$4.70, $4.16,~~$3.97, $5.46, and ~~$4.74,~~$6.53, respectively. The following assumptions were used in arriving at the fair value of options granted during ~~2017, 2016~~2021, 2020 and ~~2015,~~2019, respectively: risk-free interest rates of ~~1.30%~~0.34%, ~~1.48%~~1.63% and ~~1.54%~~2.78%; expected volatility of ~~31%~~39%, 31%, and 31%; and expected lives of ~~4.80~~4.96 years, ~~4.81~~4.91 years, and ~~4.76~~4.79 years. The Company does not declare dividends therefore a dividend yield of zero was used for the years ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015.~~2019. Risk-free interest rates reflect the yield on

zero-coupon U.S. Treasury bonds whose maturity period equals the expected term of the option. Expected volatilities are based on the historical volatility of the Company's stock. The expected option lives are based on historical experience of employee exercise behavior.

The total intrinsic value of options exercised during the years ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015~~2019 was ~~$2.8~~$0.8 million, ~~$0.1~~$0.5 million, and ~~$1.6~~$1.4 million, respectively. As of May 31, ~~2017,~~2021, there was ~~$3.7~~$3.9 million of total unrecognized compensation cost related to non-vested options, which is expected to be recognized over a weighted average period of 36 years.

Cash received from option exercises during ~~2017, 2016~~2021, 2020 and ~~2015~~2019 was ~~$9.9~~$1.9 million, ~~$1.3~~$0.6 million and ~~$4.3 million, respectively. The tax benefit realized from stock options exercised during the years ended May 31, 2016 and 2015 were $0.1 million and $0.5~~$1.5 million, respectively. Due to the valuation allowance there was no0 tax benefit realized from stock option exercises during the ~~year~~years ended May 31, ~~2017.~~2021, 2020 and 2019.

~~Performance Share and~~ Restricted Stock Unit and Performance Share Awards

The Company grants restricted stock units to certain employees under the 2020 Plan, and historically under the 2004 Plan, which give the recipients the right to receive shares of Company stock upon vesting. The restricted stock unit awards vest in four equal annual installments ~~over~~beginning on the ~~term~~first anniversary of the ~~grants.~~grant date. Restricted stock unit awards granted to directors vest over one year. Unvested restricted stock unit awards will be forfeited if the recipient ceases to be employed by the Company.

The following table summarizes information about restricted stock unit activity for the year ended May 31, ~~2017.~~2021:


						Restricted Stock Units	Weighted Average Grant-Date Fair Value
			Weighted Average Grant-Date Fair Value
Non-vested at beginning of year	549,777		$	14.62
Non-vested at beginning of year, June 1, 2020					Non-vested at beginning of year, June 1, 2020	464,921	$	19.65
Granted	255,032		$	16.54	Granted	533,708	$	10.40
Vested	(182,320	)	$	16.10	Vested	(205,202)	$	10.02
Canceled	(183,192	)	$	15.95	Canceled	(31,324)	$	17.30
Non-vested at end of year	439,297		$	15.55
Non-vested at end of year, May 31, 2021					Non-vested at end of year, May 31, 2021	762,103	$	13.28

The fair value of each restricted stock unit is the market price of Company stock on the date of grant. The weighted average grant date fair value of restricted stock units granted during the years ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015~~2019 was ~~$16.54, $15.21~~$10.40, $20.35 and ~~$14.75,~~$20.87, respectively. The total intrinsic value of restricted stock units (meaning the fair value of the units on the date of vest) vesting during the years ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015~~2019 was ~~$2.9~~$2.1 million, ~~$2.5~~$3.9 million, and ~~$2.4~~$4.6 million, respectively. As of May 31, ~~2017,~~2021, there was ~~$4.9~~$6.5 million of total unrecognized compensation cost related to non-vested restricted stock awards, which is expected to be recognized over a weighted average period of 3 years.

The Company grants performance share awards to certain employees under the 2020 Plan, and historically under the 2004 Plan, which gives the recipients the right to receive shares of Company stock if certain criteria is met. The performance criteria is established by the compensation committee for vesting of the performance share awards and may include factors such as the achievement of relative total shareholder return ("TSR"), certain sales, operating income and earnings per share (“EPS”) goals. Performance share awards are subject to additional conditions, including the recipient’s continued employment with the Company.

The following table summarizes information about performance unit award activity for the year ended May 31, ~~2017.~~2021:

Performance Unit Awards
Weighted Average
Grant-Date Fair Value
Non-vested at beginning of year 435,892
$ 19.16
Granted 93,400
$ 22.61
Vested (37,184 ) $ 14.48
Canceled (130,944 ) $ 21.54
Non-vested at end of year 361,164
$ 18.54


	Performance Unit Awards	Weighted Average Grant-Date Fair Value
Non-vested at beginning of year, June 1, 2020	273,121	$	22.07
Granted	232,236	$	9.72
Vested	0	$	0
Canceled	(129,066)	$	21.28
Non-vested at end of year, May 31, 2021	376,291	$	14.72

During fiscal year 2021 and 2020, the Company granted performance unit awards. Performance unit awards subject to vesting are based on the Company's level of attainment of the performance targets which are set for each of the three

performance years ~~2017, 2016 and 2015, we~~along with continued employment of the grantee. At the end of the three year period, the vested shares are subject to modification based on the Company’s TSR targets relative to the percentage appreciation of a specified index of companies for the respective three-year period.

During fiscal year 2019, the Company granted performance unit awards that include a three-year market condition. Vesting of the performance unit awards is based on the Company's level of attainment of specified ~~total shareholder return ("TSR")~~TSR targets relative to the percentage appreciation of a specified index of companies for the respective three-year periods. It is also subject to the continued employment of the grantees.

In order to estimate the fair value of such awards, ~~we used~~ a Monte Carlo Simulation valuation model on the date of the ~~grant.~~grant was used. For the years ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015,~~2019, the weighted average grant date fair market value for new grants was ~~$22.61, $18.07~~$9.72, $14.06 and ~~$19.83,~~$28.62, respectively. Compensation cost is recognized over the performance period which is typically three years. As of May 31, ~~2017, 0.4 million performance share units with a weighted average remaining contractual term of 3 years and $4.2~~2021, there was $2.1 million of unrecognized compensation cost ~~were outstanding.~~

which is expected to be recognized over a weighted average period of 2 years.

