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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission file number 0-50761
AngioDynamics, Inc.
(Exact name of registrant as specified in its charter)
angologoa23.gif
 
Delaware11-3146460
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

14 Plaza Drive, Latham, New York 12110
(Address of principal executive offices and zip code)
(518) 795-1400
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common Stock, par value $.01ANGONASDAQ Global Select Market
Preferred Stock Purchase RightsNASDAQ Global Select Market

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


 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes      No  
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer   Accelerated filer 
Non-accelerated filer Smaller reporting company 
Emerging growth company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
Class Outstanding as of April 8, 2024
Common Stock, par value $.01 40,054,533



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

2

PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
AngioDynamics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands of dollars, except per share data)

 
Three Months Ended
Nine Months Ended
Feb 29, 2024Feb 28, 2023Feb 29, 2024Feb 28, 2023
Net sales$75,182 $80,712 $232,934 $247,678 
Cost of sales (exclusive of intangible amortization)39,321 40,208 116,751 119,791 
Gross profit35,861 40,504 116,183 127,887 
Operating expenses:
Research and development8,189 6,852 24,788 22,023 
Sales and marketing25,405 25,406 78,237 77,956 
General and administrative10,578 8,839 30,723 29,775 
Amortization of intangibles3,287 4,739 10,474 14,384 
Goodwill impairment159,476  159,476  
Change in fair value of contingent consideration112 227 203 2,084 
Acquisition, restructuring and other items, net35,367 3,369 44,767 12,009 
Total operating expenses242,414 49,432 348,668 158,231 
Gain on sale of assets6,657  54,499  
Operating loss(199,896)(8,928)(177,986)(30,344)
Other expense:
Interest income (expense), net394 (736)1,047 (1,801)
Other expense, net(238) (558)(427)
Total other income (expense), net156 (736)489 (2,228)
Loss before income tax benefit(199,740)(9,664)(177,497)(32,572)
Income tax benefit(12,004)(179)(6,597)(1,597)
Net loss$(187,736)$(9,485)$(170,900)$(30,975)
Loss per share
Basic$(4.67)$(0.24)$(4.26)$(0.79)
Diluted$(4.67)$(0.24)$(4.26)$(0.79)
Weighted average shares outstanding
Basic40,234 39,509 40,098 39,436 
Diluted40,234 39,509 40,098 39,436 
The accompanying notes are an integral part of these consolidated financial statements.
3

AngioDynamics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
(in thousands of dollars)
 
Three Months Ended
Nine Months Ended
Feb 29, 2024Feb 28, 2023Feb 29, 2024Feb 28, 2023
Net loss$(187,736)$(9,485)$(170,900)$(30,975)
Other comprehensive income (loss), before tax:
Foreign currency translation gain (loss)1,902 (3,562)1,917 (5,207)
Other comprehensive income (loss), before tax1,902 (3,562)1,917 (5,207)
Income tax expense related to items of other comprehensive loss    
Other comprehensive income (loss), net of tax1,902 (3,562)1,917 (5,207)
Total comprehensive loss, net of tax$(185,834)$(13,047)$(168,983)$(36,182)
The accompanying notes are an integral part of these consolidated financial statements.

4

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands of dollars, except share data)
Feb 29, 2024May 31, 2023
Assets
Current assets
Cash and cash equivalents$78,451 $44,620 
Accounts receivable, net of allowances of $2,560 and $2,150 respectively
49,475 52,826 
Inventories58,068 55,325 
Prepaid expenses and other10,913 4,617 
Current assets held for sale 6,154 
Total current assets196,907 163,542 
Property, plant and equipment, net37,040 44,384 
Intangible assets, net81,570 111,144 
Goodwill 159,238 
Other assets9,325 10,676 
Non-current assets held for sale 43,653 
Total assets$324,842 $532,637 
Liabilities and stockholders' equity
Current liabilities
Accounts payable$35,152 $40,445 
Accrued liabilities30,963 26,617 
Current portion of contingent consideration9,500 14,761 
Other current liabilities10,259 2,002 
Total current liabilities85,874 83,825 
Long-term debt 49,818 
Deferred income taxes5,917 12,813 
Contingent consideration, net of current portion 4,535 
Other long-term liabilities14,353 3,350 
Total liabilities106,144 154,341 
Commitments and contingencies (Note 14)
Stockholders' equity
Preferred stock, par value $0.01 per share, 5,000,000 shares authorized; no shares issued and outstanding
  
Common stock, par value $0.01 per share, 75,000,000 shares authorized; 40,794,533 and 39,981,422 shares issued and 40,424,533 and 39,611,422 shares outstanding at February 29, 2024 and May 31, 2023, respectively
385 382 
Additional paid-in capital608,588 599,206 
Accumulated deficit (381,755)(210,855)
Treasury stock, 370,000 shares at February 29, 2024 and May 31, 2023, respectively
(5,714)(5,714)
Accumulated other comprehensive income(2,806)(4,723)
Total Stockholders’ Equity218,698 378,296 
Total Liabilities and Stockholders' Equity$324,842 $532,637 
The accompanying notes are an integral part of these consolidated financial statements.
5

