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.

109

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, as well as clarifying and amending other areas of existing GAAP under Topic 740. The new standard was effective for us beginning January 1, 2021. The adoption of this standard did not have a material impact on our financial statements.

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 and without 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 2022 income tax expense varies from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, and different statutory rates from our foreign subsidiaries. Our 2021 income tax expense ~~varies~~varied from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, different statutory rates from our foreign subsidiaries, and discrete stock option exercises. ~~Our~~ ~~2020~~ ~~income tax expense varied from the statutory rate mainly due to the generation of federal and state tax credits, permanent items, and different statutory rates from our foreign subsidiaries.~~

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 30, 2021,~~March 31, 2022, the gross amount of unrecognized tax benefits exclusive of interest and penalties was ~~$787,000.~~$749,000. 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 ~~2028.~~2030. A reconciliation of beginning and ending amount of our unrecognized tax benefits is as follows:

~~Table of Contents~~

As of ~~September 30, 2021,~~March 31, 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 $2.0 million and $2.1 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

~~Other deferred costs relate to~~In connection with our RestoreFlow allograft ~~offering and~~business, other deferred costs include costs incurred for the preservation of human tissues available for shipment, tissues currently in active processing, and tissues held in quarantine pending release to implantable status. By ~~United States~~U.S. federal law, human tissues cannot be bought or sold. Therefore, the ~~vascular and cardiac~~ tissues we preserve are not held as inventory, and the costs we incur to procure and process ~~them~~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 acquisitions are accounted for using the acquisition method, and the acquired ~~companies’~~businesses’ results have been included in the accompanying consolidated financial statements from their respective dates of 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 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 13) 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 strategic plans and other estimates. ~~Our assumptions associated with these Level~~ 3 ~~valuations are discussed below and in Note~~ 13 ~~to these financial statements.~~

On June 22, 2020, we entered into an Asset Purchase Agreement (Artegraft APA) to acquire the ~~bovine carotid artery~~biologic graft business from Artegraft, Inc., which subsequent to the closing changed ~~its~~their name to Accidentals, Inc, (Artegraft, Inc.). Under the terms of the Artegraft APA, we agreed to pay Artegraft, Inc. a total of up to $90.0 million for the purchase of substantially all of the assets related to its business of manufacturing, marketing, sale and distribution of bovine carotid artery grafts ~~(the Products),~~(Products) other than specifically identified excluded assets. The acquired assets included inventory, accounts receivable, machinery and equipment, intellectual property, permits and approvals, data and records, 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 ~~is to be~~was held until December 31, 2021 to cover any potential claims against LeMaitre or Artegraft, Inc.~~, after which it will be~~ and subsequently was released to Artegraft, Inc. by mutual consent of the parties.

~~Table of Contents~~

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 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.

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

~~Table of Contents~~

The following table reflects the 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 12.6 years.

On October 11, 2019 (the Closing Date), we entered into an asset purchase agreement (Admedus APA) to acquire the biologic patch business assets and a related technology license from Admedus Ltd (now known as Anteris Technologies Ltd) and various of its subsidiaries (collectively, Admedus). The biologic patch business consists of the CardioCel and VascuCel product lines, which are manufactured in a manner intended to reduce the risk of calcification. The products are sold worldwide. On the same date, the parties entered into a Transition Services Agreement (TSA) under which Admedus will manufacture and supply LeMaitre with inventory for a period of up to three years, unless extended in writing by both parties. In August 2021, the term of this arrangement was extended through July 11, 2023.

Under the Admedus APA we agreed to pay Admedus a total of up to $15.3 million for the purchase of substantially all of its biologic patch business assets, other than specifically identified excluded assets, plus $8.0 million for the technology license. The acquired assets (in combination with the license) included inventory, intellectual property, permits and approvals, data and records, and customer and supplier information, as well as a small amount of machinery and equipment. At closing, $14.2 million of the purchase price was paid to Admedus. Shortly thereafter another $0.3 million was paid in connection with delivery of audited financial statements of the acquired business to LeMaitre. Additional payments of $0.7 million are due within 15 days of the first and third anniversaries of the closing date; the first payment was made in October 2020. Additional contingent consideration was or may be payable as follows:

This contingent consideration of $7.5 million was initially valued in total at $2.0 million and is being re-measured each reporting period until the payment requirement ends, with any adjustments reported in income from operations.

During the quarter ended September 30, 2021, the Company entered into an amendment to the Admedus APA. Under the amendment, the Third Holdback Amount, less a deduction for certain expenses incurred by LeMaitre in order to achieve CE mark certification, will be paid as follows: 75% within 15 days following LeMaitre’s receipt of a CE mark under MDR regulations for CardioCel products, and 25% within 15 days following LeMaitre’s receipt of a CE mark under MDR regulations for VascuCel products. During the quarter ended September 30, 2021 we recorded a reduction to the liability of $0.5 million, with the offset recorded in income from operations, to reflect our estimate of costs to be deducted from the Third Holdback Amount in connection with this amendment.

~~Table of Contents~~

During the quarter ended September 30, 2020, we recorded a $1.3 million adjustment to goodwill with an offsetting adjustment to deferred income taxes to reflect the difference between book basis and tax basis of the technology license. The following table summarizes the purchase price 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 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 10.4 years.

On ~~July 12, 2019 (~~the Closing Date), we entered into an agreement with UreSil, LLC to purchase the remaining assets of their Tru-Incise valve cutter business (since rebranded as Eze-Sit), including distribution rights in the United States. We also entered into a TSA under which UreSil, LLC continued to manufacture the acquired products for us for a specified time, until we transitioned the full manufacturing process to our Burlington, Massachusetts facilities. This manufacturing transfer is now complete.

The purchase price for the acquired assets, which included inventory, machinery and equipment, intellectual property, and customer and supplier information, was $8.0 million. Of this amount, $6.8 million was paid on the Closing Date, with ~~three~~ ~~follow-on payments of $0.4 million each due on the first,~~ ~~second~~ ~~and~~ ~~third~~ anniversaries of the Closing Date. The deferred amounts totaling $1.2 million were recorded at an acquisition-date fair value of $1.1 million using a discount rate of 4.19% to reflect the time value of money between the acquisition date and the payment due dates. There are no ~~contingencies associated with these holdback payments, although they~~ ~~may~~ ~~be reduced for certain post-closing claims. The~~ ~~first~~ ~~payment was made without adjustment in~~ ~~July 2020.~~ ~~The~~ ~~second~~ ~~payment was made without adjustment in~~ ~~July 2021.~~

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~~The following table summarizes the purchase price allocation:~~

Allocated

Fair Value

(in thousands)

Inventory
$ 276
Equipment and supplies
70
Intangible assets
4,844
Goodwill
2,748

Purchase price
$ 7,938

~~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 allocation of purchase consideration to the acquired intangible assets and related estimated useful lives:~~

Weighted

Allocated

Average

Fair Value

Useful Life (years)

(in thousands)

Customer relationships
$ 3,945 13.0
Intellectual property
563 7.0
Non-compete agreement
233 5.0
Tradenames
103 7.0

Total intangible assets
$ 4,844

~~The weighted-average amortization period of the acquired intangible assets was 11.8 years.~~

5. Goodwill and Other Intangible Assets

There was no change to goodwill during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Other intangible assets consist of the following:

September 30, 2021

December 31, 2020

Gross

Net

Gross

Net

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

Value

Amortization

Value

Value

Amortization

Value

(in thousands)

Product technology and intellectual property
$ 29,951 $ 10,167 $ 19,784 $ 29,951 $ 7,947 $ 22,004
Trademarks, tradenames and licenses
4,000 1,398 2,602 4,000 1,094 2,906
Customer relationships
38,525 7,352 31,173 38,525 5,424 33,101
Other intangible assets
1,767 1,096 671 1,767 873 894

Total identifiable intangible assets
$ 74,243 $ 20,013 $ 54,230 $ 74,243 $ 15,338 $ 58,905

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	March 31, 2022						December 31, 2021
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Value		Amortization		Value		Value		Amortization		Value
	(in thousands)
Product technology and intellectual property	$	29,549	$	11,180	$	18,369	$	29,549	$	10,473	$	19,076
Trademarks, tradenames and licenses		3,647		1,233		2,414		3,647		1,139		2,508
Customer relationships		36,197		6,324		29,873		36,197		5,674		30,523
Other intangible assets		1,461		923		538		1,461		858		603

Total identifiable intangible assets	$	70,854	$	19,660	$	51,194	$	70,854	$	18,144	$	52,710

These ~~intangible~~ assets are being amortized over ~~their~~ useful lives ranging from ~~two~~2 to 16 years. The weighted-average amortization period for these intangibles as of ~~September 30, 2021~~March 31, 2022 is ~~12.1~~11.1 years. Amortization expense is included in general and administrative expense and was as follows for the periods indicated.