Compensation Expense

The following tables represents the break out of share-based compensation included in the Company's consolidated statement of ~~operations.~~operations:


	For the year ended May 31,									Year ended May 31,
(in thousands)	2017			2016			2015		(in thousands)	2021		2020		2019
Cost of sales	$	299		$	172		$	143	Cost of sales	$	768	$	655	$	461
Research and development	314			349			229		Research and development	1,152		971		724
Sales and marketing	1,762			1,489			1,685		Sales and marketing	1,641		1,665		1,952
General and administrative	4,026			2,291			3,941		General and administrative	5,064		4,301		6,112
Acquisition, restructuring and other items, net	(218		)	(1,061		)	—
	$	6,183		$	3,240		$	5,998
										$	8,625	$	7,592	$	9,249

The income tax benefit on the compensation expense recognized for all share-based compensation arrangements was ~~$2.2~~$2.0 million, ~~$1.0~~$1.7 million and ~~$2.0~~$2.1 million for the years ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015,~~2019, respectively. The income tax benefit for ~~2017~~2021, 2020 and ~~2016~~2019 are negated by the full valuation allowance ~~established as of May 31, 2016.~~

recorded against the deferred tax assets.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (the “Stock Purchase Plan”) provides a means by which employees (the “participants”) are given an opportunity to purchase the Company's common stock through payroll deductions. A total of ~~2,500,000~~4,000,000 shares of common stock have been reserved for issuance under the Stock Purchase Plan. Shares are offered through ~~two~~2 purchase periods, each with duration of approximately 6 months, commencing on the first business day of the first and third fiscal quarters. An employee is eligible to participate in an offering period if, on the first day of an offering period, he or she has been employed in a full-time capacity for at least six months, with a customary working schedule of 20 or more hours per week and more than five months in a calendar year. Employees who own stock possessing 5% or more of the total combined voting power or value of all classes of stock are not eligible to participate in the Stock Purchase Plan. The purchase price of the shares of common stock acquired on each purchase date will be the lower of (i) 85% of the fair market value of a share of common stock on the first day of the offering period or (ii) 85% of the fair market value of a share of common stock on the last day of the purchase period, subject to adjustments made by the Board of Directors. The Stock Purchase Plan is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code. During the ~~year~~years ended May 31, ~~2015,~~2017, 2019 and 2021, an additional ~~800,000~~500,000, 1,000,000 and 500,000 shares of the Company's common stock, ~~have been~~respectively, were reserved for issuance under the Stock Purchase Plan. ~~During the year ended May 31, 2017, an additional 500,000 shares of the Company's common stock have been reserved for issuance under the Stock Purchase Plan.~~

The Company uses the Black-Scholes option-pricing model to calculate the purchase date fair value of the shares issued under the Stock Purchase Plan and recognize expense related to shares purchased ratably over the offering period. During the years ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015, 129,185, 137,957~~2019, 164,194, 100,567 and ~~119,001~~72,863 shares, respectively, were issued at an average price of ~~$11.00, $10.67~~$7.95, $12.11 and ~~$11.89,~~$16.08, respectively, under the Stock Purchase Plan. As of May 31, ~~2017, 1.3~~2021, 2.4 million shares remained available for future purchases under the Stock Purchase Plan.

~~Share Repurchases~~

On November 6, 2016, the Board of Directors approved the Repurchase Program under which they authorized the Company the option to repurchase up to $25.0 million of its outstanding common stock during the twenty-four month period ending November 6, 2018. During the second quarter of fiscal year 2017, the Company repurchased 500,000 shares of common stock in the open market at an aggregate cost of $7.8 million under the Repurchase Program. During the fourth quarter of fiscal year 2017, the Company repurchased 370,000 shares of common stock in the open market at an aggregate cost of $5.7 million under the Repurchase Program. As of May 31, 2017, $11.4 million remained available for repurchase under the Repurchase Program.

In February 2017, the Company retired 642,305 shares of treasury stock. These retired shares are now included in the Company’s pool of authorized but unissued shares. The retired stock had a carrying value of approximately $9.9 million and $0.01 was the par value that was deducted from common stock and the remaining $9.9 million was deducted from additional paid-in capital.

~~14.~~15. EARNINGS PER SHARE

Basic earnings per share are based on the weighted average number of common shares outstanding. In addition, diluted earnings per share include 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 basic loss per share as the impact would be anti-dilutive.

The following table reconciles basic to diluted weighted average shares outstanding for the years ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015:~~2019:


	Year ended May 31,
	2021	2020	2019
Basic	38,342,476	37,961,224	37,484,573
Effect of dilutive securities	0	0	0
Diluted	38,342,476	37,961,224	37,484,573

Securities excluded as their inclusion would be anti-dilutive	3,285,354	2,581,006	2,200,318

16. LEASES

For the year ended May 31,
2017 2016 2015
Basic 36,616,859
36,161,383
35,683,139
Effect of dilutive securities 342,391
—
—
Diluted 36,959,250
36,161,383
35,683,139

Securities excluded as their inclusion would be anti-dilutive 1,058,790
3,277,037
2,862,414
Adoption of ASU No. 2016-02, Leases (Topic 842)

~~15. COMMITMENTS AND CONTINGENCIES~~

~~Leases~~

On June 1, 2019, the Company adopted ASU No. 2016-02 using the modified retrospective approach. This ASU increases transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Comparative periods prior to adoption have not been retrospectively adjusted.

The Company elected the three practical expedients that permit an entity to a) not reassess whether expired or existing contracts contain leases, b) not reassess lease classification for existing or expired leases, and c) not consider whether previously capitalized initial direct costs would be appropriate under the new standard. Further, the Company has elected to not recognize leases with terms of 12 months or less on the balance sheet, and elected to account for lease and non-lease components as a single component for certain classes of assets.

The adoption of this standard resulted in the recording of an additional lease asset and lease liability of approximately $5.6 million. The standard did not have a material impact on the Company's Consolidated Statement of Operations, Stockholders Equity or Cash Flows.

Leases

The Company determines if an arrangement is ~~committed under non-cancelable~~a lease at inception of the contract. The Company has operating leases for ~~facilities~~buildings, primarily for office space, R&D, manufacturing and ~~equipment.~~ 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	May 31, 2021		May 31, 2020
Assets
Operating lease ROU asset	Other assets	$	9,382	$	10,146
Liabilities
Current operating lease liabilities	Other current liabilities	2,415		2,077
Non-current operating lease liabilities	Other long-term liabilities	7,319		8,345
Total lease liabilities		$	9,734	$	10,422

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:


	May 31, 2021		May 31, 2020
Weighted average remaining term (in years)	4.12		5.00
Weighted average discount rate	3.8	%	4.2	%

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


(in thousands)	May 31, 2021
2021	$	2,735
2022	2,787
2023	2,209
2024	1,454
2025	1,148
2026 and thereafter	171
Total lease payments	$	10,504
Less: Imputed Interest	770
Total lease obligations	$	9,734
Less: Current portion of lease obligations	2,415
Long-term lease obligations	$	7,319

During ~~fiscal 2017, 2016~~the years ended May 31, 2021 and ~~2015, aggregate rental costs under all~~May 31, 2020, the Company recognized operating lease expense which includes immaterial short-term leases ~~were approximately $2.5 million, $2.5~~of $3.2 million and $3.4 million, respectively. ~~Future annual payments under non-cancelable operating leases in~~Rent expense prior to adoption of ASC 842 amounted to $2.5 million for the ~~aggregate, of which one includes an escalation clause, with initial remaining terms of more than one~~ year atended May 31, ~~2017, are summarized~~2019.