AngioDynamics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands of dollars)
Nine Months Ended
Feb 29, 2024Feb 28, 2023
Cash flows from operating activities:
Net loss$(170,900)$(30,975)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization20,895 23,316 
Non-cash lease expense1,441 1,883 
Stock based compensation8,633 8,177 
Gain on disposal of assets(54,499) 
Transaction costs for disposition(5,084) 
Change in fair value of contingent consideration203 2,084 
Impairment loss on indefinite-lived intangible assets159,476  
Deferred income taxes(7,143)(1,752)
Change in accounts receivable allowances1,007 560 
Fixed and intangible asset impairments and disposals7,084 144 
              Write-off of other assets 869  
Other161 (317)
Changes in operating assets and liabilities:
Accounts receivable2,345 759 
Inventories(6,825)(12,254)
Prepaid expenses and other(7,566)(392)
Accounts payable, accrued and other liabilities16,744 (7,109)
Net cash used in operating activities(33,159)(15,876)
Cash flows from investing activities:
Additions to property, plant and equipment(1,952)(2,756)
Additions to placement and evaluation units(3,245)(4,922)
Acquisition of intangibles(3,250)(540)
Proceeds from sale of assets134,500  
Net cash provided by (used in) investing activities126,053 (8,218)
Cash flows from financing activities:
Repayment of long-term debt(50,000)(45,000)
Proceeds from borrowings on long-term debt 70,000 
Deferred financing costs on long-term debt (751)
Payment of acquisition related contingent consideration (10,000) 
Proceeds from exercise of stock options and employee stock purchase plan752 1,171 
Net cash (used in) provided by financing activities(59,248)25,420 
Effect of exchange rate changes on cash and cash equivalents185 (40)
Increase in cash and cash equivalents33,831 1,286 
Cash and cash equivalents at beginning of period44,620 28,825 
Cash and cash equivalents at end of period$78,451 $30,111 
Supplemental disclosure of non-cash investing and financing activities:
Accrual for capital expenditures incurred during the period$148 $140 
The accompanying notes are an integral part of these consolidated financial statements.
6

AngioDynamics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands of dollars, except share data)

  
Common StockAdditional
paid in
capital
Accumulated deficit Accumulated
other
comprehensive
loss
Treasury Stock
SharesAmountSharesAmountTotal
Balance at May 31, 202339,981,422 $382 $599,206 $(210,855)$(4,723)(370,000)$(5,714)$378,296 
Net income45,884 45,884 
Issuance/Cancellation of restricted stock units386,031 (280)(280)
Issuance/Cancellation of performance share units87,377 (210)(210)
Purchases of common stock under ESPP131,811 1 899 900 
Stock-based compensation4,144 4,144 
Other comprehensive loss, net of tax(930)(930)
Balance at August 31, 202340,586,641 $383 $603,759 $(164,971)$(5,653)(370,000)$(5,714)$427,804 
Net loss(29,048)(29,048)
Issuance/Cancellation of restricted stock units7,765 (16)(16)
Issuance/Cancellation of performance share units(336)(336)
Stock-based compensation1,877 1,877 
Other comprehensive income, net of tax945 945 
Balance at November 30, 202340,594,406 $383 $605,284 $(194,019)$(4,708)(370,000)$(5,714)$401,226 
Net loss(187,736)(187,736)
Issuance/Cancellation of restricted stock units49,701 (9)(9)
Purchases of common stock under ESPP150,426 2 701 703 
Stock-based compensation2,612 2,612 
Other comprehensive income, net of tax1,902 1,902 
Balance at February 29, 202440,794,533 $385 $608,588 $(381,755)$(2,806)(370,000)$(5,714)$218,698 


7

Common StockAdditional
paid in
capital
Accumulated deficit Accumulated
other
comprehensive
income (loss)
Treasury Stock
SharesAmountSharesAmountTotal
Balance at May 31, 202239,541,173 $380 $586,879 $(158,413)$1,357 (370,000)$(5,714)$424,489 
Net loss(13,004)(13,004)
Exercise of stock options6,617 (29)(29)
Issuance/Cancellation of restricted stock units213,241 (648)(648)
Issuance/Cancellation of performance share units29,826 (312)(312)
Purchases of common stock under ESPP56,894 1 1,070 1,071 
Stock-based compensation3,024 3,024 
Other comprehensive loss, net of tax(550)(550)
Balance at August 31, 202239,847,751 $381 $589,984 $(171,417)$807 (370,000)$(5,714)$414,041 
Net loss(8,486)(8,486)
Exercise of stock options15,000 184 184 
Issuance/Cancellation of restricted stock units11,393 (36)(36)
Stock-based compensation3,350 3,350 
Other comprehensive loss, net of tax(1,095)(1,095)
Balance at November 30, 202239,874,144 $381 $593,482 $(179,903)$(288)(370,000)$(5,714)$407,958 
Net loss(9,485)(9,485)
Issuance/Cancellation of restricted stock units9,394 (36)(36)
Purchases of common stock under ESPP92,884 1 976 977 
Stock-based compensation1,803 1,803 
Other comprehensive loss, net of tax(3,562)(3,562)
Balance at February 28, 202339,976,422 $382 $596,225 $(189,388)$(3,850)(370,000)$(5,714)$397,655 

The accompanying notes are an integral part of these consolidated financial statements.
8

