AngioDynamics
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 2018OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-50761 AngioDynamics, Inc.(Exact name of registrant as specified in its charter)Delaware 11-3146460(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 14 Plaza Drive Latham, New York 12110(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code (518) 795-1400 Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, par value $.01 per share NASDAQ 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 xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No xIndicate 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 12months (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 past90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted andposted 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 and post suchfiles). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growthcompany. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.(Check one): Large accelerated filer ¨ Accelerated filer x 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 xAs of November 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stockheld by non-affiliates was approximately $631,826,627 computed by reference to the last sale price of the common stock on that date as reported by The NASDAQ Global SelectMarket.As of July 20, 2018 there were 36,885,765 shares of the registrant’s common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEThe information required for Part III of this Annual Report on Form 10-K is incorporated by reference to the registrant’s Proxy Statement for its 2018 Annual Meeting ofStockholders to be filed within 120 days of the registrant's fiscal year ended May 31, 2018.AngioDynamics, Inc. and SubsidiariesINDEX PagePart I: Item 1.Business2Item 1A.Risk Factors15Item 1B.Unresolved Staff Comments32Item 2.Properties33Item 3.Legal Proceedings34Item 4.Mine Safety Disclosures35Part II: Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity35Item 6.Selected Financial Data37Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations38Item 7A.Quantitative and Qualitative Disclosures About Market Risk52Item 8.Financial Statements and Supplementary Data52Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure52Item 9A.Controls and Procedures52Item 9B.Other Information55Part III: Item 10.Directors, Executive Officers and Corporate Governance56Item 11.Executive Compensation56Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters56Item 13.Certain Relationships and Related Transactions, and Director Independence56Item 14.Principal Accounting Fees and Services56Part IV: Item 15.Exhibits, Financial Statement Schedules571Part IItem 1.Business.OVERVIEWAngioDynamics, Inc. (together with its subsidiaries, "AngioDynamics," the "Company," "we," "our" or "us") designs, manufactures and sells a widerange of medical, surgical and diagnostic devices used by professional healthcare providers for the treatment of peripheral vascular disease, vascular accessand for use in oncology and surgical settings. Our devices are generally used in minimally invasive, image-guided procedures.HISTORYAngioDynamics was founded in Queensbury, N.Y., U.S., in 1988. Queensbury was chosen due to its location in the heart of "Catheter Valley," an area inNew York's Adirondack Region named for its long history of catheter and other medical device manufacturing. Initially dedicated to the research anddevelopment of products used in interventional radiology, AngioDynamics began manufacturing and shipping product in the early 1990s. The Companysoon became well established as a producer of diagnostic catheters for non-coronary angiography and thrombolytic delivery systems.The Company grew over the following years as a result of acquisitions of companies including RITA Medical Systems in January 2007, Oncobionic inMay 2008, Vortex Medical, Inc. in October 2012, Clinical Devices in August 2013 and the assets of Diomed in June 2008 and the assets of MicrosulisMedical Limited in January 2013. These acquisitions added product lines including market-leading ablation and NanoKnife systems, vascular accessproducts, angiographic products and accessories, dialysis products, drainage products, thrombolytic products, embolization products, venous products andtargeted renal therapy products. More recently in May 2012, AngioDynamics acquired Navilyst Medical, bringing market-leading fluid management systemsinto our portfolio. The acquisition significantly expanded the Company's scale, doubling its share of the vascular access market while building critical massin the peripheral vascular market.Headquartered in Latham, N.Y., AngioDynamics is publicly traded on the NASDAQ stock exchange under the symbol ANGO.PRODUCTSOur product offerings fall within three Global Business Units (GBUs): Peripheral Vascular ("PV"), Oncology/Surgery ("OS") and