Three months ended September 30,

Nine months ended September 30,

2021

2020

2021

2020

(in thousands)

(in thousands)

Amortization expense
$ 1,547 $ 1,681 $ 4,675 $ 3,409

	Three months ended March 31,
	2022		2021
	(in thousands)

Amortization expense	$	1,516	$	1,566

We estimate that amortization expense for the remainder of ~~2021~~2022 and for each of the five succeeding fiscal years will be as follows:

Year ended December 31,

2021

2022

2023

2024

2025

2026

(in thousands)

Amortization expense
$ 1,505 $ 5,975 $ 5,902 $ 5,706 $ 5,467 $ 5,001

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

Amortization expense	$	4,500	$	5,884	$	5,702	$	5,464	$	4,997	$	4,720

6. Revolving Line of Credit and Long-term Debt

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, ~~2020,~~ ~~we made scheduled principal payments on the term loan of $1.0 million and repaid the revolving line of credit in full. During the~~ ~~nine~~ ~~months ended~~ ~~September 30,~~ 2021, we made scheduled principal payments on the term loan of $1.0 million, ~~and~~ repaid the loan in ~~full. Cash paid for interest during~~full, and terminated the credit agreement in accordance its terms. During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, ~~was $0.9~~we made a scheduled principal payment on the term loan of $0.5 million and also made additional optional prepayments of $6.5 million.

Under the terms of the agreement, the loans ~~bear~~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 iswas 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 March 31, 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 ~~are or~~ 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 quarter ended March 31, 2021, in connection with making optional prepayments of $6.5 million on the term loan, we expensed a proportionate amount of the unamortized transaction costs in the amount of $0.1 million. Cash paid for interest during the three months ended ~~September 30,~~March 31, 2021 ~~in connection with prepaying the term loan in full, we expensed the remaining unamortized transaction costs allocated to the term loan of $0.6~~was $0.3 million. ~~The issuance costs allocated to the revolver of $0.5 million as of~~ ~~September 30, 2021~~ ~~will continue to be amortized on a straight-line basis as the line of credit is still available to us.~~

~~The term of the revolving line of credit is~~ ~~five~~ ~~years, with all outstanding amounts due on~~ ~~June 22, 2025.~~ ~~As of~~ ~~September 30, 2021,~~ ~~we had 0 borrowings outstanding under our revolving line of credit.~~

Because the revolving line of credit is still available to us, we must comply with various financial and non-financial covenants, which are set forth in the Credit Agreement governing the credit facility. The primary financial covenant consists of a maximum consolidated leverage ratio. The lenders are entitled to accelerate repayment of the loans and terminate the revolving credit commitment upon the occurrence of any of various events of default as described in the Credit Agreement. We were in compliance with the covenants as of ~~September 30, 2021.~~ Borrowings under the secured credit facility are secured by 100% of the stock of our domestic subsidiaries, portions of the stock of certain of our foreign subsidiaries, and substantially all of our and our subsidiaries’ other property and assets, in each case subject to various exceptions.

We are required to make mandatory prepayments of any revolving credit loans in various amounts if we have Excess Cash Flow (as defined in the Credit Agreement, and commencing in respect of our fiscal year ending ~~December~~ ~~31,~~~~2021~~~~), if we make certain sales of assets outside the ordinary course of business above certain thresholds or if we suffer certain property loss events above certain thresholds.~~

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7. Leases

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. In addition, our European operations are headquartered at a 16,470 square foot leased facility located in Sulzbach, Germany under a lease which expires in August 2023. This lease contains two five-year renewal options. 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, ~~Italy,~~ Spain and Illinois. 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 ~~September 30, 2021.~~March 31, 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 ~~quarter ended~~fiscal year ~~June 30,~~ 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.

~~Table of Contents~~

Additional information with respect to our leases is as follows:

Three months ended September 30,

Nine months ended September 30,

2021

2020

2021

2020

(in thousands)

(in thousands)

(in thousands)

(in thousands)

Lease cost

Operating lease cost
$ 588 $ 457 $ 1,682 �� $ 1,413
Short-term lease cost
123 67 313 123
Total lease cost
$ 711 $ 524 $ 1,995 $ 1,536

Other information

Cash paid for amounts included in the measurement of operating lease liabilities
$ 725 $ 590 $ 2,106 $ 1,761

Right-of-use assets obtained in exchange for new operating lease liabilities
$ 0 $ 96 $ 1,277 $ 2,577

Weighted average remaining lease term - operating leases (in years)
8.4 8.2

Weighted average discount rate - operating leases
4.86 % 5.17 %

	Three Months Ended
	March 31,
	2022			2021
Lease cost
Operating lease cost		525			607
Short-term lease cost		163			64
Total lease cost	$	688		$	671

Other information
Cash paid for amounts included in the measurement of operating lease liabilities	$	674		$	748

Right-of-use assets obtained in exchange for new operating lease liabilities	$	141		$	16

Weighted average remaining lease term in years - operating leases		7.6			8.0

Weighted average discount rate - operating leases		4.90	%		5.02	%

At ~~September 30, 2021,~~March 31, 2022, the minimum noncancelable operating lease rental commitments with initial or remaining terms of more than one year are as follows:

Remainder of 2021	$	724
Year ending December 31,
2022		2,670
Remainder of 2022				$	2,061
Year ending March 31,
2023		2,332			2,349
2024		2,104			2,092
2025		2,153			2,141
2026		2,155			2,143
2027					2,124
Thereafter		8,198			6,049
Adjustment to net present value as of September 30, 2021		(3,846	)
Adjustment to net present value as of March 31, 2022					(3,382	)

Minimum noncancelable lease liability	$	16,490		$	15,577

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8. Accrued Expenses and Other Long-term Liabilities

Accrued expenses consist of the following:

September 30, 2021

December 31, 2020

(in thousands)

Compensation and related taxes
$ 9,515 $ 8,675
Income and other taxes
1,429 2,394
Professional fees
153 39
Other
5,363 6,417

Total
$ 16,460 $ 17,525

	March 31, 2022		December 31, 2021
	(in thousands)
Compensation and related taxes	$	6,705	$	10,236
Income and other taxes		1,211		551
Professional fees		202		129
Other		4,800		5,416

Total	$	12,918	$	16,332

Other long-term liabilities consist of the following:

	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
	(in thousands)				(in thousands)
Aquisition-related liabilities	$	2,708	$	3,700	$	1,712	$	1,761
Income taxes		756		813		766		799
Other		136		130		148		141

Total	$	3,600	$	4,643	$	2,626	$	2,701

9. Segment and Enterprise-Wide Disclosures

~~Under Accounting Standards Codification Topic~~ ~~280,~~~~Segment Reporting~~,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 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, Canada, the United Kingdom and ~~other European countries as well as in Canada,~~ Japan, and ~~Australia. Substantially~~substantially all of our assets are located in the United States, Germany and France. Net sales to unaffiliated customers by country were as follows:

	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,					March 31,
	2021		2020		2021		2020		2022		2021
	(in thousands)				(in thousands)				(in thousands)
United States	$	23,313	$	22,633	$	70,453	$	53,168	$	24,264	$	21,968
Germany		3,369		3,384		9,586		9,377		2,991		3,063
Other countries		11,686		10,399		34,882		29,273		12,306		10,852

Net Sales	$	38,368	$	36,416	$	114,921	$	91,818	$	39,561	$	35,883

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10. Share-based Compensation

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. The components of share-based compensation expense were as follows:

Three months ended

Nine months ended

September 30,

September 30,

2021

2020

2021

2020

(in thousands)

(in thousands)

Stock option awards
$ 504 $ 455 $ 1,660 $ 1,450
Restricted stock units
293 232 933 819

Total share-based compensation
$ 797 $ 687 $ 2,593 $ 2,269

	Three months ended
	March 31,
	2022		2021
	(in thousands)
Stock option awards	$	619	$	594
Restricted stock units		408		333
Performance-based restricted stock units		140		0

Total share-based compensation	$	1,167	$	927

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

	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2021		2020		2021		2020		2022		2021
	(in thousands)				(in thousands)				(in thousands)
Cost of sales	$	91	$	68	$	291	$	237	$	138	$	100
Sales and marketing		124		103		412		397		209		169
General and administrative		499		451		1,617		1,400		712		561
Research and development		83		65		273		235		108		97

Total stock-based compensation	$	797	$	687	$	2,593	$	2,269	$	1,167	$	927

We did not grant any options during the ~~nine~~three-month ~~period~~periods ended ~~September 30,~~ March 31, 2022 or 2021.During the ~~nine~~~~-month period ended~~ ~~September 30, 2020,~~ ~~we granted options for the purchase of 20,000 shares of our common stock. During the~~ ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021, we awarded restricted stock units of ~~1,157~~112 and ~~2,292,~~694, respectively. We issued approximately ~~173,000~~32,000 and ~~141,000~~70,000 shares of common stock following the exercise or vesting of underlying stock options or restricted stock units during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020,~~2021, respectively.

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11. Net Income per Share

The computation of basic and diluted net income per share was as follows:

	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2021		2020		2021		2020		2022		2021
	(in thousands, except per share data)				(in thousands, except per share data)				(in thousands, except per share data)
Basic:
Net income available for common stockholders	$	6,504	$	7,513	$	20,732	$	14,187	$	6,038	$	5,929

Weighted average shares outstanding		21,592		20,254		20,920		20,201		21,935		20,546

Basic earnings per share	$	0.30	$	0.37	$	0.99	$	0.70	$	0.28	$	0.29

Diluted:
Net income available for common stockholders	$	6,504	$	7,513	$	20,732	$	14,187	$	6,038	$	5,929

Weighted-average shares outstanding		21,592		20,254		20,920		20,201		21,935		20,546
Common stock equivalents, if dilutive		343		220		331		233		168		301

Shares used in computing diluted earnings per common share		21,935		20,474		21,251		20,434		22,103		20,847

Diluted earnings per share	$	0.30	$	0.37	$	0.98	$	0.69	$	0.27	$	0.28

Shares excluded in computing diluted earnings per share as those shares would be anti-dilutive		0		496		1		610		430		256

12. Stockholders’ Equity

~~Equity Offering~~

On ~~July 16, 2021,~~ we closed an offering of 1,000,000 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.