AngioDynamics, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended February 29, 2024 and February 28, 2023, the Consolidated Balance Sheet as of February 29, 2024, the Consolidated Statements of Cash Flows for the nine months ended February 29, 2024 and February 28, 2023, and the Consolidated Statements of Stockholders’ Equity for the nine months ended February 29, 2024 and February 28, 2023 have been prepared by the Company and are unaudited. The Consolidated Balance Sheet as of May 31, 2023 was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to state fairly the financial position, changes in stockholders’ equity and comprehensive income, results of operations and cash flows as of and for the period ended February 29, 2024 (and for all periods presented) have been made.
The unaudited interim consolidated financial statements for the three and nine months ended February 29, 2024 and February 28, 2023 include the accounts of AngioDynamics, Inc. and its wholly owned subsidiaries (collectively, the "Company", "we", "our" or "us"). All intercompany balances and transactions have been eliminated.
2. DIVESTITURES
PICCs and Midlines
Pursuant to an asset purchase agreement dated February 15, 2024 (the "Asset Purchase Agreement"), the Company completed the sale of the PICC and Midline businesses (the "Divestiture") to Spectrum Vascular ("Spectrum"). Total consideration received by the Company for the Divestiture in the third quarter of fiscal year 2024 was $34.5 million in cash and resulted in a pre-tax book gain of $6.7 million. Included in the agreement is a $5.5 million earn-out related to the sales of divested products over a two year period and a milestone payment of $5.0 million paid upon final transfer of the manufacturing to a third-party.
The Company and Spectrum entered into various agreements to facilitate the transition of the divested businesses to Spectrum, including a Transition Services Agreement and Contract Manufacturing Agreement. The Company determined that the sale of the businesses did not constitute a strategic shift that had a major effect on the Company's operations or financial results and as a result, this transaction will not be classified as discontinued operations.
The following table summarizes the major classes of assets sold on the date of the sale:
(in thousands)As of February 15, 2024
Current assets:
Inventories $4,203 
   Total current assets$4,203 
Non-current assets:
Property, plant and equipment, net$158 
Intangible assets, net20,781 
Other assets40 
   Total non-current assets $20,979 
Dialysis and BioSentry
Pursuant to an asset purchase agreement dated June 8, 2023 (the "Asset Purchase Agreement"), the Company completed the sale of the dialysis and BioSentry tract sealant system biopsy businesses (the "Divestiture") to Merit Medical Systems, Inc. ("Merit"). Total consideration received by the Company for the Divestiture in the first quarter of fiscal year 2024 was $100.0 million in cash and resulted in a pre-tax book gain of $47.8 million.
The Company and Merit entered into various agreements to facilitate the transition of the divested businesses to Merit, including a Transition Services Agreement and Contract Manufacturing Agreement. The Company determined that the sale of
9

the businesses did not constitute a strategic shift that had a major effect on the Company's operations or financial results and as a result, this transaction will not be classified as discontinued operations.
The following table summarizes the major classes of assets sold on the date of the sale:
(in thousands)As of June 8, 2023
Current assets:
Inventories $4,068 
Prepaid expenses and other2,000 
   Total current assets$6,068 
Non-current assets:
Property, plant and equipment, net$54 
Intangible assets, net17,629 
Goodwill25,980 
   Total non-current assets $43,663 
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue Recognition
Under ASC 606, Revenue from Contracts with Customers, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company has one primary revenue stream which is the sales of its products.
Disaggregation of Revenue
The following table summarizes net sales by Med Tech, Med Device and by geography:
Three Months Ended February 29, 2024Three Months Ended February 28, 2023
(in thousands)United StatesInternationalTotalUnited StatesInternationalTotal
Net sales
Med Tech $22,033 $3,811 $25,844 $20,381 $2,493 $22,874 
Med Device40,309 9,029 49,338 47,239 10,599 57,838 
Total$62,342 $12,840 $75,182 $67,620 $13,092 $80,712 
Nine Months Ended February 29, 2024Nine Months Ended February 28, 2023
(in thousands)United StatesInternationalTotalUnited StatesInternationalTotal
Net sales
Med Tech $65,222 $11,846 $77,068 $61,373 $8,820 $70,193 
Med Device125,521 30,345 155,866 146,901 30,584 177,485 
Total$190,743 $42,191 $232,934 $208,274 $39,404 $247,678 
Net Product Revenue
The Company's products consist of a wide range of medical, surgical and diagnostic devices used by professional healthcare providers for vascular access, for the treatment of peripheral vascular disease and for use in oncology and surgical settings. The Company's products are generally used in minimally invasive, image-guided procedures. Most of the Company's products are intended to be used once and then discarded, or they may be implanted for short or long term use. The Company sells its products to its distributors and to end users, such as interventional radiologists, interventional cardiologists, vascular surgeons, urologists, interventional and surgical oncologists and critical care nurses.
Contracts and Performance Obligations
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The Company contracts with its customers based on customer purchase orders, which in many cases are governed by master purchasing agreements. The Company’s contracts with customers are generally for product only, and do not include other performance obligations such as services or other material rights. As part of its assessment of each contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations.
Transaction Price and Allocation to Performance Obligations
Transaction prices of products are typically based on contracted rates. Product revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer, net of any variable consideration as described below.
If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products underlying each performance obligation. The Company has standard pricing for its products and determines standalone selling prices based on the price at which the performance obligation is sold separately.
Revenue Recognition
Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which occurs at a point in time, and may be upon shipment from the Company’s manufacturing site or delivery to the customer’s named location, based on the shipping terms of a contract.
In determining whether control has transferred, the Company considers if there is a present right to payment from the customer and when physical possession, legal title and risks and rewards of ownership have transferred to the customer.
The Company typically invoices customers upon satisfaction of identified performance obligations. As the Company’s standard payment terms are 30 to 90 days from invoicing, the Company does not provide any significant financing to its customers.
The Company enters into agreements to place placement and evaluation units (“units”) at customer sites, but the Company retains title to the units. For the duration of these agreements the customer has the right to use the unit at no upfront charge in connection with the customer’s ongoing purchase of disposables. These types of agreements include an embedded operating lease for the right to use the units. In these arrangements, revenue recognized for the sale of the disposables is not allocated between the disposal revenue and lease revenue due to the insignificant value of the units in relation to the total agreement value.
Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.
Variable Consideration
Reserves: Revenue from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established for discounts, returns, rebates and allowances that are offered within contracts between the Company and its customers. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as a contra asset.
Rebates and Allowances: The Company provides certain customers with rebates and allowances that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. The Company establishes reserves for such amounts, which is included in accrued expenses in the accompanying Consolidated Balance Sheets. These rebates and allowances result from performance-based offers that are primarily based on attaining contractually specified sales volumes. The Company is also required to pay administrative fees to group purchasing organizations.
Product Returns: The Company generally offers customers a limited right of return. Product returns after 30 days must be pre-approved by the Company and customers may be subject to a 20% restocking charge. To be accepted, a returned product must be unadulterated, undamaged and have at least twelve months remaining prior to its expiration date. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using its historical product return information and considers other factors that it believes could significantly impact its expected returns, including product recalls. During the nine months ended February 29, 2024, such product returns were not material.
11