As of May 31, 2021 and 2020, the expenses on the Consolidated Statement of Operations were classified as ~~follows (in thousands):~~follows:


(in thousands)	May 31, 2021		May 31, 2020
Cost of sales	$	820	$	1,138
Research and development	857		583
Sales and marketing	407		397
General and administrative	1,123		1,233
	$	3,207	$	3,351

The following table presents supplemental cash flow and other information related to leases for the year ended May 31, 2021 and 2020:


(in thousands)	May 31, 2021		May 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,698	$	2,372
ROU assets obtained in exchange for lease liabilities
Operating leases	1,585		6,918

(in thousands)
2018 $ 2,214
2019 2,066
2020 1,860
2021 1,025
2022 and thereafter 2,552
$ 9,717

17. COMMITMENTS AND CONTINGENCIES

Other Commitments and Contingencies

The following table summarizes the Company's other future commitments and contingencies as of May 31, ~~2017.~~2021:


(in thousands)	Total		2022		2023		2024		2025		2026 and thereafter
Purchase obligations (1)	$	4,697	$	4,697	$	0	$	0	$	0	$	0
Royalties (2)	47,700		3,800		3,800		3,800		3,800		32,500

	$	52,397	$	8,497	$	3,800	$	3,800	$	3,800	$	32,500

(1) The non-cancelable inventory purchase obligations are not reflected on the consolidated balance sheets under accounting principles generally accepted in the United States of America.

(in thousands) Total 2018 2019 2020 2021 2022 and thereafter
Purchase obligations (1) $ 49,762
$ 8,443
$ 8,726
$ 9,162
$ 8,709
$ 14,722
Royalties 44,000
2,500
3,000
3,500
3,500
31,500
Other 834
167
167
167
167
166
$ 94,596
$ 11,110
$ 11,893
$ 12,829
$ 12,376
$ 46,388


~~(1)~~	~~The non-cancelable inventory purchase obligations are not reflected on our consolidated balance sheets under accounting principles generally accepted in the United States of America.~~

(2) These are future minimum royalty payments.

Legal Proceedings

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

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

On January 11, 2012, C.R. Bard, Inc. (“Bard”) filed a suit in the United States District Court of Utah claiming certain of ~~our~~the Company's implantable port products infringe on ~~three~~3 U.S. patents held by Bard ~~(the "Utah Action"~~(US Patent Nos. 7,785,302, 7,959,615 (“615”) and 7,947,022). ~~Bard is seeking unspecified damages and other relief.~~ The Court denied Bard’s motion for pre-trial consolidation with separate actions it filed on the same day against Medical Components, Inc. and Smiths Medical ASD, Inc., but had asked for supplemental briefing on the issue of whether to conduct a common Markman hearing. Meanwhile, we filed petitions forcase was stayed pending reexamination in the US Patent and Trademark Office ("~~PTO"~~USPTO") ~~which seek to invalidate all three patents asserted by Bard in~~. Following the ~~litigation. Our petitions were granted and 40 of Bard's 41 patent claims were rejected and, following further~~reexamination proceedings, the Patent Office issued a Final Rejection of all 40 claims subject to reexamination. Thereafter, Bard filed appeals to the PTO Board of Appeals and Interferences for all three reexams. The parties completed briefing on the appeals and oral argument was held on June 18, 2015. The Patent Office issued decisions in the three appeals. In one (issued on March 11, 2016 for US Patent No. 7,785,302), the rejections of six of the ten claims under reexamination were affirmed, but were reversed on four of the ten claims. In the second (issued on March 24, 2016 for U.S. Patent No. 7,959,615), the rejections of eight of the ten claims under reexamination were affirmed but the rejections of the other two of the ten claims were reversed. In the third (issued on March 29 for U.S. Patent No. 7,947.022) the rejections of all twenty claims under reexamination were affirmed. Bard has since filed Requests for Rehearing in all three reexamination appeals and the ~~Company filed Requests for Rehearing in two of the reexamination~~parties’ related appeals (the ‘302 and ‘615 patent reexaminations). Each party has filed comments in Opposition to the other party’s Rehearing Requests,. The PTO has since issued decisions denying all Rehearing Requests - - on February 1, 2017 for the ‘302; on February 17, 2017 for the ‘022; and on February 21, 2017 for the ‘615. In the ‘302 and ‘022, the PTO modified its characterization of one prior art reference. Bard has since filed a Notice of Appeal to the Federal Circuit ~~Court~~which resulted in further proceedings at the USPTO, certain claims of ~~Appeals in all three reexams~~the 615 patent were held invalid, while the remaining claims of the 615 patent and ~~we filed Cross-Appeals~~the other 2 patents were upheld over the prior art references considered in the ~~‘302~~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”). A scheduling order was entered on March 23, 2021. The Company filed a Motion to Amend its Answer and ~~the ‘615 reexams.~~Counterclaims on April 14, 2021. This motion seeks to add counterclaims for infringement of U.S. Patent Nos. 9,168,365; 9,895,523; and 10,632,295, as well as a counterclaim of inequitable conduct, and remains pending. The ~~parties are in the process of preparing and filing the various appellate briefs, starting with Bard’s Opening Brief which is currently due~~Company served its initial invalidity contentions on July ~~31, 2017 and ending~~2, 2021, consistent with ~~our Reply Brief which is currently due on November 6, 2017.~~the scheduling order. The ~~Utah Action has been stayed pending final resolution of the PTO process. We believe~~