Vascular Access ("VA").All products discussed below have been cleared for sale in the United States by the Food and Drug Administration (FDA). International regulatory clearancesvary by product and jurisdiction. Effective June 1, 2018 PV is now Vascular Interventions & Therapies and OS is now Oncology. Peripheral Vascular ProductsAngioDynamics’ Peripheral Vascular product offerings support the medical areas of Venous Insufficiency, Thrombus Management, Fluid Managementand Peripheral Products (Core).Thrombus ManagementOur Thrombus Management portfolio includes the proprietary AngioVac venous drainage cannula and circuit, as well as catheter directed thrombolyticdevices and Uni-Fuse infusion catheters. AngioDynamics offers a range of options when treating thrombus and removing fresh, soft thromboli or emboli.2AngioVacOur AngioVac venous drainage system includes a Venous DrainageCannula and Extracorporeal Circuit. The cannula is indicated for use as avenous drainage cannula and for removal of fresh, soft thrombi or emboliduring extracorporeal bypass. The cardiopulmonary bypass circuit isindicated for use in procedures requiring extracorporeal circulatory supportfor periods of up to six hours. AngioVac devices are for use with othermanufacturers’ off-the-shelf pump, filter and reinfusion cannula, to facilitatevenous drainage as part of an extracorporeal bypass procedure. The AngioVac venous drainage cannula is a 22 French coil-reinforced cannula designed with a balloon actuated, expandable funnel shaped distal tip.The proprietary funnel shaped tip enhances venous drainage flow when the balloon is inflated, prevents clogging of the cannula with commonly encounteredundesirable intravascular material, and facilitates en bloc removal of such extraneous material.Thrombolytic CathetersThrombolytic catheters are used to deliver thrombolytic agents, which are drugs that dissolve blood clots in hemodialysis access grafts, arteries, veinsand surgical bypass grafts. AngioDynamics’ Uni-Fuse infusion catheter features pressure response outlets, a patented, time-tested slit technology thatprovides a consistent, even distribution of fluid volume along the entire length of the infusion pattern, resulting in a 12-fold advantage over standard side-hole catheters.¹We also offer the Pulse-Spray infusion system for high pressure, pulsed delivery of lytic agent to shorten treatment time, and the Speed Lyser infusionsystem built for dialysis grafts and fistulas.Peripheral Products (Core)We offer a comprehensive portfolio for minimally invasive peripheral products. Product categories include an extensive line of angiographic cathetersand diagnostic and interventional guidewires, percutaneous drainage catheters and coaxial micro-introducer kits.Angiographic Products and AccessoriesAngiographic products and accessories are used during peripheral diagnostic and interventional procedures. These products permit physicians to reachtargeted locations to deliver contrast media for visualization purposes and therapeutic agents and devices, such as percutaneous transluminal angioplasty(PTA) balloons. Angiographic products consist of angiographic catheters and guidewires.¹ Yusuf SW, et al. Immediate and Early Follow-up Results of Pulse Spray Thrombolysis in Patients with Peripheral Ischaemia. British Journal of Surgery 1995; 82:338-340.3Our angiographic catheter line includes the following brands, all with radiopaque tips to assure excellent visibility under fluoroscopy:•Soft-Vu flush catheters are available in flush and selective varieties. Flush Catheters are used in procedures where a high flow of contrast is requiredfor “big picture” diagnostics. Anomalies discovered through a flush angiogram may require further investigation into a vessel of interest. Soft-Vuselective catheters are used to gain access to smaller or more distal vessels and advance the catheter or wire into the diseased section.•Accu-Vu sizing catheters feature radiopaque marker bands at the distal (farthest away) portion of the catheter to provide a highly accuratemeasurement of the patient’s anatomy. This enables precise measurement for interventional devices (stents, filters, etc.)•AngiOptic catheters have total catheter radiopacity, ensuring tip-to-hub visibility. This catheter is also constructed with a firm tip material thatenhances stability during high-flow injections, providing excellent pushability.