Unless the context requires otherwise, references to LeMaitre, LeMaitre Vascular, we, our, and us refer to LeMaitre Vascular, Inc. and our subsidiaries. We develop, manufacture, and market medical devices and implants used primarily in the field of vascular surgery. We also derive revenues from the processing and cryopreservation of human tissues for implantation in patients. We operate in a single segment in which our principal product lines include the following: ~~valvulotomes,~~anastomotic clips, angioscopes, biologic vascular and dialysis grafts, biologic vascular and cardiac patches, ~~balloon catheters,~~ carotid shunts, ~~biologic vascular grafts, anastomotic clips,~~embolectomy catheters, occlusion catheters, radiopaque marking tape, synthetic vascular grafts ~~remote endarterectomy devices, laparoscopic cholecystectomy devices, angioscopes,~~ and ~~powered phlebectomy devices.~~valvulotomes. Our offices and production facilities are located in Burlington, Massachusetts; Fox River Grove, Illinois; ~~Mississauga,~~North Brunswick, New Jersey; Chandler, Arizona; Vaughan, Canada; Sulzbach, Germany; Milan, Italy; Madrid, Spain; ~~North Melbourne,~~Hereford, England; Kensington, Australia; Tokyo, Japan; Shanghai, China; Singapore; and ~~Shanghai, China.~~Seoul, Korea.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form~~10-Q~~10-Q and Article 10 of Regulation~~S-X.~~ S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal, recurring adjustments considered necessary for a fair presentation of the results of these interim periods have been included. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Our estimates and assumptions, including those related to bad debts, inventories, intangible assets, sales returns and discounts, share-based compensation, and income taxes are updated as appropriate. The results for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2022 are not necessarily indicative of results to be expected for the entire year. The information contained in these interim financial statements should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, ~~2016,~~2021, including the notes thereto, included in our Form~~10-K~~10-K filed with the Securities and Exchange Commission (SEC) on ~~March 9, 2017.~~February 28, 2022.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. The Company is not aware of any specific event or circumstance that would require an update to its accounting estimates or adjustments to the carrying value of its assets and liabilities as of August 5, 2022, the issuance date of this Quarterly Report on Form 10-Q. Actual results could differ from those estimates.

Our consolidated financial statements include the accounts of LeMaitre Vascular and the accounts of our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Our revenue is derived primarily from the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU)2017-09~~ ~~which provides guidance~~sale of disposable or implantable devices used during vascular surgery. We sell primarily directly to hospitals and to a lesser extent to distributors, as described below, and, during the periods presented in our consolidated financial statements, entered into consigned inventory arrangements with either hospitals or distributors on ~~determining which changes~~a limited basis. We also derive revenues from the processing and cryopreservation of human tissues for implantation in patients. These revenues are recognized when services have been provided and the tissue has been shipped to the ~~terms and conditions~~customer, provided all other revenue recognition criteria discussed in the succeeding paragraph have been met.

We record revenue under ~~ASC 718, Compensation – Stock Compensation. The new standard is effective for us beginning January 1, 2018, with early adoption permitted. The adoption~~the provisions of ~~this standard is not expected to have a material impact on our financial statements.~~

~~In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU)2017-04,~~ which, among other provisions, eliminates “step 2” from the goodwill impairment test. The annual, or interim, goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for us beginning January 1, 2020, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our financial statements.

~~In January 2017, the FASB issued~~ ASU~~2017-01~~ which changes the definition of a business for purposes of determining whether a business has been acquired or sold. The amendment is intended to help companies evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for us beginning January 1, 2018, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our financial statements.

~~In August 2016, the FASB issued ASU2016-15,~~ which changes the classification of certain cash receipts and cash payments within the statement of cash flows. The new standard is effective for us beginning January 1, 2018, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our financial statements.

~~In May~~ 2014 ~~the FASB and the International Accounting Standards Board issued substantially converged final standards on revenue recognition. The FASB’s ASUNo. 2014-09,~~-09,Revenue from Contracts with Customers (Topic ~~606)~~606). The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard explains that to achieve the core principle, an entity should take the following actions:

Step 5: Recognize revenue when or as the entity satisfies a performance obligation

Revenue is recognized when or as a company satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). In instances in which shipping and handling activities are performed after a customer takes control of the goods (such as when title passes upon shipment from our dock), we have made the policy election allowed under Topic 606 to account for these activities as ~~amended~~fulfillment costs and not as performance obligations.

We generally reference customer purchase orders to determine the existence of a contract. Orders that are not accompanied by a purchase order are confirmed with the customer either in writing or verbally. The purchase orders or similar correspondence, once accepted, identify the performance obligations as well as the transaction price, and otherwise outline the rights and obligations of each party. We allocate the transaction price of each contract among the performance obligations in accordance with the pricing of each item specified on the purchase order, which is in turn based on standalone selling prices per our published price lists. In cases where we discount products or provide certain items free of charge, we allocate the discount proportionately to all performance obligations, unless it can be demonstrated that the discount should be allocated entirely to one or more, but not all, of the performance obligations.

We record revenue, net of allowances for returns and discounts, fees paid to group purchasing organizations, and any sales and value added taxes required to be invoiced, which we have elected to exclude from the measurement of the transaction price as allowed by the standard, at the time of shipment (taking into consideration contractual shipping terms), or in the case of consigned inventory, when it is consumed. Shipment is the point at which control of the product and title passes to our customers, and at which LeMaitre has a present right to receive payment for the goods.

Below is a disaggregation of our revenue by major geographic area, which is among the primary categorizations used by management in evaluating financial performance, for the periods indicated (in thousands):

We do not carry any contract assets or contract liabilities, as there are generally no unbilled amounts due from customers under contracts for which we have partially satisfied performance obligations, or amounts received from customers for which we have not satisfied performance obligations. We satisfy our performance obligations under revenue contracts within a very short time period from receipt of the orders, and payments from customers are typically received within 30 to 60 days of fulfillment of the orders, except in certain geographies such as Spain and Italy where the payment cycle is customarily longer. Accordingly, there is no significant financing component to our revenue contracts. Additionally, we have elected as a policy that incremental costs (such as commissions) incurred to obtain contracts are expensed as incurred, due to the short-term nature of the contracts.

Customers returning products may be entitled to full or partial credit based on the condition and timing of the return. To be accepted, a returned product must be unopened (if sterile), unadulterated, and undamaged, must have at least 18 months remaining prior to its expiration date, or twelve months for our hospital customers in Europe, and generally be returned within 30 days of shipment. These return policies apply to sales to both hospitals and distributors. The amount of products returned to us, either for exchange or credit, has not been material. Nevertheless, we provide for an allowance for future sales returns based on historical returns experience, which requires judgment. Our cost of replacing defective products has not been material and is accounted for at the time of replacement.

From time to time, ~~outlines a single comprehensive model for entities to use in~~new accounting ~~for revenue arising from contracts with customers~~pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies and supersedes most current revenue recognition guidance, including industry-specific guidance. The new revenue recognition guidance becomes effective for us on January 1, 2018, with early adoption permitted on January 1, 2017. Entities haveare general adopted by the ~~option of using either a full retrospective or a modified approach to adopt the guidance in the ASU. Our assessment~~Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact ~~to our financial statements~~ of adopting this standard is underway. We engaged external consultants to assist us with our analysis, which included evaluating our standard arrangements with customers, as well as arrangements specific to certain customer bases or product offerings, and reviewing a sample of actual contracts to determine whether thererecently issued standards that are ~~additional attributes to consider beyond our standard arrangements. Although our assessment is~~ not ~~complete, we do~~ yet effective will not ~~currently expect that adoption of Topic 606 will~~ have a material impact on ~~our consolidated~~its financial statements. However, there will likely be changes to our revenue recognition accounting policy as well as other disclosures. Additionally, we have preliminarily determined that we will use the modified retrospective methodposition or results of operations upon adoption.

As part of the process of preparing our consolidated financial statements we are required to determine our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax expense together with assessing temporary differences resulting from recognition of items for income tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from taxable income during the carryback period or in the future; and to the extent we believe that recovery is not more likely than not, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must reflect this increase as an expense within the tax provision in the statement of operations. We do not provide for income taxes on undistributed earnings of certain foreign subsidiaries, as our intention is to permanently reinvest these earnings.

We recognize, measure, present and disclose in our financial statements any uncertain tax positions that we have taken, or expect to take on a tax return. We operate in multiple taxing jurisdictions, both ~~within~~inside and ~~without~~outside the United States, and may be subject to audits from various tax authorities. Management’s judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, liabilities for uncertain tax positions, and any valuation allowance recorded against our net deferred tax assets. We will monitor the realizability of our deferred tax assets and adjust the valuation allowance accordingly.

Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense.

Our ~~2017~~2022 income tax expense varies from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, ~~and lower~~different statutory rates from our foreign ~~subsidiaries. Additionally, in the second~~subsidiaries, and ~~third quarters of 2017, we recognized~~ certain ~~discrete items primarily related~~foreign losses not benefitted due to ~~the exercise of stock options.~~a valuation allowance. Our ~~2016~~2021 income tax expense varied from the statutory rate mainly due to ~~certain~~the generation of federal and state tax credits, permanent items, ~~offset by lower~~different statutory rates from our foreign ~~entities~~subsidiaries, and a discrete ~~item for~~ stock option exercises.

We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open to examination by a taxing authority. As of ~~September~~June 30, ~~2017,~~ 2022, the gross amount of unrecognized tax benefits exclusive of interest and penalties was ~~$451,000.~~$702,000. We remain subject to examination until the statute of limitations expires for each respective tax jurisdiction. The statute of limitations will be open with respect to these tax positions until ~~2025.~~2030. A reconciliation of beginning and ending amount of our unrecognized tax benefits is as follows:

As of ~~September~~June 30, ~~2017,~~ 2022, a summary of the tax years that remain subject to examination in our taxing jurisdictions is as follows:

We had inventory on consignment at customer sites of ~~$1.3~~$1.8 million and ~~$1.1~~$2.1 million at ~~September~~June 30, ~~2017~~ 2022 and December 31, ~~2016,~~2021, respectively.

In connection with our ~~recent acquisition of the~~ RestoreFlow allograft business, other deferred costs include costs incurred for the preservation of human ~~vascular tissue~~tissues available for shipment, ~~tissue~~tissues currently in active processing, and ~~tissue~~tissues held in quarantine pending release to implantable status. By U.S. federal law, human ~~tissue~~tissues cannot be bought or sold. Therefore, the tissues we preserve are not held as inventory, and the costs we incur to procure and process ~~vascular tissue~~tissues are instead accumulated and deferred. These costs include fixed and variable overhead costs associated with the cryopreservation process, including primarily direct labor costs, tissue recovery fees, inbound freight charges, indirect materials and facilities costs. General and administrative expenses and selling expenses associated with the provision of these services are expensed as incurred.

Our ~~strategy~~acquisitions are accounted for ~~growing our business includes~~using the acquisition method, and the acquired businesses’ results have been included in the accompanying consolidated financial statements from their respective dates of ~~complementary product lines and businesses.~~ acquisition. In each case for the acquisitions disclosed below, pro forma information assuming the acquisition had occurred at the beginning of the earliest period presented is not included, as the impact is immaterial.

Our acquisitions ~~including those discussed below,~~ have historically been made at prices above the fair value of the acquired identifiable assets, resulting in goodwill, due to expectations of synergies that will be realized by combining businesses. These synergies include the use of our existing sales channel to expand sales of the acquired businesses’ products, ~~and services,~~ consolidation of manufacturing facilities, and the leveraging of our existing administrative infrastructure.

The fair market valuations associated with these transactions fall within Level 3 (see Note 15) of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our due diligence models, most recent operational budgets, ~~long range~~long-range strategic plans and other estimates.

On ~~November 10, 2016,~~ June 22, 2020, we entered into an ~~agreement~~Asset Purchase Agreement (Artegraft APA) to acquire the ~~assets~~biologic graft business from Artegraft, Inc., which subsequent to the closing changed their name to Accidentals, Inc, (Artegraft, Inc.). Under the terms of ~~Restore Flow Allografts, LLC,~~the Artegraft APA, we agreed to pay Artegraft, Inc. a ~~provider of human vascular tissue processing and cryopreservation services, for an initial purchase price of $12 million, with additional payments~~total of up to $6$90.0 million ~~depending upon~~for the ~~satisfaction~~purchase of ~~certain contingencies. A payment of $2 million is due not later than 15 days following the expiration~~substantially all of the ~~18 month period following the closing date, subject~~assets related to reductions as specified in the agreement for each calendar month that certain retained employees are not employed by us due to resignation without good reason, or termination for cause, both as defined in the agreement. The portionits business of ~~this payment that will be paid to retained employees~~manufacturing, marketing, sale and ~~that is contingent on their continuing employment, approximately $0.9 million, is being accounted for as post-combination compensation expense rather~~distribution of bovine grafts (Products) other than ~~purchase consideration. There are also two potential earn-outs under the agreement. The firstearn-out~~ ~~is calculated at 50% of the amount by which net revenue in the first 12 months following the closing exceeds $6 million, with such payout not to exceed $2 million. The secondearn-out~~ ~~is calculated at 50% of the amount by which net revenue in the second 12 months following the closing exceeds $9 million, with such payout not to exceed $2 million.~~

The RestoreFlow business derives revenue from human tissue preservation services, in particular the processing and cryopreservation of veins and arteries. By federal law, human tissues cannot be bought or sold. Therefore, the tissues we obtain and preserve are not held as inventory, and the costs we incur to procure and process vascular tissues are instead accumulated and deferred. Revenues are recognized for the provision of cryopreservation services rather than product sales.

specifically identified excluded assets. The acquired assets included inventory, accounts receivable, machinery and equipment, intellectual property, permits and approvals, data and records, ~~equipment and furnishings, accounts receivable, inventory, literature,~~ and customer and supplier information. At closing, $72.5 million of the purchase price was paid to Artegraft, Inc. and other parties as specified in the Artegraft APA, including $7.5 million into an escrow account. The escrow amount was held until December 31, 2021 to cover any potential claims against LeMaitre or Artegraft, Inc. and subsequently was released to Artegraft, Inc. by mutual consent of the parties.

Three earn-out payments of $5,833,333 each are potentially due to Artegraft, Inc. under the Artegraft APA depending on the achievement of specified revenue targets, as follows:

The Artegraft APA includes a catch-up feature on the earn-outs such that, at the end of the three-year period, if the sum of the unit sales for all three years is greater than or equal to 58,240 unit sales (80% of the combined individual-year targets), Artegraft, Inc. will receive a “catch-up payment” in an amount equal to (a) $17,500,000 times a fraction, the numerator of which is the aggregate number of unit sales for the three-year period, and the denominator of which is 72,800 less (b) any individual-year earn-out previously paid. We ~~also assumed certain accounts payable. We accounted for~~recorded this liability at a fair value of $0.4 million to reflect management’s estimate of the likelihood of achieving these targets at the time of the closing of the acquisition, as well as the time value of money until payment. This amount will be remeasured each quarter during the earn-out period, with any adjustments recorded in income from operations. As of June 30, 2022 the fair value of the liability is $0.2 million.

On the date of acquisition, the Company allocated the consideration given to the individual assets acquired and the liabilities assumed based on a ~~business combination.~~

preliminary estimate of their fair values. During the three months ended September 30, 2020, the Company obtained and considered additional information related to the assets acquired and liabilities assumed, and recorded measurement period adjustments to the allocation of the purchase price. The following table summarizes the ~~preliminary~~ purchase price ~~allocation as of September 30, 2017:~~allocation:

The goodwill results from expected synergies of combining the acquired products and customer information to our existing operations, and is deductible for tax purposes over 15 years.