Contract Balances with Customers
A receivable is generally recognized in the period the Company ships the product. Payment terms on invoiced amounts are based on contractual terms with each customer and generally coincide with revenue recognition. Accordingly, the Company does not have any contract assets associated with the future right to invoice its customers. In some cases, if control of the product has not yet transferred to the customer or the timing of the payments made by the customer precedes the Company’s fulfillment of the performance obligation, the Company recognizes a contract liability that is included in deferred revenue in the accompanying Consolidated Balance Sheets.
The following table presents changes in the Company’s receivables, contract assets and contract liabilities with customers:
(in thousands)Feb 29, 2024
May 31, 2023
Receivables$49,475 $52,826 
Contract assets$ $ 
Contract liabilities$715 $499 
During the nine months ended February 29, 2024, the Company had additions to contract liabilities of $0.6 million. This was offset by $0.3 million in revenue that was recognized during the nine months ended February 29, 2024.
Costs to Obtain or Fulfill a Customer Contract
Under ASC 606, the Company may recognize an asset for incremental costs of obtaining a contract with a customer if it expects to recover those costs. The Company’s sales incentive compensation plans qualify for capitalization since these plans are directly related to sales achieved during a period of time. However, the Company has elected the practical expedient under ASC 340-40-25-4 to expense the costs as they are incurred within selling and marketing expenses since the amortization period is less than one year.
The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and handling costs, associated with the distribution of finished products to customers, are recorded in costs of goods sold and are recognized when the related finished product is shipped to the customer. Amounts charged to customers for shipping and handling are recorded in net sales.

4. INVENTORIES
Inventories are stated at lower of cost and net realizable value (using the first-in, first-out method). Inventories consisted of the following:
(in thousands)Feb 29, 2024May 31, 2023
Raw materials$31,161 $28,679 
Work in process7,946 6,708 
Finished goods18,961 19,938 
Inventories$58,068 $55,325 
The Company periodically reviews inventory for both obsolescence and loss of value. The Company makes assumptions about the future demand for and market value of the inventory. Based on these assumptions, the Company estimates the amount of obsolete, expiring and slow-moving inventory. The total inventory reserve at February 29, 2024 and May 31, 2023 was $3.6 million and $3.1 million, respectively.

5. GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill is not amortized, but rather, is tested for impairment annually or more frequently if impairment indicators arise. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination.
The Company's annual testing for impairment of goodwill was completed as of April 30, 2023. To determine the fair value of the two reporting units as of April 30, 2023, the Company utilized the income approach for Med Tech and a
12

combination of the income approach and market approach for Med Device. Based on the results of this evaluation, there were no adjustments to goodwill for either reporting unit as of April 30, 2023.
In the fourth quarter of fiscal year 2023, the Company concluded that the sale of the dialysis and BioSentry businesses to Merit Medical Systems, Inc. was a triggering event for the Med Device reporting unit. As the Company concluded that this was the sale of a business, goodwill was allocated to the sale based on the relative fair value of the dialysis and BioSentry businesses and is included in assets held for sale as of May 31, 2023. To determine the fair value of the remaining Med Device reporting unit as of May 31, 2023, the Company utilized the income approach, as it was determined to be a better representation of the remaining Med Device reporting unit's projected long-term performance. Based on the results of this evaluation, the Company recorded a goodwill impairment charge of $14.5 million for the year ended May 31, 2023 to write down the carrying value of the Med Device reporting unit to fair value.
In the third quarter of fiscal year 2024, the Company concluded that the sustained decline in our stock price was a triggering event for the Med Tech reporting unit. To determine the fair value of the remaining Med Tech reporting unit as of February 29, 2024, the Company utilized the income approach, as it was determined to be a better representation of the remaining Med Tech reporting unit's projected long-term performance. The income approach is based on the projected cash flows discounted to their present value using discount rates, that in the Company's judgment, consider the timing and risk of the forecasted cash flows using internally developed forecasts and assumptions. Under the income approach, the discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Other significant assumptions include revenue growth rates, profitability projections, and terminal value growth rates. Based on the results of this evaluation, the Company recorded a goodwill impairment charge of $159.5 million for the quarter ended February 29, 2024 to write down the carrying value of the Med Tech reporting unit to fair value. The impairment loss is disclosed separately on the face of the accompanying consolidated statements of operations.
Goodwill for each reporting unit is allocated as follows:
Nine months ended Feb 29, 2024
(in thousands)Med Tech Med Device Total
Balance, June 1, 2023$159,238 $ $159,238 
Foreign currency translation adjustments (221) (221)
Balance, August 31, 2023$159,017 $ $159,017 
Foreign currency translation adjustments209  209 
Balance, November 30, 2023$159,226 $ $159,226 
Goodwill impairment(159,476) (159,476)
Foreign currency translation adjustments$250 $ $250 
Balance, February 29, 2024
$ $ $ 
Definite Lived Intangible Assets
Intangible assets other than goodwill are amortized over their estimated useful lives on a straight-line basis. Useful lives range from two to eighteen years. The Company periodically reviews, and adjusts, if necessary, the estimated useful lives of its intangible assets and reviews such assets or asset groups for impairment whenever events or changes in circumstances indicate that the carrying value of the assets or asset groups may not be recoverable. If an intangible asset or asset group is considered to be impaired, the amount of the impairment will equal the excess of the carrying value over the fair value of the asset.
During the third quarter of fiscal year 2024, the Company made the decision to abandon the Syntrax product line. This resulted in an impairment charge of $3.3 million for the Syntrax product technology intangible. The impairment charge is recorded in "Acquisition, Restructuring and Other" in the consolidated financial statements included in this Form 10-Q (see Note 15 "Acquisition, Restructuring, and Other Items, Net" set forth in the Notes to our consolidated financial statements in this Quarterly Report on Form 10 -Q).
13