Share Repurchase Program

On February ~~23, 2021,~~22, 2022, our Board of Directors authorized the repurchase of up to ~~$15.0~~$20.0 million of the Company’s common stock through transactions on the open market, in privately negotiated purchases or otherwise until February 22, ~~2022.~~2023. The repurchase program may be suspended or discontinued at any time. To date we have not made any repurchases under this program.

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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 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 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

Fiscal Year 2020

March 3, 2020

March 19, 2020
$ 0.095 $ 1,917
May 20, 2020

June 4, 2020
$ 0.095 $ 1,917
August 27, 2020

September 10, 2020
$ 0.095 $ 1,925
November 19, 2020

December 3, 2020
$ 0.095 $ 1,936

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

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~~April 26, ~~2021~~,2022, our Board of Directors approved a quarterly cash dividend on our common stock of ~~$0.11~~$0.125 per share payable on ~~December~~June 2, ~~2021~~2022, to stockholders of record at the close of business on ~~November 19, 2021,~~ May 17, 2022.~~which will total approximately $2.4 million.~~

13. Supplemental Cash Flow Information

	For the three months ended
	March 31,
	2022		2021
	(in thousands)
Cash paid for income taxes, net	$	731	$	337

14. Fair Value Measurements

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.

Level 1 assets being measured at fair value on a recurring basis as of ~~September 30, 2021~~March 31, 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 ~~September 30, 2021.~~March 31, 2022.

As discussed in Note 4, several of our acquisition-related assets and liabilities have been measured using Level 3 techniques. During 2020 we recorded a contingent liability associated with our acquisition of the ~~Artegraft biologic~~bovine carotid graft ~~business.~~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 first three 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 ~~will be~~is being remeasured each quarter during the earn-out period, with any adjustments recorded in income from operations.

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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 ~~statement~~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 first 12 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 first 12 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 costs incurred by LeMaitre in achieving the CE marks. ~~During the quarter ended~~ ~~September 30, 2021~~ we recorded a reduction to the liability of $0.5 million, with the offset recorded in income from operations, to reflect our estimate of costs to be deducted from the contingent payment in connection with this amendment.

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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 ~~and/or unit sales~~ for the acquired businesses, ~~and~~as well as, management’s estimates of the likelihood of ~~obtaining CE marks on~~achieving the ~~acquired CardioCel and VascuCel products and costs to be incurred by us that would reduce the associated liability.~~other specified criteria:

Nine months ended September 30,

2021

2020

(in thousands)

Beginning balance
$ 2,240 $ 1,765
Additions
0 406
Payments
0 0
Change in fair value included in earnings
(508 ) 39

Ending balance
$ 1,732 $ 2,210

	Three months ended
	March 31,
	2022		2021
	(in thousands)
Beginning balance	$	1,492	$	2,240
Additions		0		0
Payments		0		0
Change in fair value included in earnings		14		30

Ending balance	$	1,506	$	2,270

~~14.~~15. Accumulated Other Comprehensive Loss

Changes to our accumulated other comprehensive loss for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020~~2021 consisted primarily of foreign currency translation:

	Nine months ended						Three months ended
	September 30,						March 31,
	2021			2020			2022			2021
	(in thousands)						(in thousands)
Beginning balance	$	(1,525	)	$	(4,007	)	$	(3,435	)	$	(1,525	)

Other comprehensive income (loss) before reclassifications		(1,111	)		998			(1,189	)		(938	)
Amounts reclassified from accumulated other comprehensive loss		0			0			0			0

Ending Balance	$	(2,636	)	$	(3,009	)	$	(4,624	)	$	(2,463	)

16. Subsequent Events

On April 26, 2022, the Company committed to a plan to close its St. Etienne, France factory in order to streamline its manufacturing operations and to reduce expenses. The Company expects production of all devices manufactured in St. Etienne will halt, and the site will close, by June 30, 2022. The Company will terminate the employment of all personnel at that site in connection with the closure. The Company estimates that it will incur total expenses relating to employment terminations of approximately $2.7 million, all of which represent cash expenditures. In addition, the Company estimates that it will incur expenses related to the impairment of fixed assets, inventory and intangible assets of approximately $0.5 million. This factory closure will result in a total of approximately $3.2 million of special charges. The Company expects to record $3.1 million of these charges in 2022.

In April 2022, the Company agreed to buy out its Korean distributor, JiSang, for $540,000 and signed a 5-year office/warehouse lease in Seoul totaling 2,300 square feet. The Company expects to begin selling direct-to-hospital in Korea in January 2023.

In April 2022, the Company signed a new 9-year office/warehouse lease in Sulzbach, Germany, increasing square footage by 4,940 to a total of 21,410 square feet.

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

This Quarterly Report on Form 10-Q contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) that involve substantial risks and 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,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “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 foreign regulatory requirements to market and sell our products outside the United States; the duration and severity of the impact of COVID-19 on the global economy, our customers, our suppliers and our company; ~~compliance with foreign regulatory requirements to market our products outside the United States;~~ 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 acceleration or deceleration of product growth rates;risks related to product demand and market acceptance of the Company’s products and pricing; the risk that a recall of our products could result in significant costs or 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 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” in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission, including under the section headed “Risk Factors” in our most recent Annual Report on Form 10-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 Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the SEC on ~~March~~~~12, 2021.~~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 Vascular,” “we,” “our,” and “us” in this Quarterly Report on Form 10-Q refer to LeMaitre Vascular, Inc. and its subsidiaries.

LeMaitre, AlboGraft, ~~AlboSure,~~ AnastoClip, Artegraft, CardioCel, Omniflow, RestoreFlow, ~~TRIVEX,~~ VascuCel and XenoSure are registered trademarks of LeMaitre Vascular or one of its subsidiaries. This Quarterly Report on Form 10-Q also includes the registered and unregistered trademarks of other persons, which are the property of their respective owners.

~~We are~~LeMaitre Vascular is a global provider of medical devices and 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 develop, manufacture, and market vascular devices to address the needs of vascular surgeons and, to a lesser ~~extent,~~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 the United States, Europe, the United Kingdom, Canada and Asia Pacific. We estimate that the annual worldwide market for peripheral vascular devices exceeds $5 billion, within which we estimate that the addressable market for our products is approximately $750 million. We have grown our business using a simple three-pronged strategy: 1) pursuing a focused call point, 2) competing for sales of low-rivalry, niche products, and 3) expanding our worldwide direct sales force while acquiring and, to a lesser extent, developing complementary devices. We have used acquisitions as a primary means of further penetrating the peripheral vascular device market, and we expect to continue to pursue this strategy in the future. We currently manufacture most of our products in our Burlington, Massachusetts headquarters.

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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, 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 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 ~~many~~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. ~~In some~~More recently, however, in many geographies we have seen restrictions eased, ~~however,~~although the prevalence of COVID-19 variants has not always resulted in the ~~re-imposition~~re-opening of ~~restrictions in some areas.~~hospital access. During 2020 and into ~~2021,~~2022, these dynamics resulted in, and we expect will continue to result in, variable and unpredictable sales. In response to the COVID-19 pandemic, we have modified our manufacturing operations in order to adhere to social distancing requirements. In Q2 2020 we also undertook measures to reduce our operating costs, including temporary base salary cuts and a reduction in force of approximately 13% of our full-time employees. However, as sales normalized, we began rehiring personnel in many departments, including our sales force, and we expect to continue adding personnel in the second half of 2021. We ended our temporary base salary cuts on August 31, 2020.

Our principal product lines include the following: anastomotic clips, ~~angioscopes,~~ biologic vascular and dialysis grafts, biologic vascular and cardiac patches, carotid shunts, embolectomy catheters, occlusion catheters, radiopaque marking tape, synthetic vascular grafts, and valvulotomes. 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 cardiac~~ and dialysis grafts. In ~~Q3 2021,~~Q1 2022, biologics represented ~~49%~~48% of worldwide sales. We view the biologic device ~~segment~~offerings favorably, as we believe it contains differentiated and in some cases growing product segments.

~~On June 22, 2020, we acquired the Artegraft biologic graft business. The results of operations of this business have been included in our results of operations since the date of acquisition.~~

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.

Our ability to execute on these opportunities on a timely basis, or at all, may be impacted by the COVID-19 pandemic, the duration and severity of which are uncertain.

We sell our products and services primarily through a direct sales force. As of ~~September 30, 2021,~~March 31, 2022, our sales force was comprised of 92112 sales representatives in North America, Europe, the United Kingdom and Asia Pacific, including three export managers. Our worldwide headquarters is located in Burlington, Massachusetts, and we also have North American sales offices in Chandler, Arizona and Vaughan, Canada. Our European headquarters is located in Sulzbach, Germany, ~~with additional~~and we also have sales offices in Milan, Italy; Madrid, Spain; and Hereford, England. Our Asia Pacific headquarters is located in Singapore, ~~with additional~~and we also have sales offices in Tokyo, Japan; Shanghai, China; and Kensington, Australia. ~~In Q3 2021,~~During the current quarter, approximately ~~94%~~95% of our net sales were generated in ~~countries or regions~~territories in which we employ direct sales representatives. We also sell our products in other countries through distributors.