The following table reflects the ~~preliminary~~ allocation of purchase consideration to the acquired intangible assets and related estimated useful lives:

The weighted-average amortization period of the acquired intangible assets was ~~10.3~~12.6 years.

On ~~March 18, 2016,~~ April 26, 2022, we committed to a plan to close our St. Etienne, France factory, which supported our LeMaitre Cardial SAS (Cardial) business, in order to streamline manufacturing operations and reduce expenses. The Cardial business consisted of the manufacture of polyester vascular grafts, valvulotomes, surgical glue and selected OEM devices. We acquired the ~~ProCol biologic vascular graft (“ProCol”)~~Cardial business ~~for $2.7 million from Hancock Jaffe Laboratories, Inc. (HJL)~~in 2018.

On June 30, 2022 we ceased operations at the St. Etienne, France factory and ~~CryoLife, Inc. (CRY). HJL was the owner and manufacturer of ProCol and CRY was the exclusive distributor~~terminated most of the ~~ProCol graft. CRY also owned an option to purchase~~personnel at the ~~ProCol business, which we acquired from CRY. We bought finished goods~~site. The closure resulted in a restructuring charge of $3.1 million for the three and six months ended June 30, 2022. Charges primarily consisted of employment termination costs, impairment of fixed assets and inventory, and ~~other ProCol related~~third-party costs.

As of June 30, 2022, there are assets ~~from CRY~~associated with Cardial that are classified as held for ~~$2.0 million, which~~sale. The net assets held for sale represent the St. Etienne, France factory building, building improvements, and land that have met the criteria of “held for sale” accounting, as specified by Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment.” The net assets held for sale are being marketed for sale, and it is the Company’s intention to complete the sales of these assets within the next twelve-months.

There was ~~paid in full at closing. We bought other ProCol assets from HJL for $0.7 million, 50% of which was paid at closing, 25% of which was paid in~~no change to goodwill during the quarter ended September 30, 2016 and the remaining 25% of which was paid in the quarter ended March 31, 2017. Additional consideration is payable to HJL for a three-year period following the closing, calculated at 10% of ProCol revenues. This additional consideration was initially valued at $0.3 million and will be~~re-measured~~ ~~each reporting period until the payment requirement ends, with any adjustments reported in income from operations. For the nine~~six months ended ~~September~~June 30, ~~2017, the amount of the adjustment was not material to our financial statements.~~

~~Assets acquired included inventory, intellectual property and a related license, the ProCol trade name, customer lists,non-compete~~ ~~agreements and certain equipment and supplies. We did not assume any liabilities. We accounted for the acquisition as a business combination. The purchase accounting is complete.~~

~~The following table summarizes the purchase price allocation as of the acquisition date:~~

These ~~intangible~~ assets are being amortized over ~~their~~ useful lives ranging from 12 to 1316 years. The weighted-average amortization period for these intangibles as of ~~September~~June 30, ~~2017~~ 2022 is ~~9.1~~11.1 years. Amortization expense is included in general and administrative expense and was as follows for the periods indicated.

We estimate that amortization expense for the remainder of 2022 and for each of the five succeeding fiscal years will be as follows:

In connection with the acquisition of the Artegraft biologic graft business, we incurred debt in the amount of $65 million under a senior secured credit facility with a group of banks. This credit arrangement included a $25 million revolving credit line that was fully drawn at inception, as well as a $40 million five-year term loan. During the year ended December 31, 2021, we made scheduled principal payments on the term loan of $1.0 million, repaid the loan in full, and terminated the credit agreement in accordance with its terms. During the six months ended June 30, 2021, we made scheduled principal payments on the term loan of $1.0 million and also made additional optional prepayments of $15.0 million.

Under the terms of the agreement, the loans bore interest at a rate per annum of, at our option, either (i) the Base Rate plus an applicable margin of from 1.25% to 1.75% depending on our consolidated leverage ratio, or (ii) the Eurodollar Rate plus an applicable margin of from 2.25% to 2.75% depending on our consolidated leverage ratio. Base Rate was defined in the credit agreement as a fluctuating rate per annum of the Federal Funds rate plus 0.5% or the prime rate of interest established from time to time by KeyBank National Association. At June 30, 2021, all outstanding borrowings were designated as Eurodollar loans and bore interest of 3.25%.

We incurred debt issuance costs in connection with this credit arrangement of approximately $1.8 million. These costs were allocated between the revolving line of credit and the term loans, with the portion related to the revolving line of credit of $0.7 million recorded in other assets on our balance sheet, and the portion allocated to the term loan recorded as a deduction from the amount of the debt. All of these transaction costs were being amortized into interest expense on a straight-line basis as the result would not be materially different from using the interest method, over the five-year term of the arrangement. This resulted in an effective interest rate of approximately 4.2%. During the six months ended June 30, 2021, in connection with making optional prepayments of $15.0 million on the term loan, we expensed a proportionate amount of the unamortized transaction costs in the amount of $0.3 million. Cash paid for interest during the six months ended June 30, 2021 was $0.7 million.

At September 30, 2021, the outstanding balances of both the term loan and the revolver were zero, and in September 2021 we cancelled both loan agreements.

We conduct the majority of our operations in leased facilities, all of which are accounted for as operating leases, as they do not meet the criteria for finance leases. Our principal worldwide executive, distribution, and manufacturing operations are located in five leased facilities with square footage totaling 109,354 in Burlington, Massachusetts. All five Burlington leases expire in December 2030.

Our European operations are headquartered at a 21,410 square foot leased facility located in Sulzbach, Germany. During the quarter ended June 30, 2022 we increased our square footage by 4,940 (from 16,470) and extended the lease through June 2031. This lease contains a five-year renewal option. Additionally, during the quarter ending June 30, 2022, we signed a new sales office/warehouse lease in the Seoul, Korea, which includes 2,300 square feet of office space, and expires in April 2027. Finally, we extended our Singapore lease by one-year and it will expire in June 2023.

Similar to prior quarters, we also lease a facility in Hereford, England which houses our United Kingdom sales and distribution business. During the quarter ended June 30, 2021 we executed an expansion of the Hereford lease under terms substantially similar to the original lease. In connection with our acquisition of the Artegraft biologic graft business, we assumed a 16,732 square foot lease in North Brunswick, New Jersey, which expires in October 2029. In June 2021 we entered into a six-year lease in Milan, Italy which houses a customer service and warehouse facility. This lease contains a six-year renewal option. We also have smaller long-term leased sales, marketing and other facilities located in Arizona, Canada, Australia, Singapore and China, and short-term leases in Japan, Spain and Illinois. The lease in Arizona was extended during the quarter ending June 30, 2022, for an additional three years through August 2025, effective as of August 24, 2022. Our lease in Canada contains a five-year renewal option exercisable in February 2023. Our leases in Germany and Italy are subject to periodic rent increases based on increases in the consumer price index as measured on an annual basis, with such increases applicable to the subsequent twelve months of lease payments. None of our noncancelable lease payments include non-lease components such as maintenance contracts; we generally reimburse the landlord for direct operating costs associated with the leased space. We have no subleases, and there are no residual value guarantees associated with, or restrictive covenants imposed by, any of our leases. There were 0 assets held under capital leases at June 30, 2022.

We also lease automobiles under operating leases in the United States as well as certain of our international subsidiaries. The terms of these leases are generally three years, with older vehicles replaced by newer vehicles from time to time. During the fiscal year 2021, we entered into a five-year lease for printing equipment.

We account for leases under the provisions of ASU No.2016-02,Leases (Topic 842), subsequently amended by ASU 2018-11,Leases (Topic 842): Targeted Improvements. Under this guidance, we are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Our most significant judgment involved in determining the amounts to initially record as lease liabilities and right-of-use assets upon initial adoption of this standard, and for leases entered into subsequently, was the selection of a discount rate; because we had no debt as of the adoption of this standard, we had no incremental borrowing rate to reference. We therefore derived an incremental borrowing rate using quotes from potential lenders as the primary inputs, augmented by other available information. The resulting rate selected was 5.25%. We determined that it was appropriate to apply this single rate to our portfolio of leases worldwide, as the lease terms and conditions are substantially similar, and because we believe our subsidiaries would be unable to obtain borrowings on their own without a commitment of parent company support. In connection with the assumption of the Artegraft North Brunswick, New Jersey lease, we used LeMaitre’s borrowing rate of 3.5% as of the acquisition date associated with debt incurred to finance the acquisition to value the lease.

6.	~~Accrued Expenses and Other Long-term Liabilities~~

At June 30, 2022, the minimum non-cancelable operating lease rental commitments with initial or remaining terms of more than one year are as follows:

~~Under Accounting Standards Codification Topic 280,~~10.Segment ~~Reporting~~,and Enterprise-Wide Disclosures

The FASB establishes standards for reporting information regarding operating segments in financial statements. Operating segments are ~~defined~~identified as components of an enterprise that engage in business activities for which separate, discrete financial information is available and ~~evaluated~~is regularly reviewed by the chief operating decision-maker in making decisions on how to allocate resources and assess performance. We view our operations and manage our business as ~~one~~1 operating segment. No discrete operating information is prepared by us except for sales by product line and operations by legal entity for local ~~reporting~~ purposes.

Most of our revenues are generated in the United States, Germany and other European countries, ~~as well as in~~ Canada, the United Kingdom and Japan, and ~~China. Substantially~~substantially all of our assets are located in the United ~~States.~~States, Germany and France. Net sales to unaffiliated customers by country were as follows:

Our Third Amended and Restated 2006 Stock Option and Incentive Plan allows for granting of incentive stock options,non-qualified stock options, stock appreciation rights, restricted stock units, performance-based restricted stock units, unrestricted stock awards, and deferred stock awards to our officers, employees, directors and consultants.

Stock-based compensation is included in our statements of operations as follows:

Included in stock-based compensation expense for the three and nine months ended September 30, 2017 is a stock option modification charge of $0.5 million for awards that are being allowed to continue to vest for approximately one year beyond the requisite service period associated with the recent departure of our President of International Operations. This expense is included in the caption “General and administrative” above.

~~Options granted during the nine months ended September 30, 2017 were not material.~~ During the ~~nine months~~six-month period ended ~~September~~June 30, ~~2016,~~ 2022, we granted options tofor the purchase ~~511,000~~of 984 shares of our ~~stock to employees andnon-employee~~ ~~directors.~~common stock. We ~~computed the weighted average fair values of employee stock~~did not grant any options ~~for option grants issued~~ during the ~~nine~~six-month period ended June 30, 2021. During the six months ended ~~September~~June 30, ~~2016 using the Black-Scholes option model with the following assumptions:~~

~~Restricted stock awards during the nine months ended September 30, 2017 were not material. During the nine months ended September 30, 2016~~2022 and 2021, we awarded restricted stock units of ~~126,000 to employees. The weighted-average fair value per share of~~320 and 1,157, respectively. We awarded performance-based restricted stock ~~unit awards issued for~~units of 250 during the ~~nine~~six months ended ~~September~~June 30, ~~2016 was $14.11.~~

2022. We did not award any performance-based restricted stock units during the six-month period ended June 30, 2021. We issued approximately ~~702,000~~43,000 and ~~285,000~~140,000 shares of common stock following the exercise or vesting of underlying stock options or restricted stock units induring the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2022 and ~~2016,~~2021, respectively.

On ~~July 25, 2016,~~ February 22, 2022, our Board of Directors ~~approved a stock~~authorized the repurchase ~~program under which the Company was authorized to repurchase~~of up to $5$20.0 million of ~~its~~the Company’s common stock through transactions on the open market, in privately negotiated purchases or ~~otherwise. This program expired on July 25, 2017. We did not make any repurchases under this program prior to its expiration.~~

~~On July 25, 2017, our Board of Directors approved a stock~~otherwise until February 22, 2023. The repurchase program ~~under which the Company is authorized to repurchase up to $7.5 million of its common stock through transactions on the open market, in privately negotiated purchases or otherwise. This program~~ may be suspended or discontinued at any ~~time, and expires on the earlier of July 25, 2018 or when the $7.5 million repurchase limit is reached, unless extended by our Board of Directors.~~time. To date we have not made any repurchases under this program.

In February 2011, our Board of Directors approved a policy for the payment of quarterly cash dividends on our common stock. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by our Board of Directors on a quarterly basis. The dividend activity for the periods presented is as follows:

On ~~October 24, 2017~~ July 26, 2022, our Board of Directors approved a quarterly cash dividend on our common stock of ~~$0.055~~$0.125 per share payable on ~~December 7, 2017~~ September 8, 2022, to stockholders of record at the close of business on ~~November 22, 2017, which will total approximately $1.1 million.~~August 25, 2022.

The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

~~Level 1 — Quoted prices in active markets for identical assets or liabilities.~~

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

~~As of September 30, 2017, we had cash equivalents in a money market fund that was valued using Level~~ 1 ~~inputs (quoted market prices for identical assets) at a fair value of $19.0 million.~~

~~We had no Level 2~~ assets being measured at fair value on a recurring basis as of ~~September~~June 30, ~~2017.~~2022 included our short-term investment and short-duration bond mutual fund accounts.

We had no Level 2 assets being measured at fair value on a recurring basis as of June 30, 2022.

As discussed in Note 4, several of our acquisition-related assets and liabilities have been measured using Level 3 techniques. During 2020 we ~~have~~recorded a contingent liability associated with our acquisition of the bovine graft business from Artegraft. The agreement requires us to make potential additional payments to Artegraft of up to $17.5 million depending on the achievement of certain unit sales milestones during the firstthree calendar years following the acquisition. We recorded this liability at a fair value of $0.4 million to reflect management’s estimate of the likelihood of achieving these targets at the time of the Closing, as well as the time value of money until payment. This amount is being remeasured each quarter during the earn-out period, with any adjustments recorded in income from operations.

During 2019, we recorded contingent liabilities associated with our acquisition of the Admedus biologic patch business. The agreement includes the potential for us to pay up to $7.8 million of additional consideration beyond payments made to date, with $0.3 million contingent upon the delivery of audited financial statements of the acquired business to us; $2.0 million contingent on LeMaitre’s success in obtaining CE marks under MDR regulations on the acquired products, $0.5 million contingent upon Admedus’ success in extending the shelf life of the acquired products as specified in the agreement, and another $5.0 million contingent on the achievement of specified levels of revenues in the first12 and 24 months following the acquisition date. This additional contingent consideration was initially valued in total at $2.3 million and is being re-measured each reporting period until the payment requirement ends, with any adjustments reported in income from operations. The contingent payment related to the delivery of audited financial statements of the business was paid in November 2019 upon satisfaction of the deliverable. The contingent payments related to Admedus’ extending the shelf life of the acquired products and achieving the revenue targets during the first12 and 24 month periods following the acquisition were not met, and the portion of the liabilities related to these items was adjusted through income from operations. The agreement was amended in August 2021 such that the contingent payment of $2.0 million potentially due upon LeMaitre Vascular’s success in obtaining CE marks under MDR regulations on the acquired products may be reduced for certain ~~of our acquired businesses. These liabilities are or have been remeasured each reporting period using Level 3 techniques to assess~~costs incurred by LeMaitre in achieving the probability that we will be required to make future payments, and to estimate the amount of those payments. During the nine months ended September 30, 2017 we made fair-value adjustments to our contingent liabilities of $0.6 million.CE marks.