Intangible assets consisted of the following:
Feb 29, 2024
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Product technologies$178,522 $(100,707)$77,815 
Customer relationships9,023 (5,510)3,513 
Trademarks2,100 (2,010)90 
Licenses3,837 (3,685)152 
$193,482 $(111,912)$81,570 
May 31, 2023
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Product technologies$211,751 $(118,314)$93,437 
Customer relationships57,509 (40,755)16,754 
Trademarks7,450 (6,660)790 
Licenses4,837 (4,674)163 
$281,547 $(170,403)$111,144 
Amortization expense for the three months ended February 29, 2024 and February 28, 2023 was $3.3 million and $4.7 million, respectively. Amortization expense for the nine months ended February 29, 2024 and February 28, 2023 was $10.5 million and $14.4 million, respectively.
Expected future amortization expense related to the intangible assets for each of the following fiscal years is as follows:
(in thousands)
Remainder of 2024$2,605 
202510,422 
202610,241 
202710,150 
202810,101 
2029 and thereafter38,051 
$81,570 

6. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
(in thousands)Feb 29, 2024May 31, 2023
Payroll and related expenses$13,465 $9,232 
Outside services7,181 7,088 
Research and development2,303 1,525 
Royalties2,252 2,874 
Sales and franchise taxes508 480 
Deferred Warranties443 475 
Rebates454 469 
Accrued Freight450 450 
Accrued severance873 262 
Other3,034 3,762 
$30,963 $26,617 
7. LONG-TERM DEBT
On June 8, 2023 and in connection with the completion of the dialysis and BioSentry divestiture, the Company repaid all amounts outstanding under its then existing Credit Agreement, dated as of August 30, 2022, with the lender parties thereto,
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JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A. and KeyBank National Association, as co-syndication agents, and JPMorgan Chase Bank, N.A. as sole bookrunner and sole lead arranger (the "Credit Agreement"), and as a result, the Credit Agreement was extinguished. Pursuant to the terms of the Credit Agreement, AngioDynamics had the option to repay this facility prior to the maturity date without penalty.

8. INCOME TAXES
The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full fiscal year adjusted for any discrete events, which are recorded in the period that they occur.  The estimated annual effective tax rate prior to discrete items was 5.6% as of the third quarter of fiscal year 2024, as compared to 5.2% for the same period in fiscal year 2023. In fiscal year 2024, the Company’s effective tax rate differs from the U.S. statutory rate primarily due to the impact of the valuation allowance, foreign taxes, and other non-deductible permanent items (such as non-deductible meals and entertainment, Section 162(m) excess compensation and non-deductible share-based compensation).
The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluated all available positive and negative evidence, and weighted the evidence based on its objectivity.
Based on the review of all available evidence, the Company determined that it has not yet attained a sustained level of profitability and the objectively verifiable negative evidence outweighed the positive evidence. Therefore, the Company has provided a valuation allowance on its federal and state net operating loss carryforwards, federal and state R&D credit carryforwards and other net deferred tax assets as of February 29, 2024. The Company will continue to assess the level of the valuation allowance required. If sufficient positive evidence exists in future periods to support a release of some or all of the valuation allowance, such a release would likely have a material impact on the Company’s results of operations.