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Historically we have experienced success in lower-rivalry niche segments, for example the markets for valvulotomes and carotid shunts. In the valvulotome market, our highly differentiated devices have historically allowed us to increase our selling prices while maintaining unit share. In contrast, we have experienced less success in highly competitive markets such as the polyester vascular graft market, where we face competition from larger companies with greater resources. While we believe these challenging market dynamics can be mitigated by our relationships with vascular surgeons, there can be no assurance that we will succeed in highly competitive markets.

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

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

Because we believe that direct-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 into our direct sales organization:

We also rely, to a much lesser extent, on internal product development efforts to bring differentiated technology and next-generation products to market:

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

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Our execution of these initiatives may affect the comparability of our financial results and may cause fluctuations from period to period as we incur related process engineering and other charges.

Fluctuations in the exchange rates between the U.S. dollar and foreign currencies, primarily the Euro, affect our financial results. For the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 approximately 39% of our sales took place outside the U.S., largely in currencies other than the U.S. dollar. We expect foreign currencies will represent a significant percentage of future sales. Selling, marketing, and administrative costs related to these sales are also denominated in foreign currencies, thereby partially mitigating our bottom-line exposure to exchange rate fluctuations. However, if there is 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 than before the rate increase. In such cases we will record less revenue in U.S. dollars than we did before the exchange rate changed. For the ~~nine months~~quarter ended ~~September 30, 2021,~~March 31, 2022, we estimate that the effects of changes in foreign exchange rates ~~increased~~decreased our reported sales by approximately ~~$2.4~~$0.8 million, as compared to rates in effect for the ~~nine months~~quarter ended ~~September 30, 2020.~~March 31, 2021.

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 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 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 salaries, stock based compensation, legal and accounting fees, information technology expense, intangible asset amortization expense and insurance expense.

Research and development. Research and development expense primarily includes ~~primarily~~ costs associated with 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, costs to register, maintain, and defend our intellectual property, and costs to transfer the manufacturing of acquired product lines to our Burlington facility. Also included are costs associated with the design, development, testing and 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 ~~United States~~U.S. tax reporting purposes.

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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 ~~many~~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. ~~In some~~More recently, however, in many geographies we have seen restrictions eased, ~~however,~~although the prevalence of COVID-19 variants has not always resulted in the ~~re-imposition~~re-opening of ~~restrictions in some areas.~~hospital access. During 2020 and into ~~2021,~~2022, these dynamics resulted in, and we expect will continue to result in, variable and unpredictable sales. In particular, in Q3 2021, the delta variant of COVID-19 depressed demand for our products in some geographies. In response to the COVID-19 pandemic, we have modified our manufacturing operations in order to adhere to social distancing requirements. In Q2 2020 we also undertook measures to reduce our operating costs, including temporary base salary cuts and a reduction in force of approximately 13% of our full-time employees. However, as sales normalized, we began rehiring personnel in many departments, including our sales force, and we expect to add personnel in the second half of 2021. We ended our temporary base salary cuts on August 31, 2020.

For reasons 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- and nine-month periods~~three-month period ended ~~September 30, 2021~~March 31, 2022 to the ~~three- and nine-month~~three-month month ~~periods~~period ended ~~September 30, 2020:~~March 31, 2021:

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

As a general matter, the COVID-19 pandemic negatively impacted sales in the 2020 periods more acutely than in the 2021 periods in all geographies, though it still negatively impacted sales in Q3 2021 as compared to Q2 2021.

Net sales. Net sales increased ~~$2.0~~$3.7 million, or 5%10%, to ~~$38.4~~$39.6 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$36.4~~$35.9 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase was driven primarily by ~~Artegraft~~an increase in bovine ~~grafts, with increased~~graft sales of $1.0 million, and carotid patch sales of $0.7 million, ~~as well as higher~~largely due to carotid patch CE mark issues in the prior year. Additionally, shunt, allograft, ~~service revenues of $0.6 million. We also had higher~~and valvulotome sales increased by $0.7 million, $0.6 million, and ~~bovine carotid patch sales of $0.3~~$0.5 million, ~~each.~~respectively, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. We estimate that the ~~weaker~~stronger U.S. dollar ~~increased~~decreased net sales by ~~$0.2~~$0.8 million during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the three months ended ~~September 30, 2020.~~

Net sales increased $23.1 million, or 25%, to $114.9 million for the nine months ended September 30, 2021, compared to $91.8 million for the nine months ended September 30, 2020. The increase was driven largely by Artegraft bovine grafts, with increased sales of $13.0 million. We also had higher valvulotome sales of $3.2 million, higher carotid shunt and bovine carotid patch sales of $1.6 million each, and higher allografts service revenues of $1.5 million. We estimate that the weaker U.S. dollar increased sales by $2.4 million during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.March 31, 2021.

Direct-to-hospital net sales were ~~94%~~95% of our total net sales for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, and ~~95%~~94% for the ~~nine-month period~~three-months ended ~~September 30, 2020.~~March 31, 2021.

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Net sales by geography. Net sales in the Americas increased ~~$1.1~~$2.8 million, or 5%12%, for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to ~~September 30, 2020.~~the three months ended March 31, 2021. The increase was driven mainly by ~~Artegraft~~increased bovine ~~grafts, with increased~~graft sales of ~~$0.7~~$1.0 million, ~~as well as higher~~or 16%, increased allograft ~~service revenue~~sales of $0.6 ~~million. Offsetting these increases were lower bovine cardiac patch revenues of $0.3 million.~~

~~Net sales in the Americas increased $18.9~~ million, or ~~33%~~28%, ~~for the nine months ended September 30, 2021 as compared to September 30, 2020. The increase was driven mainly by Artegraft bovine grafts, with~~and increased ~~sales of $13.0 million. We also had higher~~ valvulotome sales of $1.9 million, higher allografts service revenues of $1.5 million, higher bovine carotid patch sales of $1.3 million and higher carotid shunt sales of $1.0 million. Offsetting these increases were lower bovine cardiac patch revenues of $0.3 million. Revenues from all other products increase $0.5 million, ~~on a net basis.~~or 10%.

EMEA net sales increased ~~$0.5~~$0.6 million, or 5%6%, for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to ~~September 30, 2020.~~the three months ended March 31, 2021. Higher sales of ~~valvulotomes~~carotid shunts and bovine carotid patches led the growth, with increased sales of $0.4 ~~million. Bovine cardiac patch sales increased~~million each, offset by ~~$0.2 million.~~a $0.1 million decline in embolectomy catheter sales.

~~EMEA~~Asia Pacific net sales increased ~~$2.9~~$0.2 million, or ~~10%~~9%, for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 as compared to ~~September 30, 2020. The increase was driven by higher valvulotome~~the three months ended March 31, 2021, with increased bovine carotid patch sales of ~~$1.2 million, as well as higher carotid shunt, embolectomy catheter~~$0.2 million. This and ~~bovine cardiac patch~~other product sales ~~all with increases of $0.5 million. Ovine graft sales were higher by $0.4 million. These~~ increases were offset, in part, by a ~~decrease~~$0.1 million decline in ~~sales of~~ bovine ~~carotid patches of $0.5 million.~~

In May 2021, our CE mark certifications were reinstated for five products. However, we also simultaneously received a change in CE mark requirements for certain bovine carotid patches and polyester grafts. For bovine carotid patches, only bovine pericardium sourced from certain of our suppliers are permitted to be sold under the new CE mark, which is causing our production costs to increase, and our gross margin to decrease. The company is pursuing a path to reinstate an additional lower-cost supplier, although no assurance can be given.

~~Asia Pacific net sales increased $0.3 million, or 16%, for the three months ended September 30, 2021 as compared to September 30, 2020, with bovine carotid~~cardiac patch sales increasing $0.3 million. Embolectomy catheter and ePTFE graft sales each increased by $0.1 million. These and other product sales increases were in part offset by lower sales of TRIVEX powered phlebectomy systems of $0.1 million.

Asia Pacific net sales increased $1.4 million, or 23%, for the nine months ended September 30, 2021 as compared to September 30, 2020, with bovine carotid patch sales increasing $0.8 million, and embolectomy catheter sales and ePTFE graft sales each increasing $0.1 million. These and other product sales increases were partially offset by lower sales of TRIVEX powered phlebectomy systems of $0.2 million.sales.

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

Gross Profit. Gross profit increased ~~$2.1~~$2.2 million, or ~~10%~~9%, to ~~$24.9~~$26.0 million for the three months ended ~~September 30, 2021,~~March 31, 2022, and gross margin ~~increased 250~~decreased 70 basis points to ~~64.8%~~65.6% in the period. The increase in gross profit was driven primarily by increased sales from bovine grafts and valvulotomes. The decrease in the gross margin ~~were~~was driven primarily by ~~the impact~~an increase in ~~the prior period~~labor costs, unfavorable product mix, including higher sales of ~~purchase accounting from the Artegraft bovine graft acquisition that is no longer applicable~~comparatively low margin polyester grafts, unfavorable changes in ~~the current period. Higher Artegraft~~foreign currency exchange rates and ~~valvulotome sales in the current period also contributed to the gross margin increase, as these products carry comparatively higher gross margins. These favorable impacts were partly offset by~~ manufacturing inefficiencies ~~and higher excess and obsolescence expense in the current period.~~

~~Gross profit increased $15.2 million, or 25%,~~largely related to $75.4 million for the nine months ended September 30, 2021, with gross margin unchanged for the two comparative periods. The increase in gross profit was driven partly by the impact in the prior period of purchase accounting from the Artegraft bovine ~~graft acquisition. This favorable impact was partly offset by manufacturing inefficiencies and higher excess and obsolescence expense in the current period.~~carotid patches.