The following table provides a rollforward of the fair value of these liabilities, as determined by Level 3 unobservable inputs including management’s forecast of future revenues for the acquired businesses, as well as, management’s estimates of the likelihood of achieving the other specified criteria:

Changes to our accumulated other comprehensive loss for the six months ended June 30, 2022 and 2021consisted primarily of foreign currency translation ~~for the nine months ended September 30, 2017~~ and ~~2016.~~

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form10-Q contains forward-looking statements (within the meaning of the ~~federal securities law)~~U.S. Private Securities Litigation Reform Act of 1995) that involve substantial risks and ~~uncertainties.~~uncertainties, particularly risks related to the regulatory environment, our common stock, fluctuations in our quarterly and annual results, our ability to successfully integrate acquisitions into our business, and risks related to our business and industry generally, such as risks inherent in the process of developing and commercializing products and services that are safe and effective for use in the peripheral vascular disease market. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future net sales, gross margin expectations, projected costs, projected expenses, prospects and plans and objectives of management are forward-looking statements. The words ~~“anticipates,~~“anticipates,” ~~“believes,~~“believes,” ~~“estimates,~~“estimates,” ~~“expects,~~“expects,” ~~“intends,~~“intends,” ~~“may,~~“may,” ~~“plans,~~“plans,” ~~“projects,~~“projects,” ~~“will,~~“will,” ~~“would,~~“would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that the expectations underlying any of our forward-looking statements are reasonable, these expectations may prove to be incorrect, and all of these statements are subject to risks and uncertainties. Should one or more of these risks and uncertainties materialize, or should underlying assumptions, projections, or expectations prove incorrect, our actual results, performance, or financial condition may vary materially and adversely from those anticipated, estimated, or expected. No forward-looking statement can be guaranteed and actual results may vary materially from those projected in the forward-looking statements. We intend to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our forward-looking statements, and are including this sentence for the express purpose of enabling us to use the protections of the safe harbor with respect to all forward-looking statements.These risks and uncertainties include, but are not limited to:the status of our global regulatory approvals and compliance with regulatory requirements to market and sell our products both in the US and outside of the US; the duration and severity of the impact of COVID-19 on the global economy, our customers, our suppliers and our company; the risk of significant fluctuations in our quarterly and annual results due to numerous factors; the risk that assumptions about the market for the Company’s products and the productivity of the Company’s direct sales force and distributors may not be correct; the risk that we may not be able to maintain our recent levels of profitability; the risk that the Company may not realize the anticipated benefits of its strategic activities; risks related to the integration of acquisition targets; the ~~risk that assumptions about the market for the Company’s products and the productivity~~acceleration or deceleration of ~~the Company’s direct sales force and distributors may not be correct;~~product growth rates; risks related to product demand and market acceptance of the ~~Company’s products; risks associated with~~Company’s products and pricing; the risk that a recall of our ~~newly acquired tissue processing and preservation operations and the related services we now provide; risks related to attracting, training and retaining sales representatives and other employees~~products could result in ~~new markets; adverse~~significant costs or ~~fluctuating conditions in the general domestic and global economic markets; and~~negative publicity; the risk that the Company is not successful in transitioning to a direct-selling model in new territories.

Forward-looking statements reflect ~~management’s~~management’s analysis as of the date of this quarterly report. Further information on potential risk factors that could affect our business and financial results is detailed in Part II, Item 1A, ~~“Risk Factors”~~“Risk Factors” in this Quarterly Report on Form10-Q and in our other filings with the Securities and Exchange Commission, including under the section headed ~~“Risk Factors”~~“Risk Factors” in our most recent Annual Report on Form10-K. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included in this report and our other SEC filings, including our audited consolidated financial statements and the related notes contained in our Annual Report on Form10-K for the year ended December31, ~~2016,~~2021, as filed with the SEC on ~~March 8, 2017.~~February 28, 2022. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Unless the context indicates otherwise, references to ~~“LeMaitre~~“LeMaitre Vascular,” ~~“we,~~“we,” ~~“our,~~“our,” and ~~“us”~~“us” in this Quarterly Report on Form10-Q refer to LeMaitre Vascular, Inc. and its subsidiaries.

LeMaitre, AlboGraft, AnastoClip, Artegraft, CardioCel, Omniflow, ~~ProCol,~~ RestoreFlow, VascuCel and XenoSure are registered trademarks of LeMaitre Vascular or one of its subsidiaries. This Quarterly Report on Form10-Q also includes the registered and unregistered trademarks of other persons, which are the property of their respective owners.

LeMaitre Vascular is a ~~medical device company that develops, manufactures, and markets~~global provider of medical devices and ~~implants for~~human tissue cryopreservation services largely used in the treatment of peripheral vascular disease, end-stage renal disease, and to a lesser extent cardiovascular disease. We ~~also provide processing~~develop, manufacture, and ~~cryopreservation services~~market vascular devices to address the needs of ~~human tissue for implantation into patients.~~vascular surgeons and, to a lesser degree, other specialties such as cardiac surgeons, general surgeons and neurosurgeons. Our diversified portfolio of devices consists of brand name products that are used in arteries and veins and are well known to vascular surgeons. Our principal product offerings are sold ~~throughout the world,~~globally, primarily in ~~North America,~~the United States, Europe, the United Kingdom, Canada and ~~to a lesser extent,~~ Asia ~~and the Pacific Rim.~~Pacific. We estimate that the annual worldwide market for ~~all~~ peripheral vascular devices ~~approximates~~exceeds $5 billion, within which we estimate that the market for our ~~product lines address roughly $870~~products is approximately $750 million. We have grown our business by using a simple three-pronged strategy: 1) pursuing a focused call point, 2) competing for sales oflow-rivalry, niche products, and 3) expanding our worldwide direct sales force while acquiring and, to a lesser extent, developing complementary ~~vascular~~ devices. We have used acquisitions as a primary means of further ~~accessing~~penetrating the ~~larger~~ peripheral vascular device market, and we expect to continue to pursue this strategy in the future. ~~Additionally, we have continued our efforts to expand our vascular device offerings through research and development.~~ We currently manufacture most of our ~~product lines at~~products in our Burlington, Massachusetts headquarters.

Our products and services are used primarily by vascular surgeons who treat peripheral vascular disease through both open surgical methods and endovascular techniques. In contrast to interventional cardiologists and interventional radiologists, ~~neither of whom are certified to perform open surgical procedures,~~ vascular surgeons can perform both open surgical and minimally invasive endovascular procedures, and ~~are~~ therefore ~~uniquely positioned to~~can provide a wider range of treatment ~~options.~~options to their patients. More recently, however, we have begun to explore adjacent market customers, or non-vascular surgeon customers, who can be served by our vascular device technologies, such as cardiac surgeons and neurosurgeons.

Since March 2020, the COVID-19 pandemic has significantly impacted the markets for our products as well as our business. In response to COVID-19, many hospitals limited elective procedures in response to the onset of the pandemic and then periodically when infection rates have increased. Many of our devices are used in elective procedures. Additionally, our sales representatives’ access to hospitals and surgeons has periodically been restricted by hospitals or local governments. More recently, however, in many geographies we have seen restrictions eased, although the prevalence of COVID-19 variants has not always resulted in the re-opening of hospital access. During 2020 and into 2022, these dynamics resulted in, and we expect will continue to result in, variable and unpredictable sales.

Our principal product lines include the following: anastomotic clips, ~~angioscopes, balloon catheters,~~ biologic vascular and dialysis grafts, biologic vascular and cardiac patches, carotid shunts, ~~laparoscopic cholecystectomy devices, powered phlebectomy devices,~~embolectomy catheters, occlusion catheters, radiopaque marking tape, ~~remote endarterectomy devices,~~ synthetic vascular grafts, and valvulotomes. ~~With the November 10, 2016 acquisition of the~~Through our RestoreFlow allografts business, we also provide services related to the processing and cryopreservation of human vascular and cardiac tissue.

Our principal biologic offerings include vascular and cardiac patches as well as vascular and dialysis grafts. In Q2 2022, biologics represented 50% of worldwide sales. We view the biologic device offerings favorably, as we believe they represent differentiated and in some cases growing product segments.

To assist us in evaluating our business strategies, we regularly monitor long-term technology trends in the peripheral vascular device market. Additionally, we consider the information obtained from discussions with the medical community in connection with the demand for our products, including potential new product launches. We also use this information to help determine our competitive position in the peripheral vascular device market and our manufacturing capacity requirements.

~~the long-term growth of our direct sales force in North America, Europe, Asia and the Pacific Rim;~~

~~the addition of complementary products through acquisitions;~~

~~the updating of existing products and introduction of new products through research and development;~~

Our ability to execute on these opportunities on a timely basis, or at all, may be impacted by the ~~introduction~~COVID-19 pandemic, the duration and severity of ~~our products in new territories upon receipt of regulatory approvals or registrations in these territories; and~~

~~the consolidation of, and automation of, product manufacturing at our facilities in our Burlington, Massachusetts corporate headquarters.~~

We sell our products and services primarily through a direct sales force. As of ~~September~~June 30, ~~2017~~2022, our sales force was comprised of 89111 sales representatives in North America, Europe, ~~Japan, China~~the United Kingdom and ~~Australia. We also sell our products in other countries through distributors.~~Asia Pacific, including two export managers. Our worldwide headquarters is located in Burlington, ~~Massachusetts. Our international operations are headquartered in Sulzbach, Germany. We~~Massachusetts, and we also have sales offices in Chandler, Arizona and Vaughan, Canada. Our European headquarters is located in Sulzbach, Germany, and we also have sales offices in Milan, Italy; Madrid, Spain; and Hereford, England. Our Asia Pacific headquarters is located in Singapore, and we also have sales offices in Tokyo, Japan; ~~Mississauga, Canada; Madrid, Spain; Milan, Italy;~~ Shanghai, China; Kensington, Australia; and ~~North Melbourne, Australia, and we have processing facilities in Fox River Grove, Illinois and North Melbourne, Australia.~~Seoul, Korea. During the ~~nine month periods ended September 30, 2017 and 2016,~~current quarter, approximately ~~93% and 92%, respectively,~~95% of our net sales were generated in territories in which we employ direct sales representatives. We also sell our products in other countries through distributors.

Historically we have experienced success in lower-rivalry niche product segments, for example the market segments for biologic vascular patches and valvulotomes. In the biologic vascular patch market the number of competitors is limited, and we believe that we have been able to increase segment share and increase selling prices, mainly due to the strength of our sales force.segments. In the valvulotome market, wefor example, our highly differentiated devices have ~~been able~~historically allowed us to increase our selling prices while maintaining ~~our~~ unit ~~market~~ share. In contrast, we have experienced less success in highly competitive markets such as ~~laparoscopic cholecystectomy catheters and synthetic grafts,~~the polyester vascular graft market, where we face ~~stronger~~ competition from larger companies with greater resources and lower ~~production~~per unit costs. While we believe ~~that~~ these challenging market dynamics can be mitigated by our relationships with vascular surgeons, there can be no assurance that we will ~~be successful~~succeed in ~~these~~ highly competitive markets.

We have also experienced success in international markets, such as Europe, where we have a significant sales force, and sometimes offer comparatively lower average selling prices. If we continue to seek growth opportunities outside of ~~the~~ North America, we ~~will likely~~may experience downward pressure on our gross margin.

Our strategy for growing our business includes the acquisition of complementary product lines and companies.

Occasionally we discontinue or divest products or product lines that are no longer complementary to our business or that are not commercially viable.

From time to time we may undertake SKU reductions and transition sales to other SKUs or products with similar features. For example, in 2022, we decided to initiate the transition of sales of our Syntel spring tip catheter to our NovaSil catheter. Any of these actions may result in inventory write-offs and temporary or permanent negative impacts to our sales, gross margin and customer relationships.

Because we believe thatdirect-to-hospital sales engender closer customer relationships, and allow for higher selling prices and gross margins, we periodically enter into transactions with our distributors to transition their sales of our medical devices tointo our direct sales organization:

~~During 2015, we entered into definitive agreements with seven former UreSil, LLC distributors in Europe in order to terminate their distribution of ourTru-Incise~~ ~~valvulotome and we began sellingdirect-to-hospital~~ ~~in those geographies. The total of these termination fees was approximately $0.2 million~~

~~In August 2015, we entered into a definitive agreement with Grex Medical Oy (Grex), our distributor in Finland, in order to terminate their distribution of our products and we began sellingdirect-to-hospital~~ ~~in Finland as of January 1, 2016. The termination fee was approximately $0.2 million.~~

We anticipate that the expansion of our direct sales organization in China will result in increased sales, marketing and regulatory expenses during 2017. As of September 30, 2017 we had seven employees in China.

Our strategy for growing our business includes the acquisition of complementary product lines and companies and occasionally the discontinuance or divestiture of products or activities that are no longer complementary:

•

During 2020, we entered into definitive agreements with, or participated with Admedus in concluding agreements with, several former Admedus distributors in Europe and Canada, in order to terminate their distribution of our acquired bovine cardiac and vascular patch products, and we began selling direct-to-hospital in those geographies. The termination fees totaled approximately $0.1 million.

~~In May 2015, we acquired the production and distribution rights of UreSil LLC’sTru-Incise~~ ~~valvulotome for sales outside of the United States for $1.4 million.~~

~~In July 2015, we entered into an asset sales agreement with Merit Medical Ireland Limited to sell our inventory, intellectual property and customer lists associated with The UnBalloon, ournon-occlusive~~ ~~modeling catheter product line for $0.4 million.~~

~~In December 2015, we terminated our InvisiGrip vein stripper product line, and wrote down $0.1 million of related inventory in Q3 2015.~~

In March 2016, we acquired substantially all of the assets as well as the production and distribution rights of the ProCol business from Hancock Jaffe Laboratories and CryoLife, Inc. for $2.7 million plus 10% of net sales for three years following the closing. ProCol is a biologic vascular graft used for dialysis access, and is approved for sale in the United States.

In November 2016, we acquired substantially all of the assets related to the peripheral vascular allograft operations of Restore Flow Allografts, LLC for $12.0 million plus additional payments of up to $6 million, depending upon the satisfaction of certain contingencies.

~~In addition to relying upon acquisitions to grow our business, we~~We also rely, to a much lesser extent, on ~~our~~internal product development efforts to bring differentiated technology and next-generation products to ~~market. These efforts have led to the following recent product developments:~~market:

~~In December 2015, we launched the15-cm~~ ~~AnastoClip AC.~~

~~In October 2016, we launched additional sizes of our XenoSure patch.~~

~~In December 2016, we launched the 7.0mm diameter Omniflow II graft.~~

~~In October 2017, we launched XenoSure pledgets.~~

In addition to our sales growth strategies, we have also executed on several operational initiatives designed to consolidate ~~and streamline~~ manufacturing ~~within~~into our Burlington ~~facility.~~facilities. We expect these plant consolidations will result in improved control over production ~~control,~~quality as well as reduced ~~costs over the long-term.~~costs. Our most recent manufacturing ~~transitions~~transfers included:

~~In March 2015,~~

	•	In October 2019, we acquired the biologic patch business assets from Admedus. In July 2020, we initiated a project to transfer the production of these devices to our Burlington facilities. We expect this transfer to be complete in 2023.

	•	In June 2022, we closed our St. Etienne, France factory in order to streamline manufacturing operations and to reduce expenses. The Cardial business consisted of the manufacturing of polyester vascular grafts, valvulotomes, surgical glue and select OEM devices. We expect to transition Cardial graft sales to our Burlington-manufactured AlboGraft product for additional cost savings and improved margins. We acquired the Cardial business in 2018.