•Mariner catheters have a hydrophilic coating that, when combined with water, reduces friction. This makes insertion potentially easier and morecomfortable for the patient, and can also be used for advancing through tortuous anatomy.AngioDynamics guidewires include Nit-Vu (featuring a kink-resistant NiTi alloy core facilitating smooth navigation through tortuous vasculature andaccurate wire control) and PTFE Coated (fixed core and movable core) diagnostic guidewires.AngioDynamics catheters and guidewires are available in more than 500 tip configurations and lengths.Drainage ProductsDrainage products percutaneously drain abscesses and other fluid pockets. An abscess is a tender inflamed mass that typically must be drained by aphysician. AngioDynamics offers two brands of drainage catheters for multi-purpose/general, nephrostomy and biliary drainage: Total Abscession andExodus. Each offer features and benefits depending on case presentation and physician preferences.Micro Access KitsOur Micro Access sets provide interventional physicians a smaller introducer system for minimally-invasive procedures. Our Micro Access product lineprovides physicians with the means to choose from the wide selection of configurations, including guidewire, needle and introducer options. Two lines areavailable in stiff/standard, 10cm or 15cm and echogenic for visibility under ultrasound guidance: Micro Introducer Kit and Ministick Max.Fluid ManagementOur Fluid Management product offerings include the NAMIC® Fluid Management portfolio. Since 1969, the NAMIC product line has been a leader inproviding clinicians high quality, dependable devices that help in the diagnosis and treatment of cardiovascular and peripheral vascular disease. The NAMICproduct line includes an extensive offering of manifolds, contrast management systems, closed fluid systems, guidewires, disposable transducers andinterventional accessories. These devices are utilized together and allow clinicians to aspirate or inject contrast, saline, remove waste and monitor invasiveblood pressures throughout the procedure.Venous InsufficiencyVenaCure EVLT laser systemOur VenaCure EVLT (endovenous laser treatment) system products areused in endovascular laser procedures to treat superficial venous disease(varicose veins). Superficial venous disease is a malfunction of one or morevalves in the leg veins whereby blood refluxes or does not return to the heart,thereby pooling in the legs and leading to symptoms such as pain, swellingand ulcerations. VenaCure EVLT uses laser energy to stop the reflux byablating (collapsing and destroying) the affected vein. Blood is then re-routed to other healthy veins. 4The procedure is minimally invasive and generally takes less than an hour, allowing the patient to quickly return to normal activities with minimal post-operative pain.VenaCure EVLT is sold as a system that includes diode laser hardware and procedure kits which include disposable laser fiber components, an accesssheath, access wires and needles. Our VenaCure EVLT 1470 nanometer wavelength laser allows physicians to more efficiently heat the vein wall using lowerpower settings thereby reducing the risk of collateral damage. The NeverTouch tip fiber eliminates laser tip contact with the vein wall, which in turnminimizes perforations of the vein wall that typically result in less pain and bruising as compared to traditional bare-tip fibers. The NeverTouch tip alsomaximizes ultrasonic visibility, making it easier for physicians to use. Procedure kits are available in a variety of lengths and configurations to accommodatevaried patient anatomies.The VenaCure EVLT system comes with a comprehensive physician training program and extensive marketing support.Asclera (polidocanol) InjectionAsclera (polidocanol) injection is the only FDA-approved sclerosant with an indication to treat uncomplicated spider veins and uncomplicated reticularveins in the lower extremity. AngioDynamics distributes Asclera through a global agreement with the manufacturer and their distributor. In a multicenter,randomized, double-blind, placebo and comparator-controlled trial in patients with spider or reticular varicose veins, 95% of patients treated with Asclerashowed good improvement or complete treatment success as rated by physicians and 87% of patients were satisfied or very satisfied with their Ascleratreatment. ²Oncology/Surgery ProductsAngioDynamics offers a range of comprehensive ablation technologies, including thermal tissue ablation systems (microwave energy andradiofrequency energy), surgical resection and the NanoKnife System, an innovative alternative to thermal ablation.IRE AblationNanoKnife® The NanoKnife® System is an alternative to traditional thermal ablationthat has received 510(k) clearance from the Food and Drug Administrationfor the surgical ablation of soft tissue. The NanoKnife Ablation Systemutilizes low energy direct current electrical pulses to permanently open poresin target cell membranes. These permanent pores or nano-scale defects in thecell membranes result in cell death. The treated tissue is then removed by thebody’s natural processes in a matter of weeks, mimicking natural celldeath. Unlike other ablation technologies, NanoKnife Ablation System doesnot achieve tissue ablation using thermal energy. ² Weiss, Voigts, Howell (2011) Absence of Concentration