Company believes these claims are without merit and ~~intend~~intends to defend them vigorously. ~~We have~~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, ~~C.R.~~ Bard ~~Inc.~~ and Bard Peripheral Vascular ~~Inc. (“Bard”)~~ filed suit in ~~the United States District Court for~~ the District of Delaware claiming certain of ~~our~~the Company's implantable port products infringe on ~~three~~3 U.S. patents held by Bard ~~(the “Delaware Action)~~(US Patent Nos. 8,475,417, 8,545,460, 8,805,478). The case proceeded through trial which began on March 4, 2019. On day four of the jury trial, 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 ~~is seeking unspecified damages~~appealed the judgment to the Federal Circuit and ~~other relief.~~on November 10, 2020, the Federal Circuit reversed the judgment in part with respect to Section 101, and vacated and remanded the trial court’s invalidity and non-infringement judgments. The ~~patents asserted in the Delaware Action are different than those asserted in the Utah Action.~~Company filed a combined Petition for rehearing and rehearing en banc on December 10, 2020, which was denied on January 15, 2021. The Federal Circuit issued its mandate on January 22, 2021. On ~~June 1, 2015, we filed two motions in response to Bard’s Complaint - one sought transfer to~~March 15, 2021, the District of ~~Utah where~~Delaware entered an order requiring the ~~Utah Action is currently pending,~~parties to submit status reports and denied as moot the ~~other sought dismissal of the entire complaint on grounds that none of the claims in the asserted patents is directed to patent eligible subject matter under Section 101 of the Patent Statute~~Company’s motion for attorney’s fees and in light of recent authority from the U. S. Supreme Court. On January 12, 2016, the court issued a decision denying both motions. We have since served an Answer and Counterclaim to which Bard has served a Reply. On March 10, 2016, the Court held a case management conference, and,expenses. The parties submitted status reports on March ~~14, 2016, the court entered a Scheduling Order which set, inter alia, a Markman hearing for March 10, 2017, a summary judgment hearing for December 8, 2017 and trial for March 12, 2018.~~29, 2021. The ~~parties have served various discovery requests on each other, and have been producing documents to each other; on May 27, 2016 Bard served~~matter remains pending. The Company maintains its Infringement Contentions which identified all the port products accused of infringement; and, on June 24, 2016, we served Invalidity Contentions which detail various grounds for invalidating the three asserted patents. The parties completed briefing on the claim construction issues and the Markman hearing was held on March 10, 2017 and the Court issued its Claim Construction Order on May 19, 2017. The Court has since amended the Scheduling Order to provide for the completion of Expert Discovery on October 30, 2017; briefing on Case-Dispositive Motions between November 17, 2017 and January 24, 2018 with oral argument set for February 22, 2018 and trial to commence May 29, 2018. We believe thesebelief that Bard’s claims are without ~~merit and intend to defend them vigorously. We have~~merit. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

On March 8, 2021, Bard filed suit in the District of Delaware asserting certain of the Company’s port products (including certain related infusion sets) infringe U.S. Patent Nos. 8,025,639, 9,603,992 (“992”) and 9,603,993 (“993”). On May 20, 2021, the Company filed a Motion to Dismiss Bard’s claims with respect to the 992 and 993 patents, and the motion remains pending. The Company maintains its belief that Bard’s claims are without merit. The Company has not recorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonably estimable.

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

On May 30, 2017, wethe 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, ~~we allege~~the Company alleges that Bard has illegally tied the sales of its tip location systems to the sales of its PICCs. ~~We allege~~The Company alleges that this practice violates the federal antitrust laws and has had, and continues to have, an anti-competitive effect in the market for PICCs. ~~We seek~~The Company seeks both monetary damages and injunctive relief. ~~The~~Bard moved to dismiss on September 8, 2017. On August 6, 2018 the court denied Bard’s motion in its entirety. Bard made a motion for summary judgment which was denied in its entirety in a decision issued by the Court ~~has set~~on May 5, 2021. Bard also raised a series of challenges targeted at one of AngioDynamics’ expert witnesses, which the Court denied in part and granted in part in decisions on May 5, 2021 and June 11, 2021. Discovery is largely complete, and the case is expected to proceed to trial in 2022.

Merz North America Settlement

On May 16, 2019, Merz North America, Inc. (“Merz”) commenced an ~~initial case management conference for August 29, 2017.~~

~~Governmental Investigations~~

In June 2014 we received a subpoena from the U.S. Department of Justice (the “DOJ”) requesting documents in relation to a criminal and civil investigation the DOJ is conducting regarding BTG International, Inc.’s LC Bead® product beginning in 2003. RITA Medical Systems and AngioDynamics, Inc., after its acquisition of RITA, was the exclusive distributor of LC Beadsaction in the United States ~~from 2006 through December 31, 2011. We are cooperating fully~~District Court for the Southern District of New York entitled Merz North America, Inc. v. AngioDynamics, Inc. In this action, Merz alleged breach of contract against AngioDynamics based on a March 1, 2016 Distribution Agreement. On June 28, 2019, AngioDynamics reached a settlement with ~~this investigation.~~Merz. AngioDynamics made a lump-sum payment of $2.5 million to Merz in return for dismissal of the case with prejudice during the first quarter of fiscal year 2020. The case was subsequently dismissed.

~~16.~~18. SEGMENTS AND GEOGRAPHIC INFORMATION

Segment information

The Company considers its business to be a single segment entity related to the development, manufacture and sale on a global basis of medical devices for vascular access, surgery, peripheral vascular disease and oncology. The Company's chief operating decision maker (CEO) evaluates the various global product portfolios on a net sales basis. Executives reporting in to the CEO include those responsible for operations and supply chain management, research and development, sales, franchise

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

Total sales by product category are summarized ~~below (in thousands):~~below:


	For the year ended May 31,							Year ended May 31,
(in thousands)	2017		2016		2015		(in thousands)	2021		2020		2019
Net sales by Product Category							Net sales by Product Category
Peripheral Vascular	$	208,602	$	205,620	$	196,890
Endovascular Therapies							Endovascular Therapies	$	135,079	$	112,706	$	119,901
Vascular Access	96,481		99,375		107,754		Vascular Access	101,310		94,299		94,730

Oncology/Surgery	44,560		48,895		51,890		Oncology/Surgery	54,621		57,152		56,003
Total	$	349,643	$	353,890	$	356,534	Total	$	291,010	$	264,157	$	270,634

Geographic information

Total sales for geographic areas are summarized ~~below (in thousands):~~below:


	For the year ended May 31,							Year ended May 31,
(in thousands)	2017		2016		2015		(in thousands)	2021		2020		2019
Net sales by Geography							Net sales by Geography
United States	$	282,168	$	285,824	$	284,122	United States	$	237,043	$	207,980	$	216,957
International	67,475		68,066		72,412		International	53,967		56,177		53,677
Total	$	349,643	$	353,890	$	356,534	Total	$	291,010	$	264,157	$	270,634

For fiscal years ~~2017, 2016~~2021, 2020 and ~~2015, International~~2019, international sales as a percentage of total net sales were 19%, ~~19%~~21% and 20%, 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. 99% of long-lived assets are located within the United States.