Table of the newly acquired angioscope product line to our Burlington facility. We had been purchasing the devices from Applied Medical since the September 2014 acquisition and completed the transition of manufacturing to our Burlington facility in December 2015.Contents

~~In May 2015, we initiated a project to transfer the manufacturing of the newly acquiredTru-Incise~~ ~~valvulotome product line to our Burlington facility. We have been purchasing the devices from UreSil, LLC since the acquisition. We completed this transition in the first half of 2017.~~

In March 2016, we initiated a project to transfer the manufacturing of the newly acquired ProCol biologic product line to our Burlington facility. We have an agreement to purchase the product from Hancock Jaffe Laboratories for up to three years following the closing. We initiated the transfer of the production line and transition of manufacturing in 2016, and we expect the transfer to be complete in 2018, subject to regulatory approval.

In the fourth quarter of 2017, we expect to complete the renovation of our Burlington facility, where we expect several of our biologic offerings, including the XenoSure patch and the ProCol biologic graft, will be produced or processed. We believe the cost of the facility renovation will be approximately $2.3 million, of which approximately $1.8 million has been incurred through September 30, 2017.

Our execution of these ~~business opportunities~~initiatives may affect the comparability of our financial results ~~from period to period~~ and may cause ~~substantial~~ fluctuations from period to period as we incur related process engineering and other ~~charges, as well as longer term impacts to revenues and operating expenditures.~~charges.

Fluctuations in the ~~rate of~~ exchange rates between the U.S. dollar and foreign currencies, primarily the Euro, affect our financial results. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022 approximately ~~42%~~38% of our sales ~~were to customers located~~took place outside the ~~United States.~~U.S., largely in currencies other than the U.S. dollar. We expect ~~that~~ foreign currencies will ~~continue to~~ represent a significant percentage of ~~our~~ future sales. Selling, marketing, and administrative costs related to these sales are ~~largely~~also denominated in ~~the local currency,~~foreign currencies, thereby partially mitigating our bottom-line exposure to exchange rate fluctuations. However, ~~as most of our foreign sales are denominated in local currency,~~ if there is ~~a decrease~~an increase in the rate at which a foreign currency is exchanged for U.S. dollars, it will require more of the foreign currency to equal a specified amount of U.S. ~~dollars.~~dollars than before the rate increase. In such cases we will record less revenue in U.S. dollars than we did ~~prior to~~before the exchange rate ~~increase.~~changed. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, we estimate that the effects of changes in foreign exchange rates decreased our reported sales by approximately ~~$0.3 million.~~$2.5 million, as compared to rates in effect for the six months ended June 30, 2021.

Net Sales and Expense Components

The following is a description of the primary components of our net sales and expenses:

Net sales. We derive our net sales from the sale of our products and services, less discounts and returns. Net sales include the shipping and handling fees paid for by our customers. Most of our sales are generated by our direct sales force and are shipped and billed to hospitals or clinics throughout the world. In countries where we do not have a direct sales force, sales are primarily to distributors, who in turn sell to hospitals and clinics. In certain cases our products are held on consignment at a hospital or clinic prior to purchase; in ~~these~~those instances we recognize revenue at the time the product is used in surgery rather than at shipment.

Cost of sales. We manufacture the majority of the products that we sell. Our cost of sales consists primarily of manufacturing personnel, raw materials and components, depreciation of property and equipment, and other allocated manufacturing overhead, as well as ~~the~~ freight expense we pay to ship products to customers.

Sales and marketing. Our sales and marketing expense consists primarily of salaries, commissions, stock-based compensation, travel and entertainment, sales meetings, attendance at vascular congresses, training programs, advertising and product promotions, direct mail and other marketing costs.

General and administrative. General and administrative expense consists primarily of executive, finance and human resource ~~expense, stock-based~~salaries, stock based compensation, legal and accounting fees, ~~acquisition-related charges,~~ information technology expense, intangible asset amortization expense and insurance expense.

Research and development. Research and development expense primarily includes costs associated with ~~the design, development, testing, enhancement~~obtaining and maintaining regulatory approval of our products, ~~principally~~ salaries, laboratory testing and supply costs. It also includes costs associated with the design and execution of clinical studies, ~~regulatory submissions and~~ costs to register, maintain, and defend our intellectual property, and ~~royalty payments~~costs to transfer the manufacturing of acquired product lines to our Burlington facility. Also included are costs associated with ~~licensed~~the design, development, testing and ~~acquired intellectual property.~~enhancement of new or existing products.

Other income (expense). Other income (expense) primarily includes interest income and expense, foreign currency gains (losses), and other miscellaneous gains (losses).

Income tax expense. We are subject to federal and state income taxes for earnings generated in the ~~United States,~~U.S., which include operating losses or profits in certain foreign jurisdictions for certain years depending on tax elections made, and foreign taxes on earnings of our wholly-owned foreign subsidiaries. Our consolidated tax expense is affected by the mix of our taxable income (loss) in the ~~United States~~U.S. and foreign subsidiaries, permanent items, discrete items, unrecognized tax benefits, and amortization of goodwill for U.S. tax reporting purposes.

Table of Contents

Results of Operations

Since March 2020, the COVID-19 pandemic has significantly impacted the markets for our products as well as our business. In response to COVID-19, many hospitals limited elective procedures at the onset of the pandemic and then periodically over the last two years when infection rates have increased. Many of our devices are used in elective procedures. Additionally, our sales representatives’ access to hospitals and surgeons has periodically been restricted by hospitals or local governments. More recently, in many geographies we have seen restrictions eased, although the prevalence of COVID-19 variants has not always resulted in the re-opening of hospital access. During 2020 and into 2022, these dynamics resulted in, and we expect will continue to result in, variable and unpredictable sales.

As described above, our results could be materially impacted in the near term. These financial statements and management’s discussion and analysis of financial condition and results of operations should be read in that context.

Comparison of the ~~three~~three- and ~~nine months~~six-month periods ended ~~September~~June 30, ~~2017~~2022 to the ~~three~~three- and ~~nine months~~six-month periods ended ~~September~~June 30, ~~2016.~~2021:

The following tables set forth, for the periods indicated, our ~~results of operations,~~ net sales by geography, and the change between the specified periods expressed as a percentage increase or decrease:


	Three months ended Sept ember 30,							Nine months ended September 30,							Three months ended June 30,							Six months ended June 30,
(unaudited)	2017		2016		Percent change			2017		2016		Percent change							Percent							Percent
	($ in thousands)														2022		2021		change			2022		2021		change
															($ in thousands)							($ in thousands)
Net sales	$	24,822	$	23,216		7	%	$	74,714	$	65,863		13	%	$	42,108	$	40,670		4	%	$	81,669	$	76,553		7	%

Net sales by geography:
Americas	$	15,442	$	14,528		6	%	$	46,511	$	39,594		17	%	$	28,854	$	27,329		6	%	$	55,397	$	51,028		9	%
International		9,380		8,688		8	%		28,203		26,269		7	%

Europe, Middle East and Africa																10,749		10,803		(0	%)		21,243		20,665		3	%
Asia Pacific																2,505		2,538		(1	%)		5,029		4,860		3	%
Total	$	24,822	$	23,216		7	%	$	74,714	$	65,863		13	%	$	42,108	$	40,670		4	%	$	81,669	$	76,553		7	%

Net sales. Net sales increased ~~$1.6~~by $1.4 million, or 7%4%, to ~~$24.8~~$42.1 million for the three months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~$23.2~~$40.7 million for the three months ended ~~September~~June 30, ~~2016. Sales increases for~~2021. The increase was driven primarily by an increase in carotid patch sales of $0.9 million, allograft preservation services of $0.7 million, and bovine graft sales of $0.6 million. Additionally, shunt and valvulotome sales increased by $0.2 million and $0.1 million, respectively. We estimate that the stronger U.S. dollar decreased net sales by $1.7 million during the three months ended ~~September~~June 30, ~~2017 were due in large part~~2022 as compared to ~~sales of our RestoreFlow service offering (acquired in~~ the fourth quarter of 2016) of $1.6 million. Other products with increased sales included carotid shunts of $0.4 million and Omniflow II biosynthetic vascular grafts of $0.2 million, which were offset by lower sales of valvulotomes of $0.6 million.three months ended June 30, 2021.

Net sales increased ~~$8.8~~by $5.1 million, or ~~13%~~7%, to ~~$74.7~~$81.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~$65.9~~$76.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016. Sales increases for~~2021. The increase was driven primarily by an increase in carotid patch sales of $1.6 million, bovine graft sales of $1.6 million and allograft preservation services of $1.4 million. Additionally, shunt and valvulotome sales increased by $0.9 million and $0.5 million, respectively. We estimate that the ~~nine~~stronger U.S. dollar decreased net sales by $2.5 million during the six months ended ~~September~~June 30, ~~2017 were due in large part~~2022 as compared to sales of our RestoreFlow service offering of $4.4 million. Other products with increased sales included biologic vascular patches of $2.8 million, carotid shunts of $0.9 million, Omniflow II biosynthetic vascular grafts of $0.6 million, and vessel closure systems of $0.6 million, which were offset by lower sales of valvulotomes of $0.7 million.the six months ended June 30, 2021.

Direct-to-hospital net sales were ~~93% and 92%~~95% of our total net sales for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~September~~June 30, ~~2016, respectively.~~2021.

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Net sales by geography. Net sales in the Americas increased ~~$0.9~~$1.5 million, or 6%, for the three months ended ~~September~~June 30, ~~2017. The increase was due in large part~~2022 as compared to sales of our RestoreFlow service offering of $1.6 million, and increased sales of carotid shunts of $0.3 million. These increases were partially offset by lower valvulotome sales of $0.8 million and biologic vascular patches of $0.3 million. International net sales for the three months ended ~~September~~June 30, ~~2017~~2021. The increase was driven primarily by increased ~~$0.7~~allograft preservation services of $0.6 million, ~~or 8% due mainly to higher~~increased bovine graft sales of ~~biologic vascular patches of $0.2~~$0.6 million, and ~~valvulotomes~~increased shunt sales of ~~$0.2 million, as well as carotid shunts, biosynthetic vascular grafts and polyester vascular grafts, each of $0.1~~$0.3 million.

Net sales in the Americas increased ~~$6.9~~$4.4 million, or 9%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2022 as compared to the six months ended June 30, 2021. The increase was ~~due in large part to~~driven primarily by increased bovine graft sales of ~~our RestoreFlow service offering~~$1.6 million, increased allograft preservation services of ~~$4.4~~$1.2 million, and increased shunt sales of $0.5 million. Additionally, valvulotome and carotid patch sales both increased by $0.4 million, respectively.

EMEA net sales decreased $0.1 million, or 0.5%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. The decrease was driven primarily by decreased ovine graft sales of $0.4 million largely due to the lack of a CE mark for Burlington produced devices, and decreased surgical glue sales of $0.2 million, as ~~well as our ProCol biologic grafts~~surgical glue sales were discontinued during the most recent period. The decreased sales were offset by increased carotid patch sales of $0.4 ~~million. We also recorded~~million, and increased valvulotome sales of ~~our biologic vascular patches~~$0.2 million.

EMEA net sales increased $0.6 million, or 3%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase was driven primarily by increased carotid patch sales of ~~$1.8~~$0.8 million, ~~vessel closure systems~~increased shunt sales of $0.5 million, and ~~carotid shunts of $0.6 million. These increases were partially offset by lower~~increased valvulotome sales of ~~valvulotomes of $0.8~~$0.3 million. ~~International net~~The increased sales for the nine months ended September 30, 2017 increased $1.9 million, or 7%, due mainly to higher sales of biologic vascular patches, Omniflow II biosynthetic grafts and powered phlebectomy devices, partiallywere partial offset by decreased ovine graft sales of ~~catheters~~$0.6 million largely due to the lack of a CE mark for Burlington-produced devices, and ~~ePTFE vascular grafts.~~decreased surgical glue sales of $0.3 million.

   Three months ended
September 30, Nine months ended
September 30,
(unaudited)    2017 2016 $ Change    Percent
change 2017 2016 $ Change    Percent
change
   ($ in thousands)
Gross profit
   $ 17,577 $ 17,019 $ 558    3 % $ 52,446 $ 46,742 $ 5,704    12 %
Gross margin
   70.8 % 73.3 % *    (2.5 %) 70.2 % 71.0 % *    (0.8 %)

Asia Pacific net sales decreased $33,000, or 1%, for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. The decrease was driven primarily by decreased occlusion catheter sales of $0.1 million, decreased shunt sales of $0.1 million, and decreased valvulotome sales of $0.1 million. The decreased sales were offset by increased carotid patch sales of $0.2 million.

*	~~Not applicable~~

Asia Pacific net sales increased $0.2 million, or 3%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase was driven primarily by increased carotid patch sales of $0.4 million offset by decreased shunt sales of $0.1 million.

The following table sets forth the change in our gross profit and gross margin for the periods indicated:

	Three months ended June 30,												Six months ended June 30,
(unaudited)										Percent												Percent
	2022			2021			Change			change			2022			2021			Change			change
	($ in thousands)												($ in thousands)
Gross profit	$	27,810		$	26,761		$	1,049			4	%	$	53,772		$	50,560		$	3,212			6	%

Gross margin		66.0	%		65.8	%		0.2	%		*			65.8	%		66.0	%		(0.2	%)		*

*Not applicable

Gross Profit.Gross profit increased ~~$0.6~~$1.0 million, or 4%, to ~~$17.6~~$27.8 million for the three months ended ~~September~~June 30, ~~2017, while~~2022, and gross margin ~~decreased by 250~~increased 20 basis points to ~~70.8%.~~66.0% in the period. The increase in gross profit was driven primarily by increased sales from carotid patch, allograft, and bovine grafts. The increase in gross margin ~~decrease~~ was ~~mainly the result of the addition of our RestoreFlow service offering in November 2016,~~driven primarily by increased manufacturing efficiencies, lower charges for excess and obsolete inventory, and increased bovine graft sales which ~~carries~~carry comparatively ~~lower~~higher gross margins, ~~than our other products, as well as lower valvulotome sales and an~~partially offset by unfavorable ~~geographic mix of our revenues. These factors were offset partially by pricing increases~~changes in ~~2017 as well as the effects of~~ foreign ~~exchange.~~currency exchange rates.

Gross profit increased ~~$5.7~~$3.2 million, or 6%, to ~~$52.4~~$53.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, while~~2022, and gross margin decreased ~~by 80~~20 basis points to ~~70.2%~~65.8% in the period. The increase in gross profit was driven primarily by increased sales from carotid patch, bovine graft, and allografts. The decrease in the gross margin ~~decrease~~ was ~~mainly the result of the addition of our RestoreFlow service offering~~driven primarily by an increase in ~~November 2016, which carries comparatively lower gross margins than our other products, as well as lower valvulotome sales, which were partially offset by pricing increases, favorable geographic and~~labor costs, unfavorable product mix, including higher sales of comparatively low margin polyester grafts, unfavorable changes in foreign currency exchange rates and ~~the effects~~manufacturing inefficiencies largely related to bovine carotid patches.