Congruity in Six Compounded Polidocanol Samples Obtained for Leg Sclerotherapy. American Society forDermatologic Surgery, Inc., Volume 37: 1-45The NanoKnife Ablation System consists of two major components: a Low Energy Direct Current, or LEDC Generator and needle-like electrodeprobes. Up to six (6) electrode probes can be placed into or around the targeted soft tissue. Once the probes are in place, the user enters the appropriateparameters for voltage, number of pulses, interval between pulses, and the pulse length into the generator user interface. The generator then delivers a seriesof short electric pulses between each electrode probe. The energy delivery is hyperechoic and can be monitored under real-time ultrasound.Microwave AblationSolero Microwave Tissue Ablation (MTA) SystemThe Solero MTA System features the Solero Microwave (MW) Generatorand the specially designed Solero MW Applicators. The solid state SoleroMW Generator with a 2.45 GHz operating frequency can power up to 140Wfor optimized power delivery and fast ablations. The Solero MWApplicator’s optimized ceramic tip diffuses MW energy nearly spherically,and its patented cooling channel with thermocouple provides real-timemonitoring to help protect non-targeted tissue during the ablation. Inaddition, the Solero MTA System offers physicians scalability with a singleapplicator designed for multiple, predictable ablation volumes by varyingtime and wattage. Solero is a single applicator system able to complete up toa 5 cm ablation in six (6) minutes at maximum power. The Solero MTA System and Accessories are indicated in the U.S. for the ablation of soft tissue during open procedures. The Solero MTA System is notintended for cardiac use.Radiofrequency AblationStarBurst Radiofrequency Ablation DevicesRadiofrequency Ablation (RFA) products use radiofrequency energy to provide a minimally invasive approach to ablating solid cancerous or benigntumors. Our StarBurst Radiofrequency Ablation devices deliver radiofrequency energy to raise the temperature of cells above 45-50°C, causing cellulardeath. The physician inserts the disposable needle electrode device into the targeted body tissue, typically under ultrasound, CT or Magnetic ResonanceImaging (MRI) guidance.During the procedure, our system automatically adjusts the amount of energy delivered in order to maintain the temperature necessary to ablate thetargeted tissue. For a typical 5 cm ablation using our StarBurst ® Xli-enhanced disposable device, the ablation process takes approximately ten minutes. TheRFA system consists of a radiofrequency generator and a family of disposable devices.In addition to thermal ablation systems and NanoKnife, AngioDynamics also offers Habib 4X Surgical Resection devices that are used in minimallyinvasive laparoscopic surgery procedures in surgical specialties such as Hepato-Biliary, GI, Surgical Oncology, Transplant Surgery and Urology (PartialNephrectomy Resections). It is clinically indicated to assist in coagulation of tissue during intraoperative and laparoscopic procedures.Vascular Access ProductsOur portfolio of Vascular Access products includes a broad offering of peripherally inserted central catheters (PICCs), midline catheters, implantableports, dialysis catheters and related accessories and supplies. These products are used to deliver, primarily, short-term drug therapies, such aschemotherapeutic agents and antibiotics, into the central venous system. Delivery to the circulatory system allows drugs to mix with a large volume of bloodas compared to intravenous drug delivery into a superficial vessel. Our Vascular Access product family also includes the proprietary BioFlo catheter.6BioFlo® AngioDynamics offers BioFlo, the only catheter on the market withEndexo Technology, a material more resistant to thrombus accumulation, invitro (based on platelet count). Endexo Technology is a permanent and non-eluting polymer that is “blended” into the polyurethane from which thecatheter is made. It is present throughout the catheter, including theextraluminal, intraluminal and cut catheter surface of the tip. EndexoTechnology remains present for the life of the catheter. BioFlo’s long-termdurability and efficacy is intended to provide clinicians a high degree ofsafety and confidence in providing better patient care and improved patientoutcomes. BioFlo catheters are available across the Vascular Access familyof products, including PICCs, midlines, ports and dialysis catheters. PICCsA peripherally inserted central catheter, or PICC, is a long thin catheter that is inserted into a peripheral vein, typically in the upper arm, and advanceduntil the catheter tip terminates in a large vein in the chest near the heart to obtain intravenous access. PICCs can typically be used for prolonged periods oftime and provide an alternative to central venous catheters. Our PICC product offerings include:•BioFlo® PICC: Our BioFlo line is the only power injectable PICC available that incorporates Endexo Technology into the manufacturing anddesign of the catheter. Advanced features such as large lumen diameters allow the BioFlo® PICC to deliver the power injection flow rates requiredfor contrast-enhanced Computed Tomography (CT) scans compatible with up to 325 psi CT injections.