9. SHARE-BASED COMPENSATION
On October 13, 2020, the Company's shareholders approved the 2020 Stock and Incentive Award Plan (the “2020 Plan”). The 2020 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance share units, performance shares and other incentive awards to the Company's employees, directors and other service providers. On November 14, 2023 the Company's shareholders approved an amendment to the 2020 Plan to increase the reserve of shares of common stock available for future grants by 1.5 million shares. As of February 29, 2024, there was a maximum of 2.7 million shares of common stock available for future grant under the 2020 Plan.
Prior to the adoption of the 2020 Plan, equity awards were issued under the 2004 Stock and Incentive Award Plan (the “2004 Plan”). The adoption of the 2020 Plan did not impact the administration of equity awards issued under the 2004 Plan but following the adoption of the 2020 Plan, equity award grants are no longer made under the 2004 Plan.
The Company also has an employee stock purchase plan. On November 3, 2022 the Company's shareholders approved an amendment to the employee stock purchase plan to increase the reserve of shares of common stock available for future grants by 1.0 million shares. As of February 29, 2024, there was a maximum of 2.9 million shares of common stock available for future grant under the employee stock purchase plan.
For the three months ended February 29, 2024 and February 28, 2023, share-based compensation expense was $2.6 million and $1.8 million, respectively. For the nine months ended February 29, 2024 and February 28, 2023, share-based compensation expense was $8.6 million and $8.2 million, respectively.
During the nine months ended February 29, 2024 and February 28, 2023, the Company granted stock options and restricted stock units under the 2020 Plan to certain employees and members of the Board of Directors. Stock option awards are valued using the Black-Scholes option-pricing model and then amortized on a straight-line basis over the requisite service period of the award. Generally, restricted stock unit awards are valued based on the closing trading value of the Company’s common stock on the date of grant and then amortized on a straight-line basis over the requisite service period of the award. In July 2023, the Board of Directors approved a change in terms of restricted stock units granted to non-employee directors to provide for immediate vesting upon grant of the award.
During the nine months ended February 29, 2024 and February 28, 2023, the Company granted performance share units under the 2020 Plan to certain employees. The awards may be earned by achieving performance levels over the requisite service period. The performance criteria are based on achieving certain performance targets and the total shareholder return (“TSR”) of the Company’s common stock relative to the TSR of the common stock of a pre-defined industry peer-group. The fair value of these awards is based on a Monte Carlo simulation model.
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As of February 29, 2024, there was $16.5 million of unrecognized compensation expense related to share-based payment arrangements. These costs are expected to be recognized over a weighted-average period of approximately three years. The Company has sufficient shares to satisfy expected share-based payment arrangements.
10. EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of common shares outstanding without consideration of potential common stock. Diluted earnings per share includes the dilutive effect of potential common stock consisting of stock options, restricted stock units and performance stock units, provided that the inclusion of such securities is not anti-dilutive. In periods with a net loss, stock options and restricted stock units are not included in the computation of diluted loss per share as the impact would be anti-dilutive.
The following table reconciles basic to diluted weighted-average shares outstanding:
Three Months EndedNine Months Ended
(in thousands)Feb 29, 2024Feb 28, 2023Feb 29, 2024Feb 28, 2023
Basic40,234 39,509 40,098 39,436 
Effect of dilutive securities    
Diluted40,234 39,509 40,098 39,436 
Securities excluded as their inclusion would be anti-dilutive4,134 3,706 4,134 3,706 

11. SEGMENT AND GEOGRAPHIC INFORMATION
Segment information
The Company regularly reviews its segments and the approach used by the chief operating decision maker, the President and Chief Executive Officer ("CEO"), and management to evaluate performance and allocate resources. The Company manages its operations through two segments, Med Tech and Med Device. The CEO evaluates these two segments based on net sales and gross margin to, among other items, allocate resources and assess performance. Executives reporting to the CEO include those responsible for commercial operations, manufacturing operations, regulatory and quality and certain corporate functions. The CEO evaluates all other elements of profitability, investment and cash flow metrics on a consolidated global basis due to shared infrastructure and resources.
The Company manages its assets on a total company basis, not by operating segment; therefore, the CEO does not review any asset information by operating segment and, accordingly, asset information is not reported or evaluated by operating segment. Total assets were $324.8 million as of February 29, 2024.
The table below summarizes net sales and gross margin by Med Tech and Med Device:
Three Months EndedNine Months Ended
(in thousands)Feb 29, 2024Feb 28, 2023Feb 29, 2024Feb 28, 2023
Med Tech Net Sales$25,844 $22,874 $77,068 $70,193 
Gross profit 15,857 14,774 48,400 44,816 
Gross margin 61.4 %64.6 %62.8 %63.8 %
Med Device Net Sales$49,338 $57,838 155,866 $177,485 
Gross profit 20,004 25,730 67,783 $83,071 
Gross margin 40.5 %44.5 %43.5 %46.8 %
Total Net Sales$75,182 $80,712 $232,934 $247,678 
Gross profit35,861 40,504 116,183 127,887 
Gross margin47.7 %50.2 %49.9 %51.6 %

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Geographic information
The table below summarizes net sales by geographic area based on external customer location:
Three Months EndedNine Months Ended
(in thousands)Feb 29, 2024Feb 28, 2023Feb 29, 2024Feb 28, 2023
Net Sales
United States$62,342 $67,620 $190,743 $208,274 
International12,840 13,092 42,191 39,404 
Total$75,182 $80,712 $232,934 $247,678 
For the three months ended February 29, 2024 and February 28, 2023, international sales as a percentage of total net sales were 17.1% and 16.2%, respectively. For the nine months ended February 29, 2024 and February 28, 2023, international sales as a percentage of total net sales were 18.1% and 15.9%, respectively. Sales to any one country outside the U.S., as determined by shipment destination, did not comprise a material portion of net sales in any of the last three fiscal years. In addition, no one customer represents more than 10% of consolidated net sales and 66% of long-lived assets are located within the United States.