Table of ~~foreign exchange.~~Contents

Operating Expenses

~~Our~~

The following tables set forth changes in our operating expenses for the ~~three~~periods indicated and ~~nine month~~the change between the specified periods ~~ended September 30, 2017 and 2016 consisted of the following (in thousands):~~expressed as a percentage increase or decrease:

																				Three months ended June 30,									Six months ended June 30,
(unaudited)																										Percent									Percent
																				2022		2021		$ Change		change			2022		2021		$ Change		change
	Three months ended September 30,										Nine months ended September 30,
(unaudited)	2017		2016		$ Change			Percent change			2017		2016		$ Change		Percent change
Sales and marketing	$	6,201	$	6,541	$	(340	)		(5	%)	$	19,754	$	19,353	$	401		2	%	$	8,242	$	6,803	$	1,439		21	%	$	16,092	$	13,269	$	2,823		21	%
General and administrative		4,562		3,595		967			27	%		12,857		10,343		2,514		24	%		7,331		6,200		1,131		18	%		14,583		12,744		1,839		14	%
Research and development		1,761		1,539		222			14	%		5,053		4,619		434		9	%		3,346		2,652		694		26	%		6,278		5,496		782		14	%

Restructuring																					3,107		-		3,107		*			3,107		-		3,107		*
Total	$	12,524	$	11,675	$	849			7	%	$	37,664	$	34,315	$	3,349		10	%	$	22,026	$	15,655	$	6,371		41	%	$	40,060	$	31,509	$	8,551		27	%

																				Three months ended June 30,									Six months ended June 30,
																				2022			2021						2022			2021
	Three months ended September 30,									Nine months ended September 30,										% of Net Sales			% of Net Sales			Change			% of Net Sales			% of Net Sales			Change
	2017 % of Net Sales			2016 % of Net Sales			Change			2017 % of Net Sales			2016 % of Net Sales			Change
Sales and marketing		25	%		28	%		(3	%)		26	%		29	%		(3	%)			20	%		17	%		3	%		20	%		17	%		3	%
General and administrative		18	%		15	%		3	%		17	%		16	%		1	%			17	%		15	%		2	%		18	%		17	%		1	%
Research and development		7	%		7	%		0	%		7	%		7	%		0	%			8	%		7	%		1	%		8	%		7	%		1	%
Restructuring																					7	%		0	%		7	%		4	%		0	%		4	%
* Not a meaningful percentage relationship.																			* Not a meaningful percentage relationship.

Sales and marketing. ~~Sales~~For the three months ended June 30, 2022, sales and marketing expense increased 21% to $8.2 million. The increase was driven primarily by higher salaries and related expenses of $1.1 million, including higher commissions of approximately $0.3 million. The number of sales reps increased from 88 to 111 from June 30, 2021 to June 30, 2022. We also added 2 additional regional sales managers during this time. Travel and related expenses were also higher by $0.2 million. Expense reduction programs implemented during the second quarter of 2020 through the fourth quarter of 2021 in response to the COVID-19 global pandemic, including a reduction in force, lowered expenses for the three months ended ~~September~~June 30, ~~2017 decreased $0.3 million or 5% vs. the September 30, 2016 period. Decreases were mainly driven by a decline~~2021. We have since rehired in ~~compensation-related costs of $0.2 million related to fewer direct~~many areas, including our sales representatives as well as the vacancy in the position of Vice President Sales, The Americas. Sales meeting expense also decreased $0.1 million due to an event held in the 2016 period that was not held in the 2017 period.

For the nine months ended September 30, 2017, sales and marketing expenses increased $0.4 million or 2% to $19.8 million. The increase was primarily driven by increased compensation-related expenses, related to an increase in the average number of sales representatives during the comparative periods, from 91 in 2016 to 93 in 2017.force. As a percentage of net sales, sales and marketing expense ~~decreased~~increased to ~~26% in~~20% for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2022, up from ~~29%~~17% in the prior ~~year period due~~period.

For the six months ended June 30, 2022, sales and marketing expense increased 21% to $16.1 million. The increase was driven by higher salaries and related expenses of $2.2 million, including higher commissions of approximately $0.7 million. Travel and related expenses were also higher by $0.4 million. As a percentage of net sales, sales and marketing expense increased to 20% for the six months ended June 30, 2022, up from 17% in the ~~current~~prior period.

General and administrative. For the three months ended ~~September~~June 30, ~~2017,~~2022, general and administrative expenses increased ~~$1.0~~18% to $7.3 million. The increase was driven primarily by higher salaries and related expenses of $0.6 million, ~~or 27%~~as well as an increase in personnel. Outside services expense also increased by $0.4 million. As a percentage of sales, general and administrative expense increased to ~~$4.6 million. Included~~17% for the three months ended June 30, 2022, up from 15% in the current period is a charge of $0.5 million related to a stock option award modification associated with the recent departure of our President of International Operations. We also had higher compensation costs of $0.2 million, acquisition-related charges of $0.2 million, and recruiting fees of $0.1 million.prior period.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, general and administrative expenses increased ~~$2.5~~14% to $14.6 million. The increase was driven primarily by higher salaries and related expenses of $1.3 million, or 24%, to $12.9 million. Increases included the aforementioned stock option award modification charge, higher compensation costs of $0.5 million, acquisition-related charges of $0.6 million, facility-related costs of $0.5 millionas well as an increase in ~~connection with expanding our Burlington manufacturing operations, and professional service fees of $0.3~~personnel. Outside services expense also increased by $0.4 million. As a percentage of net sales, general and administrative ~~expenses~~expense increased to ~~17%~~18% for the ~~nine~~six months ended ~~September~~June 30, ~~2017 as compared to 16% for~~2022, up from 17% in the ~~year-earlier~~prior period.

Research and development. ~~Research~~For the three months ended June 30, 2022, research and development expense increased 26% to $3.3 million. The increase was driven primarily by higher salaries and related expenses of $0.2 million, as well as an increase in personnel. Outside services and testing also increased by $0.5 million due to higher consulting and third-party costs associated with regulatory approvals, as well as testing related to our biologic products. As a percentage of sales, total research and development expense increased to 8% for the three months ended ~~September~~June 30, ~~2017 increased $0.2 million or 14% to $1.8 million, primarily due to higher professional services and testing costs.~~2022, from 7% in the prior period.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, research and development expenses increased ~~$0.4~~14% to $6.3 million. The increase was driven primarily by higher salaries and related expenses of $0.6 million, ~~or 9%, to $5.1 million. Increases were primarily due to higher compensation costs~~ as well as ~~higher product~~an increase in personnel. Outside services and testing ~~expenses related~~also increased by $0.2 million. As a percentage of net sales, total research and development expense increased to ~~clinical~~8% for the six months ended June 30, 2022, from 7% in the prior period.

Restructuring. For the three and ~~regulatory.~~six months ended June 30, 2022, restructuring expense was $3.1 million. On June 30, 2022 we ceased operations at the St. Etienne, France factory and terminated most of the personnel at the site. The closure resulted in a restructuring charge of $3.1 million for the three and six months ended June 30, 2022. Charges primarily consisted of employment termination costs, impairment of fixed assets and inventory, and third-party costs. Total costs associated with the closure are expected to be approximately $3.5 million.

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Income tax expense.We recorded a tax provision of ~~$31,000~~$2.0 million onpre-tax income of ~~$5.1~~$5.5 million for the three months ended ~~September~~June 30, ~~2017,~~2022, compared to a ~~$2.1~~$2.2 million tax provision onpre-tax income of ~~$5.3~~$10.5 million for the three months ended ~~September~~June 30, ~~2016.~~2021. We recorded a tax provision of ~~$1.9~~$4.0 million onpre-tax income of ~~$14.8~~$13.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~$4.4~~a tax provision of $3.7 million onpre-tax income of ~~$12.4~~$17.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2021. Our effective income tax rate was ~~0.6%~~36.7% and ~~12.8%~~29.5% for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2017. Our~~2022. Generally, income tax provisions for interim periods are based on an estimated annual income tax rate, adjusted for discrete tax items, with any changes affecting the estimated annual effective tax rate recorded in the interim period in which the change occurs. There is an exception to the estimated annual income tax rate calculation when there are losses in a jurisdiction that have a valuation allowance. The Company incurred losses in 2022 that are not benefitted in connection with the closure of the St. Etienne, France factory. Accordingly, the company has removed the pre-tax losses of its French subsidiary to calculate the annual effective tax rate. As such, our tax expense for the current period is based on an estimated annual effective tax rate of ~~36.8%~~24.6%, adjusted in the applicable quarterly periods for discrete stock option exercises and other discrete items. Our income tax expense for the current period varies from the statutory rate mainly due to ~~certain~~federal and state tax credits, permanent items, ~~offset by lower~~different statutory rates from our foreign entities, and certain foreign losses not benefitted due to a ~~discrete item~~valuation allowance. When the French subsidiary’s ordinary pre-tax loss is removed, our effective income tax rate is 23.7% and 24.1% for ~~stock option exercises.~~the three and six month periods ended June 30, 2022. As noted above, the effective income tax rate on unadjusted pre-tax income of $5.5 million and $13.5 million for the three and six month periods ended June 30, 2022, results in effective tax rates of 36.7% and 29.5% for the three and six month periods ended June 30, 2022, respectively. The primary factors affecting the Company’s recalculated effective tax rate for the three and six month periods ended June 30, 2022, were certain foreign losses not benefitted due to a valuation allowance.

Our effective income tax rate was ~~39.2%~~20.6% and ~~35.6%~~20.7% for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2016.~~2021. Our ~~2016~~2021 provision was based on the estimated annual effective tax rate of ~~34.8%~~24.1%, adjusted in the applicable quarterly period for discrete stock option exercises and other discrete items. Our income tax expense for ~~2016~~the six month period ended June 30, 2021 varied from the statutory rate mainly due to ~~certain~~federal and state tax credits, permanent items, ~~offset by lower~~different statutory rates from our foreign entities, and a discrete item for stock option exercises.

We monitor the mix of profitability by tax jurisdiction and adjust our annual expected rate on a quarterly basis as needed. While it is often difficult to predict the final outcome or timing of the resolution for any particular tax matter, we believe ~~that~~ our tax reserves reflect the probable outcome of known contingencies.

We assess the likelihood that our deferred tax assets will be realized through future taxable income and record a valuation allowance to reduce gross deferred tax assets to an amount that we believe is more likely than not to be realized. As of ~~September~~June 30, ~~2017,~~2022, we have provided a valuation allowance of ~~$1.9~~$2.5 million for deferred tax assets primarily related to Australian net operating loss and capital loss carry forwards, ~~and~~ Massachusetts tax credit carry forwards, and France (Cardial) net operating loss carry forwards that are not expected to be realized.

We expect that our effective tax rate will remain somewhat inconsistent for the remainder of 2017 due to the timing of exercises of certain employee stock options. We expect our 2017 effective tax rate will be lower than our 2016 effective tax rate mainly due to exercises of stock options in 2017.

Liquidity and Capital Resources

At ~~September~~June 30, ~~2017,~~2022, our cash and cash equivalents were ~~$37.5~~$20.8 million as compared to ~~$24.3~~$13.9 million at December 31, ~~2016.~~2021. We also had $54.9 million in short-term marketable securities as of June 30, 2022 and $56.1 million as of December 31, 2021. Our cash and cash equivalents are highly liquid investments with maturities of 90 days or less at the date of purchase, and consist primarily of operating bank ~~accounts~~accounts. Our short-term marketable securities consist of a managed income mutual fund investing mainly in short-term investment grade, U.S.-dollar denominated fixed and ~~money~~floating-rate debt, and a short-duration bond fund. As of June 30, 2022 our short-term marketable securities reflected an unrealized loss of $1.8 million as a result of increasing market funds, and are stated at cost, which approximates fair value. All of our cash held outside of the United States is available for corporate use, with the exception of $7.8 million held by certain international subsidiaries where earnings are planned to be permanently reinvested.interest rates.

On July ~~25, 2016,~~16, 2021, we closed an offering of 1,000,0000 shares of our common stock, $0.01 par value per share, at a price to the public of $54.50 per share less underwriting discounts. The net proceeds, after deducting the underwriting discounts and other offering expenses, were approximately $51.0 million. We used a portion of the proceeds from the offering to repay our outstanding debt. We plan to use the remaining proceeds for general corporate purposes, including working capital needs and capital expenditures, dividend payments, deferred payments related to prior acquisitions, and the funding of future acquisitions. On August 4, 2021, the underwriters purchased an additional 150,000 shares pursuant to an option granted to them in connection with the offering described above. The net proceeds to the Company, after deducting underwriting discounts and other offering expenses, were approximately $7.6 million. We plan to use the proceeds for general corporate purposes.

On February 22, 2022, our Board of Directors ~~approved a stock~~authorized the repurchase ~~program under which the Company was authorized to repurchase~~of up to $5$20.0 million of ~~its~~the Company’s common stock through transactions on the open market, in privately negotiated purchases or ~~otherwise. We did not make any repurchases under this program prior to its July 25, 2017 expiration.~~

~~On July 25, 2017, our Board of Directors approved a stock~~otherwise until February 22, 2023. The repurchase ~~program under which the Company is authorized to repurchase up to $7.5 million of its common stock through transactions on the open market, in privately negotiated purchases or otherwise. This~~ program may be suspended or discontinued at any ~~time, and expires on the earlier of July 25, 2018 or when the authorized aggregate $7.5 million repurchase limit is reached, unless extended by our Board of Directors.~~time. To date we have not made any repurchases under this program.

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In June 2020, in connection with the Artegraft acquisition, we incurred debt of $65 million including a five-year revolving line of credit of $25 million and a five-year term loan of $40 million. The loans bore interest at either the Base Rate as defined in the agreement plus an applicable margin of 1.25% to 1.75% depending on our consolidated leverage ratio, or the Eurodollar Rate plus an applicable margin of 2.25% to 2.75% depending on our consolidated leverage ratio. In July 2021 we repaid the balance under the term loan, plus accrued interest, in full.

In November 2021, we terminated the credit agreement, including the revolving line of credit, as permitted under the original agreement.

Operating and Capital Expenditure Requirements

We require cash to pay our operating expenses, make capital expenditures, and pay our long-term liabilities. Since our inception, we have funded our operations through public offerings and private placements of equity securities, short-term and long-term borrowings, and funds generated from our operations.

We recognized operating income of ~~$14.8~~$13.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2022. For the year ended December 31, ~~2016,~~2021, we had operating income of ~~$16.3~~$36.4 million. We expect to fund any increased costs and expenditures from our existing cash and cash equivalents, though our future capital requirements depend on numerous factors. These factors include, but are not limited to, the following:

~~the revenues generated by sales of our products and services;~~

•

the revenues generated by sales of our products and services;

~~payments associated with potential future quarterly cash dividends to our common stockholders;~~

•

payments associated with potential future quarterly cash dividends to our common stockholders;

~~future acquisition-related payments;~~

•

future acquisition-related payments;

~~payments associated with income and other taxes;~~

•

payments associated with income and other taxes;

~~the costs associated with expanding our manufacturing, marketing, sales, and distribution efforts;~~

•

the costs associated with expanding our manufacturing, marketing, sales, and distribution efforts;

~~the costs associated with our initiatives to selldirect-to-hospital~~ ~~in new countries;~~

•

the costs associated with our initiatives to sell direct-to-hospital in new countries;

~~the costs of obtaining and maintaining FDA and other regulatory clearances of our existing and future products;~~

•

the costs of obtaining and maintaining U.S. FDA and other regulatory clearances for our existing and future products;

~~the number, timing, and nature of acquisitions and other strategic transactions, and~~

•

the costs associated with obtaining European MDR clearances for our existing and future products;

~~potential future share repurchases.~~

•

the number, timing, and nature of acquisitions, divestitures and other strategic transactions, and

•

potential future share repurchases.