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The following tables set forth changes in our operating expenses for the periods indicated and the change between the specified periods expressed as a percentage increase or decrease:

Sales and marketing. For the three months ended ~~September 30, 2021,~~March 31, 2022, sales and marketing expense increased ~~35%~~21% to ~~$6.9~~$7.9 million. The increase was driven primarily by higher sales rep headcount, resulting in higher salaries and related expenses of ~~$1.5~~$1.1 million, including higher selling commissions of approximately ~~$0.4 million and higher recruiting costs of~~ $0.3 million. Travel and related expenses were also higher by $0.2 million. Expense reduction programs implemented during the second quarter of 2020 through the fiscal year 2021 in response to the COVID-19 global pandemic, including a reduction in force, lowered expenses for the three months ended ~~September 30, 2020.~~March 31, 2021. Since the pandemic has abated, we have ~~begun rehiring~~hired in ~~most positions,~~many areas, including our sales force. As a percentage of net sales, sales and marketing expense increased to ~~18%~~20% for the three months ended ~~September 30, 2021~~March 31, 2022, up from ~~14% in the prior period.~~

For the nine months ended September 30, 2021, sales and marketing expense increased 14% to $20.2 million. The increase was driven by higher salaries and related expenses of $2.5 million, including higher commissions due to increased sales, as well as higher recruiting costs. These increases were offset in part by lower travel and related expenses, including our annual sales meeting held each January, which took place virtually in 2021. As a percentage of net sales, sales and marketing expense decreased to 18% ~~for the nine months ended September 30, 2021 from 19%~~ in the prior period.

General and administrative. For the three months ended ~~September 30, 2021,~~March 31, 2022, general and administrative expenses increased 2%11% to ~~$6.0~~$7.3 million. Compensation and related expenses ~~were higher~~increased by ~~$0.6~~$0.7 million, largely due to salary and stock-based compensation increases, as ~~salaries were reinstated~~well as an increase in September 2020 and personnel were rehired following the April 2020 reduction in force. Offsetting this increase was a gain recognized in the current period from an amendment of a contingent purchase obligation associated with our 2019 Admedus biologic patch acquisition.personnel. As a percentage of sales, general and administrative ~~expense was~~expenses were unchanged at ~~16%~~18% for each of the three month periods ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020.~~

For the nine months ended September 30, 2021, general and administrative expenses increased 14% to $18.7 million. The increase was primarily due to higher compensation and related expenses, as salaries were reinstated in September 2020 and personnel were rehired following the April 2020 reduction in force. We also had higher insurance costs, banking fees and professional fees. As a percentage of sales, general and administrative expense decreased to 16% for the nine months ended September 30, 2021, from 18% in the prior period.respectively.

Research and development. For the three months ended ~~September 30, 2021,~~March 31, 2022, research and development expense increased ~~$0.8~~$0.1 million, or ~~36%~~3%, to ~~$2.8~~$2.9 million. Product development and process engineering expenses together increased $0.4 million or 57%, in large part due to projects related to the manufacturing transfer of acquired products to our Burlington facilities. Clinical and regulatory expenses increased $0.3 million, or 23%,The increase was driven by higher ~~compensation~~salaries and ~~other costs incurred in connection with reinstating or maintaining regulatory approvals, especially in Europe. As a percentage~~related expenses of sales, total research and development expense increased to 7% for the three months ended September 30, 2021, from 6% in the prior period. Product development expenses was unchanged at 1% of sales for the three month periods ended September 30, 2021 and 2020.

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~~For the nine months ended September 30, 2021, research and development expense increased $1.1~~$0.4 million, or 15%, to $8.3 million. Product development and process engineering expenses decreased $0.3 million, or 8%, in large part due to the completion of certain manufacturing transfer projects. Clinical and regulatory expenses increased $1.4 million, or 38%, driven by higher compensation expenses as well as ~~consulting~~an increase in personnel. These increases were largely offset by a decrease in professional fees and ~~other costs incurred in connection with reinstating or maintaining regulatory approvals, especially in Europe.~~outside services of $0.3 million. As a percentage of sales, total research and development expense decreased to 7% for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, from 8% in the prior period. ~~Product development expenses decreased to 1% of sales for the nine months ended September 30, 2021, from 2% in the prior period.~~

Table of ~~building.~~ During the first quarter of 2020, in connection with our planned manufacturing transfer of our Omniflow II ovine biologic graft to Burlington, management committed to a plan to sell our land and building located in North Melbourne, Australia. The sale was completed in September 2020. We recognized a gain on the sale during the three months ending September 30, 2020, net of applicable sales taxes and administrative costs, of $0.5 million.

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Income tax expense. We recorded a tax provision of ~~$1.9~~$2.0 million on pre-tax income of ~~$8.4~~$8.0 million for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to a ~~$1.9~~$1.6 million tax provision on pre-tax income of ~~$9.4~~$7.5 million for the three months ended September 30, 2020. We recorded a tax provision of $5.6 million on pre-tax income of $26.4 million for the nine months ended September 30, 2021, compared to $4.2 million on pre-tax income of $18.4 million for the nine months ended September 30, 2020.

March 31, 2021. Our effective income tax rate was ~~22.6% and 21.3%~~24.5% for the ~~three- and nine-month periods~~three month period ended ~~September 30, 2021.~~March 31, 2022. Our tax expense for the current period is based on an estimated annual effective tax rate of ~~24.3%~~24.5%, 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 federal and state tax credits, permanent items, and different statutory rates from our foreign ~~entities, and a discrete item for stock option exercises.~~entities.

Our effective income tax rate was ~~19.9% and 23.0%~~20.8% for the ~~three- and nine-month periods~~three month period ended ~~September 30, 2020.~~March 31, 2021. Our ~~2020~~2021 provision was based on anthe estimated annual effective tax rate of ~~25.0%~~24.0%, adjusted in the applicable quarterly period for discrete stock option exercises and other discrete items. Our income tax expense for ~~2020~~the three month period ended March 31, 2021 varied from the statutory rate mainly due to federal and state tax credits, permanent items, ~~and~~ different statutory rates from our foreign ~~entities.~~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 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 30, 2021,~~March 31, 2022, we have provided a valuation allowance of ~~$1.8~~$1.7 million for deferred tax assets primarily related to Australian net operating loss and capital loss carry forwards and Massachusetts tax credit carry forwards that are not expected to be realized.

At ~~September 30, 2021,~~March 31, 2022, our cash and cash equivalents were ~~$17.4~~$15.6 million as compared to ~~$26.8~~$13.9 million at December 31, ~~2020.~~2021. We also had ~~$49.7~~$55.3 million in short-term marketable securities as of ~~September 30, 2021~~March 31, 2022 and ~~$0.2~~$56.1 million as of December 31, ~~2020.~~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. 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 floating-rate debt, and a short-duration bond fund. All of our cash held outside of the United States is available for corporate use, with the exception of $3.4 million held by subsidiaries in jurisdictions for which earnings are planned to be permanently reinvested.

On July 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.

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On February ~~23, 2021,~~22, 2022, our Board of Directors authorized the repurchase of up to ~~$15.0~~$20.0 million of the Company’s common stock through transactions on the open market, in privately negotiated purchases or otherwise until February 22, ~~2022.~~2023. The repurchase program may be suspended or discontinued at any time. To date we have not made any repurchases under this program.

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 ~~bear~~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.

~~The term of~~In November 2021, we terminated the credit agreement, including the revolving line of credit, ~~is five years and allows re-borrowing up to $25 million during~~as allowed for in the ~~term, with all outstanding amounts due on June 22, 2025. The revolving line of credit is currently undrawn and available for future drawdowns.~~

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 ~~$28.1~~$7.9 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. For the year ended December 31, ~~2020,~~2021, we had operating income of ~~$28.8~~$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:

Our cash balances may decrease as we continue to use cash to fund our operations, make acquisitions, repay outstanding debt, pay dividends, repurchase shares of our 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 ~~access our available revolving credit facility.~~take out a loan. The sale of additional equity and debt securities may result in dilution to our 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 amounts. Any such required additional capital may not be available on reasonable terms, if at all.

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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~~April 26, ~~2021,~~2022 our Board of Directors approved a quarterly cash dividend on our common stock of ~~$0.11~~$0.125 per share payable on ~~December~~June 2, ~~2021,~~2022, to stockholders of record at the close of business on ~~November 19, 2021, which will total approximately $2.4 million.~~

Net cash provided by operating activities. Net cash provided by operating activities was ~~$30.0~~$4.7 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, consisting of ~~$20.7~~$6.0 million in net income, adjustments for non-cash or non-operating items of ~~$13.8~~$3.6 million (including primarily depreciation and amortization of ~~$8.2~~$2.4 million, stock-based compensation of ~~$2.6~~$1.2 million, provisions for inventory write-offs and doubtful accounts of ~~$3.2~~$0.6 million), and also a net use of working capital of ~~$4.5~~$5.0 million. The net cash used for working capital was driven by an increase in accounts receivable of $2.0 million, an increase in inventory and other deferred costs of ~~$2.8~~$1.3 million, ~~an increase in prepaid expenses~~ and ~~other assets of $0.7 million,~~ payments of accounts payable and accrued liabilities of ~~$0.6 million,~~$3.4 million. These cash uses were offset by a decrease in prepaid expenses and ~~an increase in accounts receivable~~other assets of ~~$0.4~~$1.7 million.