~~17.~~19. ACQUISITION, RESTRUCTURING AND OTHER ITEMS, NET

~~For the years ended May 31, 2017, 2016 and 2015 acquisition,~~Acquisition, restructuring and other items, net consisted of:



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)~~	~~(Zip Code)~~



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $.01 per share	ANGO	NASDAQ Global Select Market



Report of Independent Registered Public Accounting Firms									5849
Consolidated statements of operations—Year ended May 31, ~~2017, 2016~~202 1 , 20 20 and ~~2015~~20 19									6051
Consolidated statements of comprehensive income (loss) –- Year ended May 31, ~~2017, 2016~~202 1 , 20 20 and ~~2015~~20 19									6152
Consolidated balance sheets—May 31, ~~2017~~202 1 and May 31, ~~2016~~20 20									6253
Consolidated statements of stockholders’ equity—Year ended May 31, ~~2017, 2016~~2021, 2020 and ~~2015~~2019									6354
Consolidated statements of cash flows—Year ended May 31, ~~2017, 2016~~202 1 , 20 20 and ~~2015~~20 19									6455
Notes to consolidated financial statements									6657



x☒		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	~~For the fiscal year ended May 31, 2017~~



¨☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	~~For the transition period from to~~


				Page
Part I:				~~Page~~
~~Part I:~~
Item 1.	Business		2
Item 1A.		Risk Factors		1516
Item 1B.		Unresolved Staff Comments		3229
Item 2.		Properties		3329
Item 3.		Legal Proceedings		3429
Item 4.		Mine Safety Disclosures		3529
Part II:
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity		3530
Item 6.		Selected Financial Data		3731
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		3832
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		5143
Item 8.		Financial Statements and Supplementary Data		5143
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		5143
Item 9A.		Controls and Procedures		5144
Item 9B.		Other Information		5546
Part III:
Item 10.		Directors, Executive Officers and Corporate Governance		5647
Item 11.		Executive Compensation		5647
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		5647
Item 13.		Certain Relationships and Related Transactions, and Director Independence		5647
Item 14.		Principal Accounting Fees and Services		5647
Part IV:
Item 15.		Exhibits, Financial Statement Schedules		5748


•	~~BioFlo~~^® ~~PICC~~: Our BioFlo line is the only power injectable PICC available that incorporates Endexo Technology into the manufacturing and design of the catheter. Advanced features such as large lumen diameters allow the BioFlo^® ~~PICC to deliver the power injection flow rates required for contrast-enhanced Computed Tomography (CT) scans compatible with up to 325 psi CT injections.~~


•	~~BioFlo~~^® ~~Midline:~~ The BioFlo Midline Catheter is an effective solution to preserving a patient’s peripheral access. It provides a cost-effective alternative to multiple IV site rotations for patients who need short-term venous access.


•	~~Xcela PICC: The Xcela~~^® ~~PICC line is designed to provide a high degree of safety, ease and confidence in patient care. Advanced features such as large lumen diameters allow the Xcela~~^® ~~PICC to deliver the power injection flow rates required for contrast-enhanced CTs compatible with up to 325 psi CT injections.~~


•	~~PASV~~^® ~~Valve Technology:~~ ~~The PASV~~^® ~~Valve Technology is available in both BioFlo and Xcela lines and is designed to automatically resist backflow and reduce blood reflux that could lead to catheter-related complications.~~


•	~~BioFlo~~^® ~~Port~~: Our BioFlo Port is the only port available that features a catheter with Endexo Technology. Advanced features of the BioFlo Port include multiple profile and catheter options, a large septum area for ease of access and the ability to administer contrast through a CT injection for purposes of imaging.


•	~~Vortex~~^®: Our Vortex port technology line of ports is a clear-flow port technology that, we believe, revolutionized port design. With its rounded chamber, the Vortex port is designed to have no sludge-harboring corners or dead spaces. This product line consists of titanium, plastic and dual-lumen offerings.


•	~~LifeGuard~~^®: The LifeGuard Safety Infusion Set and The LifeGuard Vision are used to infuse our ports and complement our port and vascular access catheters. The needles’ low profile design is intended to allow clinicians to easily dress the site.



~~Item 1.~~	~~Business.~~



~~Item 1A.~~	~~Risk Factors.~~


•	~~BioFlo~~^®~~DuraMax~~: Our BioFlo DuraMax is the only dialysis catheter with Endexo Technology. Advanced features of the BioFlo DuraMax dialysis catheter include large inner diameter lumens designed for long term patency, a proprietary guidewire lumen to facilitate catheter exchanges and Curved Tip Technology that allows the catheter to self-center in the Superior Vena Cava (SVC).


•	~~DuraMax~~^®: ~~The DuraMax catheter is a stepped-tip catheter designed to improve ease of use, dialysis efficiency and overall patient outcomes.~~



	Year ended May 31,
(in thousands, except per share information)	2017			2016			2015			2014			2013
Consolidated Statements of Operations Data:
Net sales	$	349,643		$	353,890		$	356,534		$	354,425		$	341,916
Gross profit (exclusive of intangible amortization)	176,169			174,316			175,796			180,174			168,514
Operating expenses
Research and development	25,269			25,053			26,594			28,124			26,091
Sales and marketing	78,819			83,743			82,351			85,696			77,790
General and administrative	31,406			30,583			30,031			26,511			25,809
Amortization of intangibles	17,296			17,964			17,966			16,562			16,599
Change in fair value of contingent consideration	(15,261		)	948			(8,096		)	(1,908		)	1,583
Acquisition, restructuring and other items, net (a)	27,510			12,591			26,257			10,873			13,800
Medical device excise tax	(1,837		)	2,416			4,142			3,829			1,600
Total operating expenses	163,202			173,298			179,245			169,687			163,272
Operating income (loss)	12,967			1,018			(3,449		)	10,487			5,242
Total other (expenses), net	(3,120		)	(4,271		)	(4,682		)	(5,301		)	(6,579		)
Net income (loss)	$	5,008		$	(43,590	)	$	(3,388	)	$	2,347		$	(1,051	)
Earnings (loss) per share
Basic	$	0.14		$	(1.21	)	$	(0.09	)	$	0.07		$	(0.03	)
Diluted	$	0.14		$	(1.21	)	$	(0.09	)	$	0.07		$	(0.03	)