Our cash balances may decrease as we continue to use cash to fund our operations, make acquisitions, ~~make payments under~~pay dividends, repurchase shares of our ~~quarterly dividend program, make share repurchases,~~common stock and make deferred payments related to prior acquisitions. We believe that our cash, cash equivalents, investments and the interest we earn on these balances will be sufficient to meet our anticipated cash requirements for at least the next twelve months. If these sources of cash are insufficient to satisfy our liquidity requirements beyond the next twelve months, we may seek to sell additional equity or debt securities or ~~borrow funds from, or establish~~take out a ~~revolving credit facility with a financial institution.~~loan. The sale of additional equity and debt securities may result in dilution to our ~~stockholders.~~stockholders, as was the case with our July 2021 equity offering. If we raise additional funds through the issuance of debt securities, such securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations and possibly our ability to pay dividends. We may require additional capital beyond our ~~currently-forecasted~~currently forecasted amounts. Any such required additional capital may not be available on reasonable terms, if at all.

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Dividends

In February 2011, our Board of Directors approved a policy for the payment of quarterly cash dividends on our common stock. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by our Board of ~~Directors.~~Directors on a quarterly basis. The dividend activity for the periods presented is as follows:

Record Date
   Payment Date    Per Share Amount    Dividend Payment
         (in thousands)
Fiscal Year 2017

March 22, 2017
   April 6, 2017    $ 0.055    $ 1,029
May 24, 2017
   June 8, 2017    $ 0.055    $ 1,036
August 23, 2017
   September 6, 2017    $ 0.055    $ 1,055
Fiscal Year 2016

March 21, 2016
   April 4, 2016    $ 0.045    $ 825
May 25, 2016
   June 8, 2016    $ 0.045    $ 829
August 22, 2016
   September 2, 2016    $ 0.045    $ 833
November 21, 2016
   December 5, 2016    $ 0.045    $ 836

Record Date	Payment Date	Per Share Amount		Dividend Payment
				(in thousands)
Fiscal Year 2022
March 8, 2022	March 24, 2022	$	0.125	$	2,743
May 17, 2022	June 2, 2022	$	0.125	$	2,745

Fiscal Year 2021
March 9, 2021	March 25, 2021	$	0.110	$	2,262
May 19, 2021	June 3, 2021	$	0.110	$	2,267
August 26, 2021	September 9, 2021	$	0.110	$	2,401
November 19, 2021	December 2, 2021	$	0.110	$	2,405

On ~~October 24, 2017~~July 26, 2022 our Board of Directors approved a quarterly cash dividend on our common stock of ~~$0.055~~$0.125 per share payable on ~~December 7, 2017~~September 8, 2022, to stockholders of record at the close of business on ~~November 22, 2017, which will total approximately $1.0 million.~~August 25, 2022.

Cash Flows


	Nine months ended September 30,									Six months ended June 30,
	(in thousands)									(in thousands)
	2017			2016			Net Change			2022			2021			Net Change
Cash and cash equivalents	$	37,514		$	34,650		$	2,864		$	20,788		$	21,541		$	(753	)

Cash flows provided by (used in):
Operating activities	$	16,098		$	12,702		$	3,396		$	13,959		$	15,971		$	(2,012	)
Investing activities		(4,780	)		(4,198	)		(582	)		(1,509	)		(2,462	)		953
Financing activities		1,146			(1,535	)		2,681			(4,965	)		(18,504	)		13,539

Net cash provided by ~~(used in)~~ operating activities. Net cash provided by operating activities was ~~$16.1~~$14.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, consisting of ~~$12.9~~$9.6 million in net income, ~~adjusted~~adjustments fornon-cash or non-operating items of ~~$5.2~~$10.0 million (including primarily depreciation and amortization of ~~$3.0~~$4.8 million, stock-based compensation of ~~$1.8~~$2.3 million, ~~and~~ provisions for inventory write-offs and doubtful accounts of ~~$0.4~~$1.8 million, and loss on divestiture of $2.0 million), and ~~offset by changes in~~also a net use of working capital of ~~$2.0~~$5.6 million. The net cash used for working capital was driven by ~~increases~~an increase in inventory and other deferred costs of ~~$1.3~~$3.5 million and an increase in accounts receivable of ~~$0.1 million and prepaid expenses and other current assets of $1.4 million,~~$2.6 million. These cash uses were offset by a decrease in prepaid expenses and other assets of $0.4 million and increase of accounts payable ~~and other liabilities~~ of ~~$0.8~~$0.1 million.

Net cash provided by operating activities was ~~$12.7~~$16.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016, and consisted~~2021, consisting of ~~$8.0~~$14.2 million in net income, ~~adjusted~~adjustments fornon-cash or non-operating items of ~~$4.2~~$9.4 million (including depreciation and amortization of ~~$2.7~~$5.3 million, stock-based compensation of ~~$1.2~~$1.8 million, ~~and~~ provisions for inventory write-offs and doubtful accounts of ~~$0.3~~$2.3 million), ~~as well as changes in~~and also a net use of working capital of ~~$0.5~~$7.6 million. The net cash used ~~by changes in~~for working capital was driven by ~~increases in~~payments of accounts payable and ~~other~~accrued liabilities of ~~$1.2~~$4.6 million, ~~offset by decreases~~an increase in inventory and other ~~current assets~~deferred costs of ~~$0.4 million, inventory of $0.2~~$2.0 million and an increase in accounts receivable of ~~$0.1~~$1.5 million. These cash uses were offset by a decrease in prepaid expenses and other assets of $0.5 million.

Net cash used in investing activities. Net cash used in investing activities was ~~$4.8~~$1.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017. This was primarily driven by~~2022, consisting of expenditures on ~~leasehold improvements~~equipment and ~~equipment associated with the expansion of our Burlington facility.~~technology.

Net cash used in investing activities was ~~$4.2~~$2.5 million for ~~nine~~the six months ended ~~September~~June 30, ~~2016, driven by $2.4 million~~2021, consisting of ~~cash paid in connection with our acquisition of the ProCol biologic vascular grafts, as well as purchases of property~~expenditures on equipment and ~~equipment of $1.8 million primarily associated with the expansion of our Burlington facility~~technology.

Net cash ~~provided by (used in)~~used in financing activities. Net cash ~~provided by~~used in financing activities was ~~$1.1~~$5.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, consisting primarily of a dividend payment of $5.5 million. This use of cash was partly offset by proceeds from stock option exercises of ~~$5.5~~$0.5 million, ~~offset by dividend payments~~net of ~~$3.1 million,~~ shares ~~withheld~~repurchased to ~~satisfy~~cover employee ~~taxes on restricted stock vesting~~payroll taxes.

Table of ~~$0.8 million and payments related to prior acquisitions of $0.4 million.~~Contents

Net cash used in financing activities was ~~$1.5~~$18.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016, driven~~2021, consisting primarily byof payments made on our long-term debt of $16.0 million and dividend payments of ~~common stock dividends~~$4.5 million. These uses of ~~$2.5 million, partially~~cash were partly offset by proceeds from stock option exercises of $2.0 million, net of shares ~~withheld~~repurchased to ~~satisfy~~cover employee ~~taxes on restricted stock vesting of $1.2 million. We also made payments related to our prior acquisitions of $0.2 million.~~payroll taxes.

~~Contractual obligations~~. Our principal contractual obligations consist of operating leases and inventory purchase commitments, and have not changed significantly since December 31, 2016 as reported in our Annual Report on Form~~10-K.~~

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

~~We did not have anyoff-balance~~ sheet arrangements as of September 30, 2017. We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating~~off-balance~~ ~~sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involvingnon-exchange~~ ~~traded contracts. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.~~

Critical Accounting Policies and Estimates

We have adopted various accounting policies to prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. Our most significant accounting policies are described in ~~note~~Note 1 to our consolidated financial statements included in our Annual Report onForm 10-K for the fiscal year ended December 31, ~~2016.~~2021. There have been no material changes in our critical accounting policies during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2022. The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to ~~bad debts, inventories,~~revenue recognition, inventory valuation, valuation of intangible assets ~~sales returns~~ and ~~discounts, share-based compensation,~~goodwill, contingent consideration and income taxes are reviewed on an ongoing basis and updated as appropriate. Actual results may differ from those estimates.

Recent Accounting Pronouncements

~~In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2017-09~~ ~~which provides guidance on determining which changes to the terms and conditions~~

A summary of ~~share-based payment awards require an entity to apply modification~~recent accounting under ASC 718, Compensation – Stock Compensation. The new standard is effective for us beginning January 1, 2018, with early adoption permitted. The adoption of this standard is not expected to have a materialpronouncements that may impact on our financial ~~statements.~~

~~In January 2017, FASB issued ASU2017-04,~~ ~~which, among other provisions, eliminates “step 2” from the goodwill impairment test. The annual, or interim, goodwill impairment test will~~statements upon adoption in future periods can be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for us beginning Januaryfound in Note 1 ~~2020, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our financial statements.~~

~~In January 2017, the FASB issued ASU2017-01~~ which changes the definition of a business for purposes of determining whether a business has been acquired or sold. The amendment is intended to help companies evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for us beginning January 1, 2018, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our financial statements.

~~In May 2014, the FASB and the International Accounting Standards Board issued substantially converged final standards on revenue recognition. The FASB’s ASUNo. 2014-09,~~ Revenue from Contracts with Customers (Topic 606), as amended from time to time, outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new revenue recognition guidance becomes effective for us on January 1, 2018, with early adoption permitted on January 1, 2017. Entities have the option of using either a full retrospective or a modified approach to adopt the guidance in the ASU. Our assessment of the impact to our financial statements included under Part 1, Item 1 of ~~adopting~~ this standard is underway. We engaged external consultants to assist us with our analysis, which included evaluating our standard arrangements with customers, as well as arrangements specific to certain customer bases or product offerings, and reviewing a sample of actual contracts to determine whether there are additional attributes to consider beyond our standard arrangements. Although our assessment is not complete, we do not currently expect that adoption of Topic 606 will have a material impactQuarterly Report on ~~our consolidated financial statements. However, there will likely be changes to our revenue recognition accounting policy as well as other disclosures.~~

~~Additionally, we have preliminarily determined that we will use the modified retrospective method of adoption.~~Form 10-Q.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

Item3. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of conducting business, we are exposed to certain risks associated with potential changes in market conditions. These market risks include changes in currency exchange rates and interest rates which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, if considered appropriate, we may enter into derivative financial instruments such as forward currency exchange contracts, although we have not done so in ~~2017~~2022 or in recent years. There have been no material changes in our quantitative and qualitative market risks since the disclosure in our Annual Report on Form10-K for the year ended December 31, ~~2016.~~

2021.

~~Item 4.~~ ~~Controls and Procedures~~

Item4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for our disclosure controls and procedures pursuant to Rules13a-15(e) and15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified under SEC rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. We design our disclosure controls and procedures to ensure, at reasonable assurance levels, that such information is timely recorded, processed, summarized and reported, and then accumulated and communicated appropriately.

~~Management conducted~~

Based on an evaluation of ~~the effectiveness~~our disclosure controls and procedures as of June 30, 2022 our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, managementChief Executive Officer and Chief Financial Officer concluded that, ~~the company’s internal control over financial reporting was effective~~ as of September 30, 2017. In November 2016, we acquired substantially all of the assets of the RestoreFlow allograft business from Restore Flow Allografts LLC. This acquired business, which during the nine months ended September 30, 2017 comprised 5.9% ofsuch date, our ~~revenues~~disclosure controls and ~~as of that date comprised approximately 2.5% of our total assets, is excluded from our evaluation of internal control over financial reporting.~~procedures were effective at reasonable assurance levels.

Changes in Internal Control

There have been no changes in our internal control over financial reporting for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~Management is in the process~~

Table of ~~assessing the effectiveness of internal control over financial reporting for the acquired RestoreFlow allograft business.~~Contents

Inherent Limitations of Internal Controls

Notwithstanding the foregoing, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any system will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Part II. Other Information

~~Item 1.~~

~~Legal Proceedings~~

Item1. Legal Proceedings

In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to employment, product liability, commercial arrangements, contracts, intellectual property and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, there are no matters, as of ~~November 1, 2017,~~August 5, 2022, that management believes would have a material adverse effect on our financial position, results of operations or cash flows.

~~Item 1A.~~ ~~Risk Factors~~
Item1A. Risk Factors

In addition to the information set forth in this report, you should consider the risks and uncertainties discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form10-K for the year ended December 31, ~~2016,~~2021, which could materially affect our business, financial condition, or future results. ~~There have been no substantive changes from~~The risk factors below supplement and update the risk factors ~~previously disclosed~~and information discussed in our Annual Report on Form10-K for the year ended December 31, ~~2016, which was filed~~2021.

Our business is subject to complex, costly, and burdensome regulations. We could be subject to significant penalties if we fail to comply.

The production and marketing of our products and services and our ongoing research and development are subject to extensive regulation and review by numerous governmental authorities both in the U.S. and abroad. U.S. and foreign regulations applicable to medical devices and human tissues are wide-ranging and govern, among other things, the testing, marketing, and premarket clearance or approval of new medical devices and services related to human tissue, as applicable, in addition to regulating manufacturing and processing practices, reporting, promotion and advertising, importing and exporting, labeling, and record-keeping procedures.

Our failure to comply with applicable regulatory requirements could result in governmental agencies or a court taking action, including any of the following:

	•	issuing public warning letters to us;
	•	imposing fines and penalties on us;
	•	issuing an injunction preventing us from manufacturing, processing, selling or distributing our products;
	•	bringing civil or criminal charges against us;
	•	delaying the introduction of our new products into the market;
	•	ordering a recall of, or detaining or seizing, our products or cryopreserved human tissue; or
	•	withdrawing or denying approvals or clearances for our products.

If any or all of the foregoing were to occur, our business, results of operations, and brand could be materially adversely affected.

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

We are subject to inspection and marketing surveillance by the FDA to determine our compliance with all regulatory requirements. If the FDA finds that we have failed to comply with any regulatory requirements, it can institute a wide variety of enforcement actions, including, but not limited to, warning letters, fines and penalties, injunctions, civil or criminal charges, mandatory recalls, and withdrawal of clearances to sell products.

We and some of our suppliers must comply with the FDA’s Quality System Regulation, 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. Our Fox River Grove operations must comply with the FDA’s current Good Tissue Practices, which are the FDA regulatory requirements for the processing of human tissue. The FDA enforces its regulations through pre-announced and unannounced inspections. We have been, and anticipate in the future being, subject to such inspections by the FDA and other regulatory bodies. The timing and scope of future audits is unknown and it is possible, despite our efforts to ensure that our quality systems and the operation of our manufacturing facilities remain in compliance with U.S, and non-U.S. regulatory requirements, that audits may result in one or more unsatisfactory results. If we or one of our suppliers fails an 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 against us, and our operations could be disrupted and our manufacturing delayed. For example, the FDA concluded a six week inspection of our Burlington facilities in June 2022. The inspection, which primarily focused on the manufacturing activities for our XenoSure biologic patch, yielded five FDA Form 483 observations with numerous examples cited by the FDA in support. Notwithstanding the FDA’s observations, based on our controls and empirical evidence, we believe that our products remain safe and effective for their intended use. We responded to the FDA with an extensive corrective action plan, and we have begun to address their findings. However, there can be no assurance that the FDA will be satisfied with our proposed actions or risk mitigation activities. As a result, the FDA may choose to take enforcement action against our firm, including by issuing a warning letter to us, requesting or mandating a recall of certain lots of our XenoSure patches or taking any of the other enforcement actions described above. If the FDA were to issue a warning letter to us, it could trigger additional audits by regulators from other geographies, consume additional internal and financial resources, interrupt our operations and have a material adverse impact on our business, results of operations and brand.