Net cash provided by operating activities was ~~$20.6~~$6.1 million for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, consisting of ~~$14.2~~$5.9 million in net income, adjustments for non-cash or non-operating items of ~~$9.1~~$4.7 million (including depreciation and amortization of ~~$5.9~~$2.6 million, stock-based compensation of ~~$2.3~~$0.9 million, provisions for inventory write-offs and doubtful accounts of ~~$1.0 million and $0.3 million, respectively, and a gain on the sale of a building of $0.5~~$1.1 million), and also a net use of working capital of ~~$2.7~~$4.6 million. The net cash used for working capital was driven by payments of accounts payable and accrued liabilities of $3.0 million, an increase in inventory and other deferred costs of ~~$3.2~~$1.3 million and an increase in receivable of ~~$1.3~~$0.9 million. These cash uses were offset by ~~an increase~~a decrease in ~~accounts payable~~prepaid expenses and ~~accrued liabilities~~other assets of ~~$1.9~~$0.6 million.

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Net cash used in investing activities. Net cash used in investing activities was ~~$53.8~~$0.5 million for the ~~nine~~three months ~~ended September 30, 2021,~~March 31, 2022, consisting of ~~purchases of marketable securities of $49.6 million and~~ expenditures on equipment and ~~technology of $4.3 million.~~technology.

Net cash used in investing activities was ~~$56.6~~$1.1 million for the ~~nine~~three months ended ~~September 30, 2020, including acquisition-related payments~~March 31, 2021, consisting of ~~$72.6 million primarily associated with the purchase of the Artegraft biologic graft business and~~ expenditures on equipment and ~~technology of $1.2 million, offset by net sales and purchases of marketable securities of $15.8 million and proceeds from the sale of the North Melbourne, Australia building of $2.0 million.~~technology.

Net cash ~~provided by~~used in financing activities. Net cash ~~provided by~~used in financing activities was ~~$14.9~~$2.4 million for the ~~nine~~three months ended ~~September 30, 2021. Sources~~March 31, 2022, consisting primarily of a dividend payment of $2.7 million. This use of cash ~~included primarily net proceeds from an equity offering of $58.7 million and~~was partly offset by proceeds from stock option exercises of ~~$2.5~~$0.4 million, net of shares repurchased to cover employee payroll taxes. ~~These sources~~

Net cash used in financing activities was $8.0 million for the three months ended March 31, 2021, consisting primarily of ~~cash were offset by~~ payments made on our long-term debt of ~~$39.0 million, dividend payments of $6.9~~$7.0 million and ~~deferred payments for acquisitions~~a dividend payment of ~~$0.4~~$2.3 million.

~~Net~~ These uses of cash ~~provided~~were partly offset by ~~financing activities was $53.2 million for the nine months ended September 30, 2020, consisting primarily of borrowings of $63.2 million net of debt issuance costs incurred and~~ proceeds from stock option ~~exercises~~exercise of ~~$1.2~~$1.3 million, net of shares repurchased to cover employee payroll taxes. ~~These increases to cash were partly offset by the payment of dividends of $5.8 million, payments of debt of $4.5 million and deferred payments for acquisitions of 1.0 million.~~

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 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. There have been no material changes in our critical accounting policies during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 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 revenue recognition, inventory valuation, valuation of intangible assets and goodwill, contingent consideration and income taxes are reviewed on an ongoing basis and updated as appropriate. Actual results may differ from those estimates.

A summary of recent accounting pronouncements that may impact our financial statements upon adoption in future periods can be found in Note 1 to our financial statements included under Part 1, Item 1 of this Quarterly Report on Form 10-Q.

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 ~~2021~~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 Form 10-K for the year ended December 31, ~~2020.~~2021.

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 Rules 13a-15(e) and 15d-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.

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Based on an evaluation of our disclosure controls and procedures as of ~~September 30, 2021~~March 31, 2022 our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at reasonable assurance levels.

There have been no changes in our internal control over financial reporting for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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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 ~~October 29, 2021,~~May 10, 2022, that management believes would have a material adverse effect on our financial position, results of operations or cash flows.

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 Form 10-K for the year ended December 31, ~~2020,~~2021, which could materially affect our business, financial condition, or future results. The risk factors below supplement and update the risk factors and information discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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 ~~continue to~~ 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 ~~since 2020. A summary table of the reinstated or abandoned CE marks is provided below.~~

*CE mark no longer being pursued under MDDin 2020 and ~~no filing will be made under MDR.~~

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As part of the CE mark reinstatement of XenoSure, our new Notified Body required us to limit the indications for use to vascular-only. As a result, we lost our ability to promote the XenoSure device for cardiac and neuro procedures in Europe. We estimate that the removed indications account for roughly $1.0 million of annual sales. Additionally, the governing Notified Body also restricted our sourcing of raw tissue to two of our three tissue suppliers. While our existing suppliers have pledged to meet our demand for tissue supply over time, there can be no assurance that they will meet or sustain those higher levels of demand. If they cannot meet our demand for tissue supply, our ability to supply conforming XenoSure devices 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 gross margin for XenoSure tissue sold in Europe may be impacted. The Company is pursuing a path to reinstate the third supplier, although no assurances can be given.2021.

As a result of the previous CE mark lapses, and the subsequent re-initiation of CE marked production with new limits on suppliers, we have begun experiencing backorders related to some of these products and our revenues are being impacted. Although there were no backorders for these products as of September 30, 2021, the backorders approximated $0.2 million as of June 30, 2021. To partially mitigate the potential impact of certain of these backorders, we have sought extension to our existing temporary exemptions, or derogations, in certain European countries from the requirement to apply CE marks to XenoSure and AlboGraft while we continue to restock our warehouses with CE marked products. We have received extensions to those exemptions in a limited number of countries, although nearly all have expired as of the date of this report. Where customers are not satisfied with this authorization status, they have in some cases decided to stop using our product and/or use a competing product and may continue to do so in the future, which could impact our revenues. If we are unsuccessful rapidly building and distributing our stock of these CE marked products, our revenues could be further impacted and our business could be harmed.

~~Additionally, the~~The CE mark for our Omniflow II graft is currently being transferred to our Burlington headquarters due to our discontinuation of operations in North Melbourne, Australia in June 2020. While the MDD CE mark has been secured, ~~the startup~~receipt of approval from our Notified Body for our validation activities ~~have~~has been delayed, and as a result, Burlington-built product is not yet available for sale on the European market. We currently expect ~~that~~approval by the ~~inventory~~end of ~~the majority~~Q2 2022. The inventory of such products held by our European subsidiary ~~will only be sufficient to supply customers until partly through Q1 2022, based on historical sales,~~is insufficient, and as a result, we ~~may go into backorder~~have begun to experience backorders for Omniflow II ~~until the validation activities are approved by our~~while we await Notified ~~Body.~~Body approval. As of April 29, 2022, backorders of Omniflow II subject to CE marking requirements totaled $0.1 million. If the approval of these validation activities for Omniflow II is materially delayed further, or withheld, our ~~European~~EMEA revenues could be further impacted and our business could be harmed.

In April 2017, the EU adopted new regulations for medical devices, the MDR, which replace the MDD and ~~now apply beginning~~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 in order to obtain approval to renew the CE marks on certain of our products.~~us. Until recently, our preparation of filings under the MDR ~~has~~had been delayed due to our work on the ~~other~~MDD CE mark ~~matters described~~reinstatement referred to above. If we fail to obtain new CE marks ~~on these products or our other products~~ under the MDR in a timely manner, or at all, future sales of our products in the EU could be adversely impacted.

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. For example, under the new CE mark issued for XenoSure by TUV SUD, 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. 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. Removal of these indications may cause a loss of roughly $1.0 million of annual sales. 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.

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Additionally, significant changes to our devices may trigger a requirement to file for an MDR CE mark earlier than expected, which could result in ~~supply chain delays.~~backorders. For example, in March 2020, we learned that a chemical used in our latex formulation was obsoleted. As a result, we ~~must submit~~submitted our new latex formulation to one of our Notified Bodies for review and acceptance under our Pruitt F3 shunt MDD CE ~~mark, which we expect to do in Q1 2022. If the~~mark. Our Notified Body ~~determines~~determined that the change is significant under the rules of the MDD ~~it will require us to file a new~~and as such we cannot implement that change under the MDD rules. We filed for an MDR CE mark ~~application,~~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 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 until June 30, 2023. Following such date, all 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, but we expect that we will only receive UKCA marks for products representing approximately 50% of our revenues in the U.K. by such date. We intend to place inventory with our U.K. subsidiary in amounts that we believe are sufficient to cover the period between July 1, 2023 and the point in time when will expect to have received UKCA marks for all of our UK products. However, there could be delays in obtaining these UKCA marks, which could ~~result~~lead to U.K. backorders. To the extent that we fail to obtain UKCA marks by this June 30, 2023 deadline, or at all, our sales in ~~significant delays to instituting~~ the ~~change and thus maintaining adequate inventory levels of our F3 shunts.~~U.K. could be negatively affected.

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.

~~Table of Contents~~

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.

~~Supply chain disruptions~~The closure of our French factory could ~~adversely~~ impact our ~~operations~~sales and ~~financial condition.~~profitability.