•BioFlo® Midline: The BioFlo Midline Catheter is an effective solution to preserving a patient’s peripheral access. It provides a cost-effectivealternative to multiple IV site rotations for patients who need short-term venous access.•Xcela PICC: The Xcela® PICC line is designed to provide a high degree of safety, ease and confidence in patient care. Advanced features such aslarge lumen diameters allow the Xcela® PICC to deliver the power injection flow rates required for contrast-enhanced CTs compatible with up to 325psi CT injections.•PASV® Valve Technology: The PASV® Valve Technology is available in both BioFlo and Xcela lines and is designed to automatically resistbackflow and reduce blood reflux that could lead to catheter-related complications.PortsPorts are implantable devices utilized for the central venous administration of a variety of medical therapies and for blood sampling and diagnosticpurposes. Central venous access facilitates a more systemic delivery of treatment agents, while mitigating certain harsh side effects of certain treatmentprotocols and eliminating the need for repeated access to peripheral veins. Depending upon needle gauge size and the port size, a port can be utilized for upto approximately 2,000 accesses once implanted in the body. Our ports are used primarily in systemic or regional short- and long-term cancer treatmentprotocols that require frequent infusions of highly concentrated or toxic medications (such as chemotherapy agents, antibiotics or analgesics) and frequentblood samplings. Our port products and accessories include:•BioFlo® Port: Our BioFlo Port is the only port available that features a catheter with Endexo Technology. Advanced features of the BioFlo Portinclude multiple profile and catheter options, a large septum area for ease of access and the ability to administer contrast through a CT injection forpurposes of imaging.•SmartPort®: The Smart Port power-injectable port with Vortex technology offers the ability for a clinician to access a vein for both the delivery ofmedications or fluids and for administering power-injected contrast to perform a (CT) scan. The ability to access a port for power-injected contraststudies eliminates the need for additional needle sticks in the patient’s arm and wrist veins. Once implanted, repeated access to the bloodstream canbe accomplished with greater ease and less discomfort. Our Smart Port is available in mini and low-profiles to accommodate more patient anatomies.•Vortex®: Our Vortex port technology line of ports is a clear-flow port technology that, we believe, revolutionized port design. With its roundedchamber, the Vortex port is designed to have no sludge-harboring corners or dead spaces. This product line consists of titanium, plastic and dual-lumen offerings.7•PASV® Valve Technology: The PASV® Valve Technology is designed to automatically resist backflow and reduce blood reflux that could lead tocatheter-related complications.•LifeGuard®: The LifeGuard Safety Infusion Set and The LifeGuard Vision are used to infuse our ports and complement our port and vascular accesscatheters. The needles’ low profile design is intended to allow clinicians to easily dress the site.Dialysis ProductsWe market a complete line of dialysis products that provide short and long-term vascular access for dialysis patients. Dialysis, or cleaning of the blood, isnecessary in conditions such as acute renal failure, chronic renal failure and end-stage renal disease (ESRD). We currently offer a variety of dialysis catheters,including:•BioFlo® DuraMax: Our BioFlo DuraMax is the only dialysis catheter with Endexo Technology. Advanced features of the BioFlo DuraMax dialysiscatheter include large inner diameter lumens designed for long term patency, a proprietary guidewire lumen to facilitate catheter exchanges andCurved Tip Technology that allows the catheter to self-center in the Superior Vena Cava (SVC).