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We participate in the Medical Device Single Audit (MDSAP) program, which allows manufacturers to undergo a universal quality system audit that is accepted in the United States, Japan, Australia, Canada and Brazil in lieu of individual routine audits by each regulator. Maintenance of this certification is a requirement to maintain sales in certain geographies including Canada. Failure to maintain this certification in good standing could result in suspension of our sales efforts in Canada or the other geographies.

We are also subject to the FDA’s general prohibition against promoting our products for unapproved or off-label uses and to the medical device reporting regulations that require us to report to the FDA if our products may have caused or contributed to a death or serious injury, or if our device malfunctions and a recurrence of the malfunction would likely result in a death or serious injury. We must also file reports with the FDA of some device corrections and removals, and we must adhere to the FDA’s rules on labeling and promotion. If we fail to comply with these or other FDA requirements or fail to take adequate corrective action in response to any significant compliance issue raised by the FDA, the FDA can take significant enforcement actions, which could harm our business, results of operations, and our reputation.

In addition, most other countries, such as Japan, require us to comply with manufacturing and quality assurance standards for medical devices that are similar to those in force in the U.S. before marketing and selling our products in those countries. If we fail to comply, we would lose our ability to market and sell our products in those foreign countries.

If we do not comply with international regulatory requirements to market our products outside the United States or are required to modify our operations or products as a result of such requirements, our business will be harmed.

Sales of medical devices outside the United States are subject to international regulatory requirements that vary from country to country. These requirements and the amount of time required for approval may differ from our experiences with the U.S. FDA. In some countries, we rely on our international distributors to obtain premarket approvals, complete product registrations, comply with clinical trial requirements, and complete those steps that are customarily taken in the applicable jurisdictions to comply with governmental and quasi-governmental regulation. In the future, we expect to continue to rely on distributors in this manner in those countries where we market and sell our products through them. Failure to satisfy these foreign regulations would impact our ability to sell our products in these countries and could cause our business to suffer. There can be no assurance that we will be able to obtain or maintain the required regulatory approvals in these countries.

Our products are currently regulated in the European Union (EU) and the United Kingdom under the European Medical Devices Directive (93/42/EC as amended by 2007/47/EC) (MDD) and the European Medical Device Regulation (2017/745) (MDR). In order to market our medical devices in the EU, we are required to obtain CE marks, which denote conformity to the essential requirements of the MDD or MDR, and manufacturers of higher-risk devices generally must use a “Notified Body”—an appointed independent third party to assess conformity. We currently use three Notified Bodies for our various products. We have received CE marks under the MDD to sell most of our products after managing a reinstatement process for those CE marks in 2020 and 2021.

In April 2017, the EU adopted new regulations for medical devices, the MDR, which replace the MDD and which took effect as of May 26, 2021. Our products will eventually be fully subject to the MDR, which requires all of our products, regardless of classification, to obtain a new CE mark in accordance with the new, more stringent standards under the MDR. As a condition to CE mark approval, clinical evidence will be required for Class III and implantable devices. As our Notified Bodies transition from MDD to MDR, they have begun to impose more rigorous requirements on us. Until recently, our preparation of filings under the MDR had been delayed due to our work on the MDD CE mark reinstatement referred to above. As a result, we may not receive CE marks under MDR on a timely basis, which could lead to backorders if we have not placed sufficient inventory on the EU market before our CE mark under MDD expires in order to bridge any gap between such CE mark and a new CE mark under MDR. For example, the arrangement under which Admedus agreed to manufacture and supply us with CardioCel and VascuCel inventory expires on July 11, 2023.and we may not receive a CE mark under MDR for such products until Q2 2024. If we are unable to procure sufficient inventory to cover such gap period, then we could encounter backorders in CardioCel and VascuCel until receipt of CE marks under MDR for such products in 2024. If we fail to obtain new CE marks under the MDR in a timely manner, or at all, future sales of our products in the EU could be adversely impacted.

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There can be no assurance that we will be able to obtain or maintain MDR CE marks for our existing products, and obtaining CE marks may involve a significant amount of time and expense, stringent clinical and preclinical testing, or modification of our products and could result in limitations being placed on the use of our products in order to obtain approval. These types of more stringent restrictions on our products as they transition to MDR could impact sales of our products and/or their gross margins could be adversely impacted. For example, under the MDD CE mark issued for XenoSure in 2021, the indications for its use no longer include neuro or cardiac applications, indications for which the product was previously approved. Additionally, only XenoSure made from bovine pericardium sourced from certain of our suppliers is permitted to be sold under the new CE mark. While our existing suppliers are meeting our demand for tissue supply, there can be no assurance that they will meet or sustain higher levels of demand in the future. If they cannot meet our demand for tissue supply, our ability to supply conforming XenoSure devices to our EMEA customers may be impacted and our sales may suffer. Additionally, the tissue from the two approved tissue suppliers is significantly more expensive than that sourced from the third supplier. As a result, our EMEA gross margin for XenoSure has been negatively impacted. The Company is pursuing a path to reinstate the third supplier, although no assurances can be given.

Additionally, significant changes to our devices may trigger a requirement to file for an MDR CE mark earlier than expected, which could result in backorders. For example, in March 2020, we learned that a chemical used in our latex formulation was obsoleted. As a result, we submitted our new latex formulation to one of our Notified Bodies for review and acceptance under our Class III Pruitt F3 shunt MDD CE mark. Our Notified Body determined that the change is significant under the rules of the Class III MDD and as such we cannot implement that change under the Class III MDD rules. We filed for an MDR CE mark on that device in Q4 2021, and we currently await the results of our MDR review. We anticipate approval for that device in Q4 2022, though no assurance can be given as to timing or result. We believe inventory for our Pruitt F3 shunt will likely only be sufficient to supply customers until the end of Q3 2022, based on historical sales, and as a result, we may begin to experience backorders for the Pruitt F3 shunt while we await approval by our Notified Body. If we fail to obtain a new CE mark under MDR on this product in a timely manner, or at all, future sales of this product in the EU could be adversely impacted, though we could pursue mitigation strategies, including country-by-country derogations.

As a result of the United Kingdom’s exit from the EU, the U.K. Medicines and Healthcare Products Regulatory Agency (MHRA) has announced that devices marketed in the U.K. will require U.K. Conformity Assessed (UKCA) marks certified by a U.K. approved Notified Body following the expiration of a transition period. During the transition period, CE marking will continue to be recognized in the U.K. and certificates issued by EU-recognized Notified Bodies will continue to be valid in the U.K. market. The MHRA previously indicated that the transition period would remain in effect until June 30, 2023. On June 26, 2022, the MHRA announced its intention to establish a transitionary arrangement that would extend this deadline and allow medical devices with valid MDD CE marks to continue to be sold in the U.K. until the expiration of such CE marks. For all of our CE marked products except CardioCel and VascuCel, this would result in an extension of the transition period until May 25, 2024. Following such date (and in the case of CardioCel and VascuCel, following August 13, 2023), our devices marketed in the U.K. will require U.K. Conformity Assessed (UKCA) marks certified by a U.K. approved Notified Body. We intend to seek such marks for our products currently sold on the U.K. market. If we fail to obtain UKCA marks in a timely manner, or at all, future sales of our products in the U.K. could be adversely impacted.

Failure to receive or maintain CE mark approval would prohibit us from selling these products in the EU or the U.K., and would require significant delays in obtaining individual country approvals. If we do not receive or maintain these approvals, our business could be harmed. Maintaining a CE mark is contingent upon our continued compliance with applicable European medical device requirements, including limitations on advertising and promotion of medical devices and requirements governing the handling of adverse events. As highlighted above, there can be no assurance that we will be successful in obtaining, retaining or maintaining the CE mark for any of our current products. In particular, adverse event reporting requirements in the EU and the U.K. mandate that we report incidents which led or could have led to death or serious deterioration in health. Under certain circumstances, we could be required to or could voluntarily initiate a recall or removal of our product from the market in order to address product deficiencies or malfunctions. Any recall of our products may harm our reputation with customers and divert managerial and financial resources.

Our facilities are subject to periodic inspection by numerous regulatory authorities, including governmental agencies and Notified Bodies, and we must demonstrate compliance with the applicable medical devices regulations. Any failure by us to comply with regulatory requirements may entail our taking corrective action, such as modification of our policies and procedures. In addition, we may be required to cease all or part of our operations for some period of time until we can demonstrate that appropriate steps have been taken. There can be no assurance that we will be found in compliance with such standards in future audits.

We also pursue registrations in other jurisdictions in which we sell our devices directly, such as Japan and China. In 2015, the China Food and Drug Administration (NMPA) significantly increased the application fees for product registrations and imposed additional requirements for obtaining product approval, which includes requirements for conducting clinical trials to support the registration application process on newly introduced products in China. As a result, we may not seek registration for certain products where the cost is not justified. Any delay in product registrations could have a negative impact on our results of operations.

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Item2. Unregistered Sales of Equity Securities and ~~Exchange Commission on March 8, 2017.~~Use of Proceeds

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

   Issuer Purchases of Equity Securities
Period
   Total
Number of
Shares (or Units)
Purchased (1)    Average
Price
Paid Per
Share (or Unit)    Total Number of
Shares (or Units)
Purchased as
Part of Publicly
Announced Plans
or Program    Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
that may yet be
Purchased under
the Plans or
Program
July 1, 2017 through July 31, 2017
   27,291    $ 28.51    N/A    N/A
August 1, 2017 through August 31, 2017
   —         N/A    N/A
September 1, 2017 through September 30, 2017
   —         N/A    N/A








Total
   27,291    $ 28.51    N/A    N/A

Issuer Purchases of Equity Securities

Maximum Number

(or Approximate

Total Number of

Dollar Value) of

Shares (or Units)

Total

Average

Purchased as

that may yet be

Number of

Price

Part of Publicly

Purchased under

Shares (or Units)

Paid Per

Announced Plans

the Plans or

Period

Purchased (1)

Share (or Unit)

or Program

Program

April 1, 2022 through April 30, 2022

47.85

N/A

May 1, 2022 through May 31, 2022

39.05

N/A

June 1, 2022 through June 30, 2022

N/A

Total

41.79

N/A

(1) For the three months ended June 30, 2022, we repurchased 98 shares of our common stock to satisfy employees’ obligations with respect to minimum statutory withholding taxes in connection with the vesting of restricted stock units.

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Item6. Exhibits

~~(1)~~

For the three months ended September 30, 2017, we withheld 27,291 shares of common stock to satisfy employees’ obligations with respect to minimum statutory withholding taxes in connection with the vesting of restricted stock units.

IncorporatedbyReference

Exhibit

~~Item 6.~~Number
~~Exhibits~~

Exhibit Description

	Form	Date	Number					Filed Herewith
				~~Incorporated by Reference~~
~~Exhibit~~ ~~Number~~31.1		~~Exhibit Description~~		~~Form~~		~~Date~~	~~Number~~	~~Filed~~ ~~Herewith~~

~~31.1~~		Certification of Chief Executive Officer, as required by Rule13a-14(a) or Rule~~15d-14(a)~~ 15 d-14(a).						X
31.2
~~31.2~~		Certification of Chief Financial Officer, as required by Rule13a-14(a) or Rule15d-14(a).						X
32.1
~~32.1~~		Certification by the Chief Executive Officer, as required by Rule13a-14(b) or Rule15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).*						X
32.2
~~32.2~~		Certification by the Chief Financial Officer, as required by Rule13a-14(b) or Rule15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).*				X
101.INS	Inline XBRL Instance Document.				X
101.SCH
~~101.INS~~		~~XBRL Instance Document.~~						X

~~101.SCH~~		Inline XBRL Taxonomy Extension Schema Document.						X
101.CAL
~~101.CAL~~		Inline XBRL Taxonomy Extension Calculation Linkbase Document.						X
101.DEF
~~101.DEF~~		Inline XBRL Taxonomy Extension Definition Linkbase Document.						X
101.LAB
~~101.LAB~~		Inline XBRL Taxonomy Extension Label Linkbase Document.						X
101.PRE
~~101.PRE~~		Inline XBRL Taxonomy Extension Presentation Linkbase Document.				X
				X
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).				X

+ †	Indicates a management contract or any compensatory plan, contract, or arrangement.

The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form10-Q, are not deemed filed with the SEC and are not to be incorporated by reference into any filing of LeMaitre Vascular, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form10-Q, irrespective of any general incorporation language contained in such filing.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on ~~November 3, 2017.~~August 5, 2022.


LEMAITRE VASCULAR, INC.

/s/ George W. LeMaitre
George W. LeMaitre
Chairman and Chief Executive Officer

/s/ Joseph P. Pellegrino, Jr.
Joseph P. Pellegrino, Jr.
Chief Financial Officer and Director

~~EXHIBIT INDEX~~


		~~Incorporated by Reference~~
~~Exhibit~~ ~~Number~~	~~Exhibit Description~~	~~Form~~	~~Date~~	~~Number~~	~~Filed~~ ~~Herewith~~

~~31.1~~	~~Certification of Chief Executive Officer, as required by Rule13a-14(a)~~ ~~or Rule15d-14(a).~~				X

~~31.2~~	~~Certification of Chief Financial Officer, as required by Rule13a-14(a)~~ ~~or Rule15d-14(a).~~				X

~~32.1~~	~~Certification by the Chief Executive Officer, as required by Rule13a-14(b)~~ ~~or Rule15d-14(b)~~ and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).*				X

~~32.2~~	~~Certification by the Chief Financial Officer, as required by Rule13a-14(b)~~ ~~or Rule15d-14(b)~~ and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350).*				X

~~101.INS~~	~~XBRL Instance Document.~~				X

~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document.~~				X

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document.~~				X

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document.~~				X

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document.~~				X

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document.~~				X

+	~~Indicates a management contract or any compensatory plan, contract, or arrangement.~~

~~The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form10-Q,~~ are not deemed filed with the SEC and are not to be incorporated by reference into any filing of LeMaitre Vascular, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form~~10-Q,~~ ~~irrespective of any general incorporation language contained in such filing.~~


63 Second Avenue, Burlington, Massachusetts		01803
(Address of principal executive offices)	(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	LMAT	The Nasdaq Global Market


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
		~~Accelerated filer~~
		☒

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

				Emerging growth company	☐	☐

							(unaudited)
	(unaudited)						June 30,			December 31,
	September 30, 2017			December 31, 2016			2022			2021
	(in thousands, except share data)						(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	37,514		$	24,288		$	20,788		$	13,855
Accounts receivable, net of allowances of $315 at September 30, 2017, and $258 at December 31, 2016		13,553			13,191
Short-term marketable securities								54,895			56,104
Accounts receivable, net of allowances of $792 at June 30, 2022 and $679 at December 31, 2021								21,542			19,631
Inventory and other deferred costs		21,095			19,578			47,192			46,104
Prepaid expenses and other current assets		3,480			1,970			3,243			4,189
Assets held for sale								826			0
Total current assets								148,486			139,883

Total current assets		75,642			59,027
Property and equipment, net		11,367			8,012			15,753			17,059
Right-of-use leased assets								16,290			15,071
Goodwill		23,850			23,426			65,945			65,945
Other intangibles, net		8,669			9,897			49,598			52,710
Deferred tax assets		1,562			1,399			2,369			1,566
Other assets		179			163			984			568