	As of May 31,
(in thousands)	2017		2016		2015		2014		2013
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	48,759	$	33,986	$	20,080	$	17,914	$	23,955
Working capital	82,398		79,527		90,283		81,071		71,643
Total assets	707,961		726,194		773,058		798,576		790,561
Long-term debt, including current portion (1)	96,320		120,541		137,660		142,660		142,500
Contingent consideration (2)	12,761		38,275		47,384		67,231		75,049
Total long-term liabilities	121,418		152,239		167,444		195,750		201,317
Total stockholders’ equity	515,027		507,228		545,099		536,885		526,324



	For year ended May 31,
(in thousands)	2017			2016
Income tax expense (benefit)	$	4.8		$	40.3
Effective tax rate including discrete items	49		%	(1,240		)%



	May 31, 2017			May 31, 2016
Assets
Current Assets
Cash and cash equivalents	$	47,544		$	32,333
Marketable securities, at fair value	1,215			1,653
Accounts receivable, net of allowances of $2,945 and $4,372, respectively	44,523			52,867
Inventories	54,506			55,370
Prepaid income taxes	336			788
Prepaid expenses and other	5,790			3,243
Total current assets	153,914			146,254
Property, plant and equipment, net	45,234			48,284
Other assets	1,886			3,827
Intangible assets, net	145,675			166,577
Goodwill	361,252			361,252
Total Assets	$	707,961		$	726,194
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	18,087		$	15,616
Accrued liabilities	38,804			21,942
Current portion of long-term debt	5,000			16,250
Current portion of contingent consideration	9,625			12,919
Total current liabilities	71,516			66,727
Long-term debt, net of current portion	91,320			104,291
Deferred income taxes	26,112			21,684
Contingent consideration, net of current portion	3,136			25,356
Other long-term liabilities	850			908
Total Liabilities	192,934			218,966
Commitments and Contingencies (Note 15)
Stockholders’ Equity
Preferred stock, par value $.01 per share, 5,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, par value $.01 per share, 75,000,000 shares authorized; 37,210,091 and 36,420,403 shares issued and 36,840,091 and 36,278,098 shares outstanding at May 31, 2017 and 2016, respectively	367			363
Additional paid-in capital	532,705			525,775
Accumulated deficit	(11,007		)	(16,015		)
Treasury stock, 370,000 and 142,305 shares, at cost at May 31, 2017 and 2016, respectively	(5,714		)	(2,104		)
Accumulated other comprehensive loss	(1,324		)	(791		)
Total Stockholders' Equity	515,027			507,228
Total Liabilities and Stockholders' Equity	$	707,961		$	726,194



	Financial Assets			Financial Liabilities
(in thousands)	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance at May 31, 2016	$	1,653		$	38,275
Change in fair value of contingent consideration, net (1)	—			(15,261		)
Currency (gain) loss from remeasurement	—			(153		)
Fair market value adjustments	12			—
Sale of securities	(450		)	—
Contingent consideration payments	—			(10,100		)
Balance at May 31, 2017	$	1,215		$	12,761



	Amortized cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
(in thousands)
Available-for-sales securities
New York State government agency obligations	$	1,350	$	—	$	(135	)	$	1,215
	$	1,350	$	—	$	(135	)	$	1,215



(in thousands)
2018	$	16,500
2019	16,132
2020	14,578
2021	13,627
2022	12,952
2023 and thereafter	71,886
	$	145,675



		~~Total estimated amount expected to be incurred (in millions)~~
~~Termination benefits~~		~~$1.75 to $2.25~~
~~Plant consolidation~~ ~~(1)~~		~~$2.25 to $2.50~~
~~Regulatory filings~~		~~$0.75 to $1.00~~
~~Contract cancellations~~		~~$0.75 to $1.00~~
~~Other~~		~~$0.75 to $1.00~~
		~~$6.25 to $7.75~~



								Contract
	Termination		Plant			Regulatory		Cancellation		Other
	Benefits		Consolidation			Filings		Costs		Costs			Total
(in thousands)
Balance at May 31, 2016	$	—	$	—		$	—	$	—	$	—		$	—
Charges	851		494			—		—		3			1,348
Non-cash adjustments	—		(108		)	—		—		—			(108		)
Cash payments	—		(275		)	—		—		(3		)	(278		)
Balance at May 31, 2017	$	851	$	111		$	—	$	—	$	—		$	962



(in thousands)	Foreign currency translation gain (loss)			Unrealized gain (loss) on marketable securities			Unrealized gain (loss) on interest rate swap			Total
Balance at May 31, 2015	$	(648	)	$	(23	)	$	(162	)	$	(833	)
Other comprehensive income (loss) before reclassifications, net of tax	(112		)	(8		)	162			42
Amounts reclassified from accumulated other comprehensive income	—			—			—			—
Net other comprehensive income (loss)	$	(112	)	$	(8	)	$	162		$	42
Balance at May 31, 2016	$	(760	)	$	(31	)	$	—		$	(791	)
Other comprehensive income (loss) before reclassifications, net of tax	(545		)	12			—			(533		)
Amounts reclassified from accumulated other comprehensive income	—			—			—			—
Net other comprehensive income (loss)	$	(545	)	$	12		$	—		$	(533	)
Balance at May 31, 2017	$	(1,305	)	$	(19	)	$	—		$	(1,324	)



	2017
	First quarter		Second quarter		Third quarter		Fourth quarter
(in thousands, except per share data)
Net sales	$	88,098	$	89,029	$	85,602	$	86,914
Gross profit	45,032		45,010		43,792		42,335
Net income (loss) (1)	1,300		13,734		2,887		(12,913		)
Earnings (loss) per common share
Basic	0.04		0.37		0.08		(0.35		)
Diluted	0.04		0.37		0.08		(0.35		)


	SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS
	(in thousands)
Column A	Column B		Column C			Column D			Column E
(in thousands)											(in thousands)	SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS
Description	Balance at Beginning of Year		Additions - Charged to costs and expenses			Deductions			Balance at End of Period		Description	Balance at Beginning of Year		Additions - Charged to costs and expenses		Deductions		Balance at End of Period
Year Ended May 31, 2015
Year Ended May 31, 2019											Year Ended May 31, 2019
Allowance for deferred tax asset	$	1,531	$	467		$	(207	)	$	1,791	Allowance for deferred tax asset	$	26,607	$	0	$	(14,919)	$	11,688
Allowance for sales returns and doubtful accounts	$	1,736	$	1,846		$	(539	)	$	3,043	Allowance for sales returns and doubtful accounts	$	2,466	$	393	$	(953)	$	1,906
Year Ended May 31, 2016