~~Global supply chains have been disrupted as a result~~We plan to halt all operations, terminate the employment of ~~the COVID-19 pandemic. Accordingly, the availability of raw materials~~all employees and ~~components used~~close our factory in ~~the manufacture~~St. Etienne, France by June 30, 2022. Prior to that date, we intend to build inventory of our Wovex/Dialine polyester grafts and Chevalier valvulotome at that factory to meet our ongoing commitments. Though Chevalier valvulotome and Wovex/Dialine customers may purchase replacement products ~~may~~manufactured in our Burlington facilities, there can be ~~adversely impacted.~~no assurance that sales of such products will be sustained at the same or similar levels after the St. Etienne manufactured inventory is depleted. We are also discontinuing St. Etienne's OEM sales, and we previously discontinued production of surgical glue at that factory. Additionally, ~~even when~~ we ~~are able~~expect to ~~source such materials~~incur charges of approximately $3.2 million in connection with the closure. If the amount of time, effort and/or expense associated with the closure is materially higher than our initial estimates, then the closure could consume more resources than expected and ~~components, they may cost~~could impact our profitability more and may only be available on a delayed basis. Higher materials and component costs could adversely affect our margins if we are unable to pass such costs along to customers in the form of price increases. Delays in receipt of materials and components could also interrupt our production and cause us to go into backorder on certain of our products, further exacerbating the global supply chain disruption.

~~If we are unable to expand our product and service offerings, we may not achieve our growth objectives and our results of operations could suffer.~~

Treatment of peripheral vascular and cardiovascular disease includes both open vascular surgery and minimally invasive endovascular procedures, and most of our products are used primarily or exclusively in open surgery procedures. We market and sell our products primarily to vascular surgeons. We estimate that in 2020 over 90% of our sales were from devices used in open surgery.

A core component of our growth strategy is the acquisition of complementary product lines, principally in the open vascular surgery space. The number of appropriately sized targets in the open vascular surgery space is limited, and if we are unable to execute on our acquisition strategy (or we do not expand the scope of our acquisition strategy), growth of our sales may be inhibited.

We may not be able to compete effectively unless we can keep pace with existing or new products, services and technologies in the vascular device market and the minimally invasive endovascular procedure segment, in particular. Our success in developing and commercializing new products and new versions of our existing products and services, or acquiring new products, is affected by our ability to:

If we are unable to expand our product or service offerings, whether through internal development or by acquisition, we may not achieve our growth objectives and our results of operations as well as our stock price could suffer.significantly than expected.

3934

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~~On July 23, 2021,~~(1) For the three months ended March 31, 2022, we repurchased 3,016 shares of our ~~Board~~common stock to satisfy employees’ obligations with respect to minimum statutory withholding taxes in connection with the vesting of ~~Directors approved changes to the Company’s director compensation policy, which is incorporated by reference into this report as Exhibit 10.3.~~restricted stock units.

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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 4, 2021.~~May 10, 2022.


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	☐

		Emerging growth company	☐

~~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~~


			Page
Part I.	Financial Information:

	Item 1.	Financial Statements

		Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 (unaudited) and December 31, ~~2020~~2021	3

		Unaudited Consolidated Statements of Operations for the three-month ~~and nine-month~~ periods ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	4

		Unaudited Consolidated Statements of Comprehensive Income for the three-month ~~and nine-month~~ periods ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	5

		Unaudited Consolidated Statements of ~~Stockholders’~~ Stockholders’ Equity for the three-month ~~and nine-month~~ periods ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	6

		Unaudited Consolidated Statements of Cash Flows for the ~~nine-month~~three-month periods ended ~~September 30, 2021~~March 31, 2022 and 2021	87

		Notes to Unaudited Consolidated Financial Statements	98

	Item 2.	~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	2521

	Item 3.	Quantitative and Qualitative Disclosure about Market Risk	3531

	Item 4.	Controls and Procedures	3531

Part II.	Other Information:

	Item 1.	Legal Proceedings	3733

	Item 1A.	Risk Factors	3733

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4035

	~~Item 5.~~	~~Other Information~~	40

	Item 6.	Exhibits	4135

	Signatures		4237


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

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

	(unaudited)
	March 31,			December 31,
	2022			2021
	(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	15,560		$	13,855
Short-term marketable securities		55,322			56,104
Accounts receivable, net of allowances of $777 at March 31, 2022 and $679 at December 31, 2021		21,386			19,631
Inventory and other deferred costs		46,664			46,104
Prepaid expenses and other current assets		2,479			4,189
Total current assets		141,411			139,883

Property and equipment, net		16,683			17,059
Right-of-use leased assets		14,687			15,071
Goodwill		65,945			65,945
Other intangibles, net		51,194			52,710
Deferred tax assets		1,977			1,566
Other assets		556			568
Total assets	$	292,453		$	292,802
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,194		$	2,340
Accrued expenses		12,918			16,332
Acquisition-related obligations		1,283			1,271
Lease liabilities - short-term		1,872			1,870
Total current liabilities		18,267			21,813
Lease liabilities - long-term		13,705			14,067
Deferred tax liabilities		68			70
Other long-term liabilities		2,626			2,701
Total liabilities		34,666			38,651

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 23,509,859 shares at March 31, 2022, and 23,477,784 shares at December 31, 2021		235			235
Additional paid-in capital		183,305			181,630
Retained earnings		91,420			88,125
Accumulated other comprehensive loss		(4,624	)		(3,435	)
Treasury stock, at cost; 1,557,921 shares at March 31, 2022 and 1,554,905 shares at December 31, 2021		(12,549	)		(12,404	)
Total stockholders’ equity		257,787			254,151
Total liabilities and stockholders’ equity	$	292,453		$	292,802

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


Balance at December 31, 2020		22,061,554	$	221	$	114,924	$	70,554		$	(1,525	)		1,538,572	$	(11,602	)	$	172,572			22,061,554	$	221	$	114,924	$	70,554		$	(1,525	)		1,538,572	$	(11,602	)	$	172,572

Net income				0		0		5,929			0					0			5,929					0		0		5,929			0					0			5,929
Other comprehensive income (loss)				0		0		0			(938	)				0			(938	)				0		0		0			(938	)				0			(938	)
Issuance of common stock for stock options exercised		63,895		0		1,385		0			0			0		0			1,385			63,895		0		1,385		0			0			0		0			1,385
Vested restricted stock units		5,974		0		0		0			0			0		0			0			5,974		0		0		0			0			0		0			0
Stock-based compensation expense				0		927		0			0					0			927
Repurchase of common stock for net settlement of equity awards		0		0		0		0			0			2,241		(88	)		(88	)		0		0		0		0			0			2,241		(88	)		(88	)
Common stock dividend paid				0		0		(2,262	)		0					0			(2,262	)

Balance at March 31, 2021		22,131,423		221		117,236		74,221			(2,463	)		1,540,813		(11,690	)		177,525

Net income				0		0		8,299			0					0			8,299
Other comprehensive income				0		0		0			220					0			220
Issuance of common stock for stock options exercised		70,355		1		1,186		0			0			0		0			1,187
Stock-based compensation expense				0		869		0			0					0			869					0		927		0			0					0			927
Common stock dividend paid				0		0		(2,267	)		0					0			(2,267	)				0		0		(2,262	)		0					0			(2,262	)

Balance at June 30, 2021		22,201,778	$	222	$	119,291	$	80,253		$	(2,243	)		1,540,813	$	(11,690	)	$	185,833

Net income				0		0		6,504			0					0			6,504
Other comprehensive income (loss)				0		0		0			(393	)				0			(393	)
Issuance of common stock		1,150,000		12		58,683		0			0			0		0			58,695
Issuance of common stock for stock options exercised		17,410		0		299		0			0			0		0			299
Vested restricted stock units		14,941		0		0		0			0			0		0			0
Stock-based compensation expense				0		797		0			0					0			797
Repurchase of common stock for net settlement of equity awards		0		0		0		0			0			5,223		(286	)		(286	)
Common stock dividend paid				0		0		(2,401	)		0					0			(2,401	)

Balance at September 30, 2021		23,384,129		234		179,070		84,356			(2,636	)		1,546,036		(11,976	)		249,048
Balance at March 31, 2021																						22,131,423	$	221	$	117,236	$	74,221		$	(2,463	)		1,540,813	$	(11,690	)	$	177,525

	For the nine months ended						For the three months ended
	September 30,						March 31,
	2021			2020			2022			2021
	(in thousands)						(in thousands)
Operating activities
Net income	$	20,732		$	14,187		$	6,038		$	5,929
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,186			5,861			2,373			2,624
Stock-based compensation		2,593			2,269			1,167			927
Fair value adjustment to contingent consideration obligations		(454	)		132			(32	)		47
Provision for doubtful accounts		136			257			60			59
Provision for inventory write-downs		3,016			1,032			498			1,005
Gain on sale of building		0			(470	)
Foreign currency transaction loss		322			49			(428	)		33
Changes in operating assets and liabilities:
Accounts receivable		(425	)		(1,326	)		(1,951	)		(857	)
Inventory and other deferred costs		(2,752	)		(3,228	)		(1,267	)		(1,346	)
Prepaid expenses and other assets		(741	)		35			1,692			638
Accounts payable and other liabilities		(567	)		1,850			(3,439	)		(2,985	)
Net cash provided by operating activities		30,046			20,648			4,711			6,074

Investing activities
Purchases of property and equipment and other assets		(4,276	)		(1,767	)		(536	)		(1,059	)
Proceeds from sale of building		0			2,023
Payments related to acquisitions		0			(72,627	)
Purchases of short-term marketable securities		(49,554	)		(2,193	)		0			(1	)
Proceeds from sales of marketable securities		0			18,000
Net cash used in investing activities		(53,830	)		(56,564	)		(536	)		(1,060	)