Total assets	$	121,269		$	101,924		$	299,425		$	292,802

Liabilities and stockholders’ equity
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,617		$	1,217		$	2,844		$	2,340
Accrued expenses		8,803			8,804			17,009			16,332
Acquisition-related obligations		1,690			461			1,758			1,271
Lease liabilities - short-term								1,794			1,870
Total current liabilities								23,405			21,813

Total current liabilities		12,110			10,482
Lease liabilities - long-term								15,420			14,067
Deferred tax liabilities		1,948			1,941			64			70
Other long-term liabilities		1,098			2,001			2,503			2,701
Total liabilities								41,392			38,651

Total liabilities		15,156			14,424
Stockholders’ equity:
Preferred stock, $0.01 par value; authorized 3,000,000 shares; none outstanding		—			—			0			0
Common stock, $0.01 par value; authorized 37,000,000 shares; issued 20,742,411 shares at September 30, 2017, and 20,040,348 shares at December 31, 2016		207			200
Common stock, $0.01 par value; authorized 37,000,000 shares; issued 23,520,888 shares at June 30, 2022, and 23,477,784 shares at December 31, 2021								235			235
Additionalpaid-in capital		92,685			85,378			184,605			181,630
Retained earnings		25,109			15,335			92,190			88,125
Accumulated other comprehensive loss		(2,280	)		(4,583	)		(6,444	)		(3,435	)
Treasury stock, at cost; 1,480,101 shares at September 30, 2017 and 1,452,810 shares at December 31, 2016		(9,608	)		(8,830	)

Treasury stock, at cost; 1,558,019 shares at June 30, 2022 and 1,554,905 shares at December 31, 2021								(12,553	)		(12,404	)
Total stockholders’ equity		106,113			87,500			258,033			254,151

Total liabilities and stockholders’ equity	$	121,269		$	101,924		$	299,425		$	292,802

	Three months ended						Six months ended
	June 30,						June 30,
	2022			2021			2022			2021
	(in thousands, except per share data)						(in thousands, except per share data)

Net sales	$	42,108		$	40,670		$	81,669		$	76,553
Cost of sales		14,298			13,909			27,897			25,993

Gross profit		27,810			26,761			53,772			50,560

Sales and marketing		8,242			6,803			16,092			13,269
General and administrative		7,331			6,200			14,583			12,744
Research and development		3,346			2,652			6,278			5,496
Restructuring		3,107			0			3,107			0

Total operating expenses		22,026			15,655			40,060			31,509

Income from operations		5,784			11,106			13,712			19,051

Other income (expense):
Interest income		167			1			275			2
Interest expense		0			(495	)		0			(1,072	)
Foreign currency gain (loss)		(403	)		(157	)		(443	)		(33	)

Income before income taxes		5,548			10,455			13,544			17,948
Provision for income taxes		2,033			2,156			3,991			3,720

Net income	$	3,515		$	8,299		$	9,553		$	14,228

Earnings per share of common stock:
Basic	$	0.16		$	0.40		$	0.44		$	0.69
Diluted	$	0.16		$	0.40		$	0.43		$	0.68

Weighted-average shares outstanding:
Basic		21,958			20,611			21,947			20,579
Diluted		22,129			20,959			22,115			20,900

Cash dividends declared per common share	$	0.125		$	0.110		$	0.250		$	0.220


~~Delaware~~
LEMAITRE VASCULAR, INC.
(Exact name of registrant as specified in its charter)

	(781) 221-2266
(Registrant’s telephone number, including area code)
		~~(Zip Code)~~


			Page
Part I.	Financial Information:

~~Page~~	Item 1.	Financial Statements
~~Part I.~~		~~Financial Information:~~
		~~Item 1.~~		~~Financial Statements~~
				~~Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016~~		3
				Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	3

				Unaudited Consolidated Statements of Operations for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021	4
				4
			Unaudited Consolidated Statements of Comprehensive Income for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021	5
			5
		Unaudited Consolidated Statements of Stockholders’ Equity for the three-month and six-month periods ended June 30, 2022 and 2021	6

		Unaudited Consolidated Statements of Cash Flows for the ~~three-month and nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021	7
		6
		Notes to Unaudited Consolidated Financial Statements	8
		7
	Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
		19
	Item 3.		Quantitative and Qualitative Disclosure about Market Risk	32
			29
		Item 4.		Controls and Procedures	32
			30
Part II.			Other Information:
		~~Item 1.~~		~~Legal Proceedings~~		30
		~~Item 1A.~~		~~Risk Factors~~		31
		Item 2.1.	Legal Proceedings	34

		Item 1A.	Risk Factors	34

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
		31
	Item 6.		Exhibits	38
			32
	Signatures				33
	~~Index to Exhibits~~


	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
	(in thousands, except per share data)
Net sales	$	24,822		$	23,216		$	74,714		$	65,863
Cost of sales		7,245			6,197			22,269			19,121

Gross profit		17,577			17,019			52,445			46,742
Sales and marketing		6,201			6,541			19,754			19,353
General and administrative		4,562			3,595			12,857			10,343
Research and development		1,761			1,539			5,053			4,619

Total operating expenses		12,524			11,675			37,664			34,315

Income from operations		5,053			5,344			14,781			12,427
Other income (expense):
Interest income		48			24			100			55
Foreign currency gain (loss)		(28	)		(61	)		(103	)		(74	)

Income before income taxes		5,073			5,307			14,778			12,408
Provision for income taxes		31			2,078			1,885			4,415

Net income	$	5,042		$	3,229		$	12,893		$	7,993

Earnings per share of common stock:
Basic	$	0.26		$	0.17		$	0.68		$	0.43

Diluted	$	0.25		$	0.17		$	0.65		$	0.42

Weighted-average shares outstanding:
Basic		19,124			18,524			18,859			18,423

Diluted		20,147			19,248			19,970			19,103

Cash dividends declared per common share	$	0.055		$	0.045		$	0.165		$	0.135

										Accumulated
					*Additional*					*Other*								*Total*
	*Common Stock*				*Paid-in*		*Retained*			*Comprehensive*			*Treasury Stock*					*Stockholders*’
	*Shares*		*Amount*		*Capital*		*Earnings*			*Income (Loss)*			*Shares*		*Amount*			*Equity*


Balance at December 31, 2021		23,477,784	$	235	$	181,630	$	88,125		$	(3,435	)		1,554,905	$	(12,404	)	$	254,151

Net income				0		0		6,038			0					0			6,038
Other comprehensive income (loss)				0		0		0			(1,189	)				0			(1,189	)
Issuance of common stock for stock options exercised		24,917		0		508		0			0			0		0			508
Vested restricted stock units		7,158		0		0		0			0			0		0			0
Stock-based compensation expense				0		1,167		0			0					0			1,167
Repurchase of common stock for net settlement of equity awards		0		0		0		0			0			3,016		(145	)		(145	)
Common stock dividend paid				0		0		(2,743	)		0					0			(2,743	)

Balance at March 31, 2022		23,509,859		235		183,305		91,420			(4,624	)		1,557,921		(12,549	)		257,787

Net income				0		0		3,515			0					0			3,515
Other comprehensive income (loss)				0		0		0			(1,820	)				0			(1,820	)
Issuance of common stock for stock options exercised		10,808		0		164		0			0			0		0			164
Vested restricted stock units		221		0		0		0			0			0		0			0
Stock-based compensation expense				0		1,136		0			0					0			1,136
Repurchase of common stock for net settlement of equity awards		0		0		0		0			0			98		(4	)		(4	)
Common stock dividend paid				0		0		(2,745	)		0					0			(2,745	)

Balance at June 30, 2022		23,520,888	$	235	$	184,605	$	92,190		$	(6,444	)		1,558,019	$	(12,553	)	$	258,033

	For the six months ended
		June 30,
	2022			2021
	(in thousands)
Operating activities
Net income	$	9,553		$	14,228
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,817			5,261
Stock-based compensation		2,303			1,796
Fair value adjustment to contingent consideration obligations		(54	)		99
Provision for doubtful accounts		141			133
Provision for inventory write-downs		1,671			2,154
Loss on disposal of property and equipment		95			0
Loss on divestitures		1,954			0
Foreign currency transaction loss		(919	)		(14	)
Changes in operating assets and liabilities:
Accounts receivable		(2,610	)		(1,486	)
Inventory and other deferred costs		(3,536	)		(2,044	)
Prepaid expenses and other assets		403			447
Accounts payable and other liabilities		141			(4,603	)
Net cash provided by operating activities		13,959			15,971

Investing activities
Purchases of property and equipment and other assets		(1,509	)		(2,462	)
Net cash used in investing activities		(1,509	)		(2,462	)

Financing activities
Payment of long-term debt		0			(16,000	)
Proceeds from issuance of common stock		672			2,113
Purchase of treasury stock for net settlement of equity awards		(149	)		(88	)
Common stock cash dividend paid		(5,488	)		(4,529	)
Net cash used in financing activities		(4,965	)		(18,504	)

Effect of exchange rate changes on cash and cash equivalents		(552	)		(228	)
Net increase (decrease) in cash and cash equivalents		6,933			(5,223	)
Cash and cash equivalents at beginning of period		13,855			26,764
Cash and cash equivalents at end of period	$	20,788		$	21,541


	For the nine months ended September 30,
	2017			2016
	(in thousands)
Operating activities
Net income	$	12,893		$	7,993
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,966			2,658
Stock-based compensation		1,845			1,195
Provision for (recovery of) doubtful accounts		152			52
Provision for inventory write-downs		272			280
Foreign currency transaction loss		(34	)		(1	)
Changes in operating assets and liabilities:
Accounts receivable		(50	)		(68	)
Inventory and other deferred costs		(1,330	)		(216	)
Prepaid expenses and other assets		(1,403	)		(390	)
Accounts payable and other liabilities		787			1,199

Net cash provided by operating activities		16,098			12,702
Investing activities
Purchases of property and equipment and other assets		(4,780	)		(1,830	)
Payments related to acquisitions		—			(2,368	)

Net cash used in investing activities		(4,780	)		(4,198	)
Financing activities
Payments of deferred acquisition consideration		(427	)		(249	)
Proceeds from issuance of common stock		5,470			1,384
Purchase of treasury stock		(778	)		(183	)
Common stock cash dividend paid		(3,119	)		(2,487	)

Net cashprovidede by (used in) financing activities		1,146			(1,535	)
Effect of exchange rate changes on cash and cash equivalents		762			230

Net increase in cash and cash equivalents		13,226			7,199
Cash and cash equivalents at beginning of period		24,288			27,451

Cash and cash equivalents at end of period	$	37,514		$	34,650

Supplemental disclosures of cash flow information (see Note 11)


	Nine months ended September 30, 2017
	(in thousands)
Unrecognized tax benefits as of December 31, 2016	$	390
Additions for tax positions of current year		66
Additions for tax positions of prior years		—
Reductions for settlements with taxing authorities.		—
Reductions for lapses of the applicable statutes of limitations		(5	)

Unrecognized tax benefits as of September 30, 2017	$	451

	Six months ended June 30, 2022
	(in thousands)
Unrecognized tax benefits as of December 31, 2021	$	768
Additions/adjustments for tax positions of current year		0
Additions/adjustments for tax positions of prior years		(66	)
Reductions for settlements with taxing authorities		0
Reductions for lapses of the applicable statutes of limitations		0
Unrecognized tax benefits as of June 30, 2022	$	702


United States		~~2014~~ 2018 and forward
Foreign		~~2010~~ 2014 and forward

				Allocated
	Allocated Fair Value			Fair Value
	(in thousands)			(in thousands)
Inventory				$	3,859
Accounts receivable	$	394			1,789
Deferred cryopreservation costs		2,583
Equipment and supplies		125			1,140
Accounts payable		(286	)
Accounts payable and other					(53	)
Intangible assets		4,544			39,056
Goodwill		5,599			27,115

Purchase price	$	12,959		$	72,906


	Allocated Fair Value		Weighted Average Useful Life
	(in thousands)
Non-compete agreement	$	84		5.0 years
Tradename		109		9.5 years
Intellectual property		277		9.0 years
Customer relationships		150		9.0 years

Total intangible assets	$	620


	Allocated Fair Value		Weighted Average Useful Life
	(in thousands)
Non-compete agreement	$	120		5.0 years
Tradename license		17		3.0 years
Product technology		391		7.0 years
Customer relationships		17		3.0 years

Total intangible assets	$	545


	September 30, 2017		December 31, 2016		June 30, 2022		December 31, 2021
	(in thousands)				(in thousands)
Raw materials	$	3,657	$	2,810	$	13,434	$	5,945
Work-in-process		3,491		2,489		3,057		9,416
Finished products		11,944		11,662		25,269		25,286
Other deferred costs		2,003		2,617		5,432		5,457

Total inventory and other deferred costs	$	21,095	$	19,578	$	47,192	$	46,104


	(in thousands)
Balance at December 31, 2016	$	23,426
Purchase accounting adjustments		257
Effects of currency exchange		167

Balance at September 30, 2017	$	23,850

		Year ended December 31,
	2022		2023		2024		2025		2026		2027
	(in thousands)

Amortization expense	$	3,071	$	5,952	$	5,629	$	5,429	$	4,983	$	4,706

Remainder of 2022	$	1,463
Year ending December 31,
2023		2,602
2024		2,547
2025		2,530
2026		2,489
2027		2,372
Thereafter		6,973
Adjustment to net present value as of June 30, 2022		(3,762	)

Minimum noncancelable lease liability	$	17,214


	2016
Dividend yield		1.3	%
Volatility		34.5	%
Risk-free interest rate		1.2	%
Weighted average expected option term (in years)		5.5
Weighted average fair value per share of options granted	$	4.04


Record Date	Payment Date		Per Share Amount		Dividend Payment
					(in thousands)
Fiscal Year 2017
March 22, 2017		April 6, 2017	$	0.055	$	1,029
May 24, 2017		June 8, 2017	$	0.055	$	1,036
August 23, 2017		September 6, 2017	$	0.055	$	1,055
Fiscal Year 2016
March 21, 2016		April 4, 2016	$	0.045	$	825
May 25, 2016		June 8, 2016	$	0.045	$	829
August 22,2016		September 2, 2016	$	0.045	$	833
November 21, 2016		December 5, 2016	$	0.045	$	836

	•	introducing our products into new territories upon receipt of regulatory approvals or registrations in these territories;

	•	consolidating and automating product manufacturing at our Burlington, Massachusetts facilities, and

	•	updating existing products and introducing new products through research and development.

	•	In July 2019, we entered into an agreement with UreSil, LLC to purchase the remaining assets of their Eze-Sit valve cutter business, including U.S. distribution rights, for $8.0 million.

	•	In October 2019, we entered into an agreement with Admedus to purchase the assets of their CardioCel biologic patch business for $15.5 million plus additional payments of up to $7.8 million, depending upon the satisfaction of certain contingencies.

	•	In June 2020, we entered into an agreement with Artegraft to purchase the assets of their bovine graft business for $72.5 million plus additional payments of up to $17.5 million, depending upon 2021 – 2023 unit sales.

	•	During 2021, we made decisions to wind down or discontinue TRIVEX powered phlebectomy systems, remote endarterectomy devices and surgical glue. These product lines totaled approximately $2.2 million in 2021 revenues.

	•	During 2022, we made the decision to wind down the ProCol graft, AlboSure polyester patch and Latis graft cleaning catheter product lines. These products totaled approximately $0.9 million in 2021 revenues.

	•	In 2020, we launched RestoreFlow cardiac allografts for use in cardiac repair and restoration.

	•	In March 2022, we received U.S. FDA clearance to market PhasTIPP, a portable powered phlebotomy device used to remove varicose veins in the leg.