Year Ended May 31, 2020											Year Ended May 31, 2020
Allowance for deferred tax asset	$	1,791	$	40,685		$	(267	)	$	42,209	Allowance for deferred tax asset	$	11,688	$	1,426	$	0	$	13,114
Allowance for sales returns and doubtful accounts	$	3,043	$	3,748		$	(2,419	)	$	4,372	Allowance for sales returns and doubtful accounts	$	1,906	$	1,218	$	(974)	$	2,150
Year Ended May 31, 2017

Year Ended May 31, 2021											Year Ended May 31, 2021
Allowance for deferred tax asset	$	42,209	$	6,139		$	—		$	48,348	Allowance for deferred tax asset	$	13,114	$	3,921	$	0	$	17,035
Allowance for sales returns and doubtful accounts	$	4,372	$	(291	)	$	(1,136	)	$	2,945	Allowance for sales returns and doubtful accounts	$	2,150	$	1,833	$	(2,064)	$	1,919


Date:			July 27, 2021	/S/ HOWARD W. DONNELLY
				Howard W. Donnelly,
				Chairman of the Board, Director

Date:			July 27, 2021	/S/ JAMES C. CLEMMER
				James C. Clemmer,
				President, Chief Executive Officer (Principal Executive Officer)

Date:			July 27, 2021	/S/ STEPHEN A. TROWBRIDGE
				Stephen A. Trowbridge,
				Executive Vice President, Chief Financial Officer, (Principal Financial and Accounting Officer)

Date:			July 27, 2021	/S/ WESLEY E. JOHNSON, JR.
				Wesley E. Johnson, Jr.,
				Director


~~Date:~~			~~August 4, 2017~~	/S~~/ HOWARD~~ ~~W. DONNELLY~~
		~~Howard W. Donnelly,~~
		~~Chairman of the Board, Director~~

~~Date:~~	~~August 4, 2017~~	/S~~/ JAMES C. CLEMMER~~
		~~James C. Clemmer,~~
		~~President, Chief Executive Officer~~ ~~(Principal Executive Officer)~~

~~Date:~~	~~August 4, 2017~~	/S~~/ MICHAEL C. GREINER~~
		~~Michael C. Greiner~~
		~~Executive Vice President, Chief Financial Officer, (Principal Financial and Principal Accounting Officer)~~

~~Date:~~	~~August 4, 2017~~	/S~~/ WESLEY~~ ~~E. JOHNSON, J~~R.
		~~Wesley E. Johnson, Jr.,~~
		~~Director~~

~~Date:~~	~~August 4, 2017~~	/S~~/ JEFFREY~~ ~~G. GOLD~~
		~~Jeffrey G. Gold,~~
		~~Director~~

~~Date:~~	~~August 4, 2017~~	/S~~/ DENNIS~~ ~~S. METENY~~
		~~Dennis S. Meteny,~~
		~~Director~~

~~Date:~~	~~August 4, 2017~~	/S~~/ STEVEN R.~~ LAP~~ORTE~~
		~~Steven R. LaPorte,~~
		~~Director~~

~~Date:~~	~~August 4, 2017~~	/S~~/ KEVIN~~ ~~J. GOULD~~
		~~Kevin J. Gould,~~
		~~Director~~

~~Date:~~	~~August 4, 2017~~	/S~~/ JAN REED~~
		~~Jan Reed,~~
		~~Director~~

~~Date:~~	~~August 4, 2017~~	/S~~/ EILEEN AUEN~~
		~~Eileen Auen,~~
		~~Director~~



~~(b)~~		~~Exhibits~~
~~2.1~~	Stockholders Agreement, dated as of May 22, 2012, among AngioDynamics, Inc. and the stockholders set forth on the signature pages thereto (incorporated by reference to Exhibit 2.2 of the Company’s current report on Form 8-K filed with the Commission on May 25, 2012).
~~2.2~~	Stock Purchase Agreement, dated as of October 8, 2012, by and among AngioDynamics, Inc., Vortex Medical, Inc. (“Vortex”), the stockholders of Vortex set forth on the signature pages thereto, the option holders of Vortex set forth on the signature pages thereto and CHTP Management Services, Inc., as sellers’ representative (incorporated by reference to Exhibit 2.1 of the Company’s current report on Form 8-K, filed with the Commission on October 12, 2012).
~~3.1.1~~	~~Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s quarterly report on Form 10-Q, filed with the Commission on October 7, 2005).~~
~~3.1.2~~	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of AngioDynamics, Inc. (incorporated by reference to Exhibit 3.1.2 of the Company's Annual Report on Form 10-K, filed with the Commission on August 10, 2015).
~~3.2~~	Second Amended and Restated By-Laws, effective October 16, 2015 (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K, filed with the Commission on October 21, 2015).
~~10.1~~	Credit Agreement, dated as of November 7, 2016, by and among AngioDynamics, Inc., the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A. and Keybank National Association as co-syndication agents, and JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Keybank National Association as joint bookrunners and joint lead arrangers (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K, filed with the Commission on November 10, 2016).
~~10.1.1~~	AngioDynamics, Inc. 1997 Stock Option Plan, as amended by the Board and Shareholders on February 27, 2004 (incorporated by reference to Exhibit 10.2 of the Company’s registration statement on Form S-1, filed on March 5, 2004).
~~10.1.2~~	AngioDynamics, Inc. 2004 Stock and Incentive Award Plan (as amended) (incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Commission on September 15, 2016).
~~10.1.3~~	AngioDynamics 2013 Total Shareholder Return Performance Unit Agreement Program (incorporated by reference to Exhibit 10.2 of the Company's current report on Form 8-K filed with the Commission on November 5, 2013).
~~10.1.4~~	AngioDynamics 2014 Total Shareholder Return Performance Unit Agreement Program (incorporated by reference to Exhibit 10.1.4 of the Company's Annual Report on Form 10-K filed with the Commission on January 12, 2015).
~~10.1.5~~	AngioDynamics 2015 Total Shareholder Return Performance Unit Agreement Program (incorporated by reference to Exhibit 10.1.5 of the Company’s Annual Report on Form 10-K filed with the Commission on August 10, 2015).
~~10.1.6~~	AngioDynamics 2016 Total Shareholder Return Performance Unit Agreement Program (incorporated by reference to Exhibit 10.1.6 of the Company’s Annual Report on Form 10-K filed with the Commission on August 1, 2016).
~~10.2~~	AngioDynamics, Inc. Employee Stock Purchase Plan (as amended) (incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Commission on September 15, 2016).
~~10.3~~	Form of Non-Statutory Stock Option Agreement pursuant to the AngioDynamics, Inc. Stock and Incentive Award Plan (incorporated by reference to Exhibit 10.1 of the Company’s quarterly report on Form 10-Q, filed with the Commission on October 12, 2004).
~~10.4.1~~	Form of 2013 Performance Share Award Agreement pursuant to the AngioDynamics, Inc. 2004 Stock and Incentive Award Plan (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K, filed with the Commission on May 12, 2005).
~~10.4.2~~	Form of 2014 Performance Share Award Agreement pursuant to the AngioDynamics, Inc. 2004 Stock and Incentive Award Plan (incorporated by reference to Exhibit 10.4.2 of the Company's Annual Report on Form 10-K filed with the Commission on January 12, 2015).
~~10.4.3~~	Form of 2015 Performance Share Award Agreement pursuant to the AngioDyanmics, Inc. 2004 Stock and Incentive Award Plan (incorporated by reference to Exhibit 10.4.3 of the Company’s Annual Report on Form 10-K filed with the Commission on August 10, 2015).