Financing activities
Payments of deferred acquisition consideration		(401	)		(976	)
Proceeds from revolving line of credit		0			25,000
Proceeds from issuance of long-term debt		0			40,000
Payments of revolving line of credit		0			(4,000	)
Payments of long-term debt		(39,000	)		(500	)		0			(7,000	)
Payment of deferred debt issuance costs		0			(1,751	)
Proceeds from issuance of common stock		61,566			1,437
Proceeds from stock option exercises								508			1,385
Purchase of treasury stock for net settlement of equity awards		(374	)		(291	)		(145	)		(88	)
Common stock cash dividend paid		(6,930	)		(5,759	)		(2,743	)		(2,262	)
Net cash provided by (used in) financing activities		14,861			53,160
Net cash used in financing activities								(2,380	)		(7,965	)

Effect of exchange rate changes on cash and cash equivalents		(472	)		249			(90	)		(288	)
Net increase in cash and cash equivalents		(9,395	)		17,493
Net increase (decrease) in cash and cash equivalents								1,705			(3,239	)
Cash and cash equivalents at beginning of period		26,764			11,786			13,855			26,764
Cash and cash equivalents at end of period	$	17,369		$	29,279		$	15,560		$	23,525
Supplemental disclosures of cash flow information (see Note 13)

	Three months ended September 30,				Nine months ended September 30,

	2021		2020		2021		2020
	($ in thousands)				($ in thousands)

Americas	$	25,299	$	24,184	$	76,327	$	57,462
Europe, Middle East and Africa		10,535		10,039		31,200		28,339
Asia Pacific		2,534		2,193		7,394		6,017
Total	$	38,368	$	36,416	$	114,921	$	91,818

	Nine months ended September 30, 2021
	(in thousands)
Unrecognized tax benefits as of December 31, 2020	$	820
Additions for tax positions of current year		0
Additions/adjustments for tax positions of prior years		(33	)
Reductions for settlements with taxing authorities		0
Reductions for lapses of the applicable statutes of limitations		0
Unrecognized tax benefits as of September 30, 2021	$	787

	Three months ended March 31, 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		(19	)
Reductions for settlements with taxing authorities		0
Reductions for lapses of the applicable statutes of limitations		0
Unrecognized tax benefits as of March 31, 2022	$	749

United States	~~2017~~2018 and forward
Foreign	2014 and forward

	Allocated
	Fair Value
	(in thousands)
Inventory	$	3,859
Accounts receivable		1,789
Equipment and supplies		1,140
Accounts payable and other		(53	)
Intangible assets		39,056
Goodwill		27,115

Purchase price	$	72,906


	FORM 10-Q

							Estimated
	Allocated		Estimated		*Allocated*		*Useful Life*
	Fair Value		Useful Life (years)		*Fair Value*		*(years)*
	(in thousands)				(in thousands)
Customer relationships	$	20,310		15.0	$	20,310		15.0
Intellectual property		16,449		10.0		16,449		10.0
Non-compete agreement		104		5.0		104		5.0
Tradenames		2,193		10.0		2,193		10.0

Total intangible assets	$	39,056			$	39,056

			Weighted
	*Allocated*		*Average*
	*Fair Value*		*Useful Life (years)*
	(in thousands)
Customer relationships	$	5,562		12.0
Intellectual property		2,335		8.0
Non-compete agreement		361		5.0
Tradenames		467		8.0

Total intangible assets	$	8,725

			Year ended December 31,
	2021		2022		2023		2024		2025		2026
	(in thousands)

Amortization expense	$	1,505	$	5,975	$	5,902	$	5,706	$	5,467	$	5,001

	•	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, ~~in the United States,~~ for $8.0 million.

	•	In October 2019, we entered into an agreement with ~~Admedus~~Anteris 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 ~~Inc.,~~ to purchase the assets of their ~~biologic~~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 combined to account for approximately $2.2 million in revenues in 2021.

	•	In March 2022, we made the decision to wind down the ProCol graft product line, which totaled approximately $0.7 million in revenues in 2021.

	•	During 2020, we entered into definitive agreements with, or participated with ~~Admedus~~Anteris in concluding agreements with, several former ~~Admedus~~Anteris distributors in ~~the United Kingdom,~~ Europe and Canada, in order to terminate their distribution of our ~~biologic patches,~~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.
	•	During 2020, we participated with Artegraft in concluding agreements with several of their former U.S. distributors in order to terminate their distribution of ~~biologic grafts.~~our bovine graft products. We now sell Artegraft products direct-to-hospital throughout the United States.

	•	In 2019, we launched DuraSure, a biologic patch indicated for closing or repairing dural defects during open neurosurgical procedures.

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

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

	•	In ~~late~~ 2018 and ~~into~~ 2019, we expanded our Burlington biologic clean room in order to transfer the production of our Omniflow II vascular graft from our North Melbourne, Australia facility to Burlington. This transfer is substantially complete, and the North Melbourne facility has been sold.

	•	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.

	Three months ended September 30,							Nine months ended September 30,
(unaudited)					Percent							Percent
	2021		2020		change			2021		2020		change
	($ in thousands)							($ in thousands)
Net sales	$	38,368	$	36,416		5	%	$	114,921	$	91,818		25	%

Net sales by geography:
Americas	$	25,299	$	24,184		5	%	$	76,327	$	57,462		33	%
Europe, Middle East and Africa		10,535		10,039		5	%		31,200		28,339		10	%
Asia Pacific		2,534		2,193		16	%		7,394		6,017		23	%
Total	$	38,368	$	36,416		5	%	$	114,921	$	91,818		25	%

	Three months ended September 30,												Nine months ended September 30,												Three months ended March 31,
(unaudited)										Percent												Percent												Percent
	2021			2020			Change			change			2021			2020			Change			change			2022			2021			Change			change
	($ in thousands)												($ in thousands)												($ in thousands)
Gross profit	$	24,866		$	22,704		$	2,162			10	%	$	75,426		$	60,216		$	15,210			25	%	$	25,962		$	23,799		$	2,163			9	%

Gross margin		64.8	%		62.3	%		2.5	%		*			65.6	%		65.6	%		0.0	%		*			65.6	%		66.3	%		(0.7%	)		*

	Three months ended September 30,										Nine months ended September 30,										Three months ended March 31,
(unaudited)								Percent										Percent									Percent
	2021		2020			$ Change		change			2021		2020			$ Change		change			2022		2021		$ Change		change

Sales and marketing	$	6,941	$	5,157		$	1,784		35	%	$	20,210	$	17,788		$	2,422		14	%	$	7,850	$	6,466	$	1,384		21	%
General and administrative		6,004		5,901			103		2	%		18,748		16,425			2,323		14	%		7,252		6,544		708		11	%
Research and development		2,848		2,098			750		36	%		8,344		7,230			1,114		15	%		2,932		2,844		88		3	%
Gain on sale of building		-		(470	)		470		*			-		(470	)		470		*
Total	$	15,793	$	12,686		$	3,107		24	%	$	47,302	$	40,973		$	6,329		15	%	$	18,034	$	15,854	$	2,180		14	%

~~Product~~	~~Notified Body~~	~~Regulatory Status~~	~~Expiration Date~~
~~XenoSure~~	~~TUV SUD~~	~~CE Marked~~	~~May, 2024~~
~~AlboGraft~~	~~TUV SUD~~	~~CE Marked~~	~~May, 2024~~
~~Pruitt Aortic Occlusion Catheter~~	~~TUV SUD~~	~~Expired~~	~~n/a~~
~~AnastoClip~~	~~SGS~~	~~CE Marked~~	~~May, 2024~~
~~Flexcel~~	~~SGS~~	~~CE Marked~~	~~May, 2024~~
~~Pruitt Carotid Shunts~~	~~SGS~~	~~CE Marked~~	~~May, 2024~~
~~LifeSpan~~	~~SGS~~	~~CE Marked~~	~~May, 2024~~
~~AlboSure~~	~~SGS~~	Expired*	~~n/a~~
~~Surgical Glue~~	~~BSI~~	Abandoned*	~~n/a~~

	•	~~identify suitable acquisition targets in the open vascular surgery space and execute on the acquisition of such targets;~~

	•	~~obtain regulatory clearance or approval of new products and technologies;~~

	•	~~successfully develop cost-effective manufacturing processes for such products;~~

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


~~2.1~~	~~Amendment No. 1 to Asset Purchase Agreement dated October 11, 2019 between the Registrant and Admedus Ltd (now known as Anteris Technologies Ltd) and certain of its subsidiaries.~~	~~8-K~~	~~9-1-21~~	~~001-33092~~

~~10.1~~	~~Underwriting Agreement, dated as of July 13, 2021, among LeMaitre Vascular, Inc. and Jefferies LLC and Stifel, Nicolaus & Company, Incorporated, as representatives for the underwriters named therein.~~	~~8-K~~	~~7-16-21~~	~~001-33092~~

~~10.2†~~	~~Eighth Amended and Restated Equity Award Grant Policy~~	~~8-K~~	~~7-9-21~~	~~001-33092~~

~~10.3~~	~~Director Compensation Policy~~	~~10-Q~~	~~8-5-21~~	~~001-33092~~

31.1	Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15 d-14(a).				X
31.2	Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a).				X
32.1	Certification by the Chief Executive Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. ~~§1350)~~§1350).*				X
32.2	Certification by the Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. ~~§1350)~~§1350).*				X
101.INS	Inline XBRL Instance Document.				X
101.SCH	Inline XBRL Taxonomy Extension Schema Document.				X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.				X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.				X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.				X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.				X

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).				X

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