12. FAIR VALUE
On a recurring basis, the Company measures certain financial assets and financial liabilities at fair value based upon quoted market prices, where available. Where quoted market prices or other observable inputs are not available, the Company applies valuation techniques to estimate fair value. FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:
Level 1 - Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.
Level 2 - Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.
Level 3 - Inputs to the valuation methodology are significant unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk.
The Company's financial instruments include cash and cash equivalents, accounts receivable, accounts payable and contingent consideration. The carrying amount of cash and cash equivalents, accounts receivable, and accounts payable approximates fair value due to their immediate or short-term maturities. The recurring fair value measurements using significant unobservable inputs (Level 3) relate to contingent consideration liabilities.
The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis:
Fair Value Measurements using inputs considered as:
Fair Value at Feb 29, 2024
(in thousands)Level 1Level 2Level 3
Financial Liabilities
Contingent consideration for acquisition earn outs$ $ $9,500 $9,500 
Total Financial Liabilities$ $ $9,500 $9,500 
Fair Value Measurements using inputs considered as:
Fair Value at May 31, 2023
(in thousands)Level 1Level 2Level 3
Financial Liabilities
Contingent consideration for acquisition earn outs$ $ $19,296 $19,296 
Total Financial Liabilities$ $ $19,296 $19,296 
There were no transfers between Level 1, 2 and 3 for the three and nine months ended February 29, 2024 and February 28, 2023.
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The table below presents the changes in fair value components of Level 3 instruments:
Three Months Ended Feb 29, 2024
(in thousands)Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance, November 30, 2023$9,387 
Change in present value of contingent consideration (1)
112 
Currency gain from remeasurement1 
Contingent consideration payment 
Balance, February 29, 2024
$9,500 
Nine Months Ended Feb 29, 2024
(in thousands)Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance, May 31, 2023$19,296 
Change in present value of contingent consideration (1)
203 
Currency gain from remeasurement1 
Contingent consideration payment(10,000)
Balance, February 29, 2024
$9,500 
(1) Change in the fair value of contingent consideration is included in earnings and comprised of changes in estimated earn out payments based on projections of Company performance and amortization of the present value discount.
Contingent Liability for Acquisition Earn Outs
Some of the Company's business combinations involve the potential for the payment of future contingent consideration upon the achievement of certain product development milestones or various other performance conditions. Payment of the additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified revenue levels or product development targets. Contingent consideration is recorded at the estimated fair value of the contingent payments on the acquisition date. The fair value of the contingent consideration is remeasured at the estimated fair value at each reporting period with the change in fair value recognized as income or expense within change in fair value of contingent consideration in the Consolidated Statements of Operations.
The Company measures the initial liability and remeasures the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements, which is determined using a discounted cash flow model applied to projected net sales, using probabilities of achieving projected net sales and projected payment dates. Projected net sales are based on internal projections and extensive analysis of the target market and the sales potential. Increases or decreases in any valuation inputs in isolation may result in a significantly lower or higher fair value measurement in the future.
The recurring Level 3 fair value measurements of the contingent consideration liabilities include the following significant unobservable inputs as of February 29, 2024:
(in thousands)Fair ValueValuation TechniqueUnobservable InputRange
Revenue based payments$9,500 Discounted cash flowDiscount rate10%
Probability of payment
90% - 100%
Projected fiscal year of payment2024 - 2025
At February 29, 2024, the amount of undiscounted future contingent consideration that the Company expects to pay as a result of all completed acquisitions is approximately $10.0 million. The milestones, including revenue projections and technical milestones associated with the contingent consideration, must be reached in future periods ranging from fiscal years 2024 to 2029 in order for the associated consideration to be paid.
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13. LEASES
The Company determines if an arrangement is a lease at inception of the contract. The Company has operating leases for buildings, primarily for office space, R&D, manufacturing and warehousing.
Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Many of the lease agreements contain renewal or termination clauses that are factored into the determination of the lease term if it is reasonably certain that these options would be exercised. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The following table presents supplemental balance sheet information related to leases:
(in thousands)Balance Sheet LocationFeb 29, 2024May 31, 2023
Assets
Operating lease ROU assetOther assets$3,854 $5,113 
Liabilities
Current operating lease liabilitiesOther current liabilities1,645 1,922 
Non-current operating lease liabilitiesOther long-term liabilities2,322 3,316 
Total lease liabilities$3,967 $5,238 
The interest rate implicit in lease agreements is typically not readily determinable, and as such the Company used the incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The incremental borrowing rate is defined as the interest the Company would pay to borrow on a collateralized basis, considering factors such as length of lease term. The following table presents the weighted average remaining lease term and discount rate:
Feb 29, 2024
Weighted average remaining term (in years)2.58
Weighted average discount rate4.7 %
The maturities of the lease liabilities for each of the following fiscal years is:
(in thousands)Feb 29, 2024
Remainder of 2024$501 
20251,671 
20261,437 
2027437 
2028 and thereafter174 
Total lease payments$4,220 
Less: Imputed Interest253 
Total lease obligations$3,967 
Less: Current portion of lease obligations1,645 
Long-term lease obligations$2,322 
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During the three months ended February 29, 2024 and February 28, 2023, the Company recognized $0.7 million and $0.7 million of operating lease expense, respectively, which includes immaterial short-term leases. During the nine months ended February 29, 2024 and February 28, 2023, the Company recognized $1.9 million and $2.0 million of operating lease expense, respectively, which includes immaterial short-term leases. The expenses on the Consolidated Statement of Operations were classified as follows:
Three Months Ended
Nine Months Ended
(in thousands)
Feb 29, 2024
Feb 28, 2023
Feb 29, 2024
Feb 28, 2023
Cost of sales$218 $221 $634 $661 
Research and development54 54 151 158 
Sales and marketing40 42 121 122 
General and administrative338 379 998 1,103 
$650 $696 $1,904 $2,044 
The following table presents supplemental cash flow and other information related to leases:
Nine Months Ended
(in thousands)Feb 29, 2024Feb 28, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$1,555 $2,079 
ROU assets obtained in exchange for lease liabilities
Operating leases$618 $ 

14. COMMITMENTS AND CONTINGENCIES

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

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

On January 11, 2012, C.R. Bard, Inc. (“Bard”) filed a suit in the United States District Court of Utah claiming certain of the Company's implantable port products infringe on three U.S. patents held by Bard (US Patent Nos. 7,785,302 ("302"), 7,959,615 (“615”) and 7,947,022 ("022")).