~~10.4.4~~		Form of 2016 Performance Share Award Agreement pursuant to the AngioDyanmics, Inc. 2004 Stock and Incentive Award Plan (incorporated by reference to Exhibit 10.4.3 of the Company’s Annual Report on Form 10-K filed with the Commission on August 1, 2016).
~~10.5~~Date:		Form of Restricted Stock Award Agreement pursuant to the AngioDynamics, Inc. 2004 Stock and Incentive Award Plan (incorporated by reference to the Company’s current report on Form 8-K, filed with the Commission on May 12, 2005).	July 27, 2021	/S/ DENNIS S. METENY
~~10.6~~		~~Rita Medical Systems, Inc. 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.2 of Rita Medical Systems registration statement on Form S-1, filed with the Commission on May 3, 2000)~~		Dennis S. Meteny,
~~10.7~~		Horizon Medical Products, Inc. 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.11 of Horizon Medical Products’ registration statement on Form S-1, filed with the Commission on February 13, 1998.
~~10.8~~	~~Rita Medical Systems, Inc. 2000 Stock Plan (incorporated by reference to Exhibit 10.3 of Rita Medical Systems registration statement on Form S-1/A, filed with the Commission on June 14, 2000).~~
~~10.9~~	Rita Medical Systems, Inc. 2000 Directors’ Stock Plan, as amended on June 8, 2005 (incorporated by reference to Exhibit 99.2 of Rita Medical System’s registration statement on Form S-8, filed with the Commission on July 8, 2005).
~~10.10~~	Rita Medical Systems, Inc. 2005 Stock and Incentive Plan (incorporated by reference to Exhibit 99.1 of Rita Medical System’s registration statement on Form S-8, filed with the Commission on July 8, 2005).
~~10.11~~	~~Form of Indemnification Agreement of AngioDynamics, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K, filed with the Commission on May 12, 2006).~~
~~10.11.1~~	Employment Agreement, dated April 1, 2016, between AngioDynamics, Inc. and James C. Clemmer (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K, filed with the Commission on April 6, 2016).
~~10.11.2~~	Employment Agreement, dated August 18, 2016, between AngioDynamics, Inc. and Michael C. Greiner (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K, filed with the Commission on July 25, 2016).
~~10.12~~	Change in Control Agreement, dated April 1, 2016, between AngioDynamics, Inc. and James C. Clemmer (incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K, filed with the Commission on April 6, 2016).
~~10.12.1~~	~~Form of Severance Agreement of AngioDynamics, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s current report on form 8-K, filed with the Commission on October 31, 2007).~~
~~10.13~~	~~Form of Change in Control Agreement (incorporated by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K filed with the Commission on January 12, 2015).~~
~~10.13.1~~	Change in Control Agreement, dated August 18, 2016, between AngioDynamics, Inc. and Michael C. Greiner (incorporated by reference to Exhibit 10.3 of the Company’s quarterly report on Form 10-Q, filed with the Commission on October 5, 2016).
~~10.14~~	Performance Share Award Agreement, with a grant date of April 4, 2016, between AngioDynamics, Inc. and James C. Clemmer (incorporated by reference to Exhibit 10.3 of the Company’s current report on Form 8-K, filed with the Commission on April 6, 2016).
~~10.15~~	AngioDynamics, Inc. Total Shareholder Return Performance Share Award Program - Performance Period Ending July 2019 (incorporated by reference to Exhibit 10.4 of the Company’s current report on Form 8-K, filed with the Commission on April 6, 2016).
~~10.16~~	Stock Option Award Agreement, with a grant date of April 4, 2016, between AngioDynamics, Inc. and James C. Clemmer (incorporated by reference to Exhibit 10.5 of the Company’s current report on Form 8-K, filed with the Commission on April 6, 2016).
~~10.17~~	Restricted Stock Unit Award Agreement, with a grant date of April 4, 2016, between AngioDynamics, Inc. and James C. Clemmer (incorporated by reference to Exhibit 10.6 of the Company’s current report on Form 8-K, filed with the Commission on April 6, 2016).
~~10.18~~	Separation Agreement and General Release, dated April 22, 2016, between AngioDynamics, Inc. and Joseph M. DeVivo (incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K, filed with the Commission on April 27, 2016).
~~10.19~~	AngioDynamics, Inc. Fiscal Year 2012 Senior Executive Equity Incentive Program (incorporated by reference to Exhibit 10.30 of the Company’s Annual Report on Form 10-K, filed with the commission on August 12, 2011).

Director

14Date:	~~Code of Ethics (incorporated by reference to Exhibit 14 of the Company’s current report on Form 8-K, filed with the Commission on May 12, 2006).~~	July 27, 2021	/S/ JAN S. REED

					Jan S. Reed,
					Director

21		~~Subsidiaries~~
23Date:		~~Consent of Deloitte & Touche LLP, an independent registered public accounting firm.~~		July 27, 2021	/S/ EILEEN O. AUEN
~~23.1~~		~~Consent of PricewaterhouseCoopers LLP, an independent registered public accounting firm.~~			Eileen O. Auen,
~~31.1~~		~~Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~			Director
~~31.2~~		~~Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~32.1~~Date:		~~Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~		July 27, 2021	/S/ KAREN A. LICITRA
~~32.2~~		~~Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~			Karen A. Licitra,
~~101.INS~~		~~XBRL Instance Document~~			Director
~~101.SCH~~		~~XBRL Schema Document~~
~~101.CAL~~Date:		~~XBRL Calculation Linkbase Documents~~		July 27, 2021	/S/ MICHAEL E. TARNOFF
~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~			Michael E. Tarnoff,
~~101.LAB~~		~~XBRL Labels Linkbase Documents~~
~~101.PRE~~	~~XBRL Presentation Linkbase Documents~~		Director