On March 10, 2015, Bard and Bard Peripheral Vascular filed suit in the District of Delaware claiming certain of the Company's implantable port products infringe on three U.S. patents held by Bard (US Patent Nos. 8,475,417, 8,545,460, 8,805,478). The Court entered Judgement on June 1, 2023 in favor of the Company. Bard has appealed to the Federal Circuit, where Bard has its reply brief in support of its appeal due May 6, 2024. A hearing date has not yet been set.

On March 8, 2021, Bard filed suit in the District of Delaware asserting certain of the Company’s port products (including certain related infusion sets) infringe U.S. Patent Nos. 8,025,639, 9,603,992 and 9,603,993. The Company counterclaimed, alleging that certain of Bard’s catheter products infringe U.S. Patent Nos. 8,377,011, 10,729,881, 8,454,574.

On March 31, 2024, the Company and Bard’s parent company Becton, Dickinson and Company (collectively, “BD”) entered into a settlement agreement (the “Settlement Agreement”) to resolve the ongoing litigations. Under the terms of the Settlement Agreement, BD will grant a license to the Company under certain of BD’s port patents and AngioDynamics will grant BD a license under certain of the Company’s catheter patents. The Company will make a one-time lump sum payment to BD in the amount of $7.0 million which will be payable in installments over the next 12 months. The Company will also make six minimum annual payments to BD of $2.5 million through February, 2029, and potential additional payments if six percent (6%) of annual net sales of the Company’s port products exceed the minimum payment. The parties will participate in the pending appeal before the Federal Circuit of the case that was filed March 10, 2015 and a contingent payment of $3.0 million will be due from the Company to BD if the Federal Circuit reverses or vacates the District Court’s findings of invalidity with respect to the patent claims at issue in the case. Neither party admitted any liability and the agreement contains mutual covenants not to sue and releases.
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15. ACQUISITION, RESTRUCTURING, AND OTHER ITEMS, NET
Acquisition, Restructuring and Other Items
Acquisition, restructuring and other items, net, consisted of:
Three Months EndedNine Months Ended
(in thousands)Feb 29, 2024Feb 28, 2023Feb 29, 2024Feb 28, 2023
Legal (1)
$23,314 $2,614 $30,453 $6,899 
Mergers and acquisitions (2)
147  399  
Plant closure (3)
5,426  6,115  
Intangible and other asset impairment (4)
6,260  6,260  
Transition service agreement (5)
(333) (655) 
Manufacturing relocation (6)
 324 587 1,062 
Israeli Innovation Authority prepayment (7)
   3,544 
Other (8)
553 431 1,608 504 
Total$35,367 $3,369 $44,767 $12,009 
(1) Legal expenses related to litigation that is outside the normal course of business. For the three and nine months ended February 29, 2024, a $19.3 million settlement expense was recorded as a result of the Settlement Agreement that was entered into between the Company and BD.
(2) Mergers and acquisitions expense related to legal and due diligence.
(3) Included in the $6.1 million in plant closure for the nine months ended February 29, 2024 is $0.7 million that was previously included in manufacturing relocation.
(4) An impairment of $3.4 million on intangible and fixed assets and an inventory write-off of $2.9 million was taken in the third quarter of fiscal year 2024 relating to the abandonment of the Syntrax and RF product lines.
(5) Transition services agreements that were entered into with Merit and Spectrum.
(6) Expenses to relocate certain manufacturing lines out of Queensbury, NY.
(7) In the first quarter of fiscal year 2023, a $3.5 million payment was made to the Israeli Innovation Authority to fully satisfy the obligation related to grant funds that were provided to Eximo for development of the Auryon laser prior to the acquisition in the second quarter of fiscal year 2020.
(8) Included in the $1.6 million in other for the nine months ended February 29, 2024 is $0.9 million of deferred financing fees that were written-off in conjunction with the sale of the Dialysis and BioSentry businesses and concurrent extinguishment of the debt.
Restructuring
The Company evaluates its performance and looks for opportunities to improve the overall operations of the Company on an ongoing basis. As a result of this evaluation, certain restructuring initiatives are taken to enhance the Company’s overall operations. On January 5, 2024, the Company announced a restructuring of its manufacturing footprint and a shift to an outsourced model (the "Plan"). This Plan will transfer all product manufacturing processes to third-party manufacturers. The restructuring activities associated with the Plan are expected to be completed in the third quarter of fiscal year 2026.
The following table provides a summary of our estimated costs associated with the plan:

Type of costTotal estimated amount expected to be incurred (in thousands)
Facilities closeout fees (1)
$14,500 to$15,250 
Termination benefits9,000 to10,000 
Outside consultants9,000 to10,000 
Validation expenses4,500 to5,500 
Regulatory filings750 to1,250 
Other750 to1,250 
$38,500 to$43,250 
(1) Included in this estimate is approximately $13.6 million of non-cash charges for accelerated depreciation and building impairment.

The Company recorded restructuring charges related to the plan during the three and nine months ended February 29, 2024 of $5.4 million and $6.1 million, respectively. Total restructuring charges recorded to date are $6.1 million. Termination
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benefits are only earned if an employee stays until their termination date; therefore, the expenses related to termination benefits are being recorded ratably over the service period.

The table below presents the restructuring reserve for the three and nine months ended February 29, 2024:

Three Months Ended Feb 29, 2024
Termination BenefitsOutside ConsultantsValidation ExpensesFacilities Closeout FeesRegulatory FilingsOtherTotal
(in thousands)
Balance at November 30, 2023$ $653 $ $ $ $36 $689 
Charges227 647 37 4,500 10 5 5,426 
Non-cash adjustments   (4,500)  (4,500)
Cash payments (635)