•DuraMax®: The DuraMax catheter is a stepped-tip catheter designed to improve ease of use, dialysis efficiency and overall patient outcomes.In addition, AngioDynamics also offers other renal therapies, including DuraFlow™ Chronic Hemodialysis Catheter, Schon Chronic HemodialysisCatheter, EVENMORE Chronic Hemodialysis Catheter, EMBOSAFE™ Valved, Splitable Sheath Dilator and Perchik™ Button Suture Retention Device.RESEARCH & DEVELOPMENTOur growth depends in large part on the continuous introduction of new and innovative products, together with ongoing enhancements to our existingproducts. This happens through internal product development, technology licensing and strategic alliances. We recognize the importance of, and intend tocontinue to make investments in, research and development (R&D).Our R&D teams work closely with our marketing teams, sales force and regulatory and compliance teams to incorporate customer feedback into ourdevelopment and design process. We believe that we have a reputation among interventional physicians as a strong partner for developing high qualityproducts because of our tradition of close physician collaboration, dedicated market focus, responsiveness and execution capabilities for productdevelopment and commercialization.COMPETITIONWe encounter significant competition across our product lines and in each market in which our products are sold. These markets are characterized byrapid change resulting from technological advances, scientific discoveries and changing customer needs and expectations. We face competitors ranging fromlarge manufacturers with multiple business lines to small manufacturers that offer a limited selection of products.Our primary device competitors include: Boston Scientific Corporation; Cook Medical; Medical Components, Inc. (Medcomp); TeleFlex Medical; BDMedical Technology; Smiths Medical, a subsidiary of Smiths Group plc; Medtronic; Merit Medical; Terumo Medical Corporation; Johnson and Johnson andTotal Vein Systems.We believe our products compete primarily based on their quality, clinical outcomes, ease of use, reliability, physician familiarity and cost-effectiveness.In the current environment of managed care, which is characterized by economically motivated buyers, consolidation among health care providers, increasedcompetition and declining reimbursement rates, we have been increasingly required to compete on the basis of price. We believe that our continuedcompetitive success will depend upon our ability to develop or acquire scientifically advanced technology, apply our technology cost-effectively acrossproduct lines and markets, attract and retain skilled personnel, obtain patent or other protection for our products, obtain required regulatory andreimbursement approvals, manufacture and successfully market our products either directly or through outside parties, and maintain sufficient inventory tomeet customer demand.SALES AND MARKETINGWe sell our broad line of quality devices in the United States primarily through a direct sales force and internationally through a combination of directsales and distributor relationships. We support our customers and sales organization with a marketing staff that includes product managers, customer servicerepresentatives and other marketing specialists.8We focus our sales and marketing efforts on interventional radiologists, interventional cardiologists, vascular surgeons, urologists, interventional andsurgical oncologists and critical care nurses.MANUFACTURINGWe manufacture certain proprietary components and products and assemble, inspect, test and package our finished products. By designing andmanufacturing many of our products from raw materials, and assembling and testing our subassemblies and products, we believe that we are able to maintainbetter quality control, ensure compliance with applicable regulatory standards and our internal specifications, and limit outside access to our proprietarytechnology. We have custom-designed proprietary manufacturing and processing equipment and have developed proprietary enhancements for existingproduction machinery.We own two primary manufacturing properties providing capabilities which include manufacturing, service, engineering and research, distributionwarehouses and offices. These facilities are registered with the FDA and have been certified to ISO 13485 standards, as well as the CMD/CAS CanadianMedical Device Regulations. ISO 13485 is a quality system standard that satisfies European Union regulatory requirements, thus allowing us to market andsell our products in European Union countries. Our manufacturing facilities are subject to periodic inspections by regulatory authorities to ensure compliancewith domestic and non-U.S. regulatory requirements. See “Government Regulation” section of this report for additional information. See Item 2 "Properties"for details on each manufacturing location.In February 2017, we announced the consolidation of our global operations into two facilities located in New York State. Operations being done in theDenmead, U.K. and Manchester, GA. manufacturing facilities were consolidated into the Glens Falls and Queensbury, N.Y. facilities during fiscal year 2018.BACKLOGHistorically, we ship the majority of products within 24-48 hours of receiving an order, and accordingly our backlog is not significant. INTELLECTUAL PROPERTYPatents, trademarks and other proprietary rights are very important to our business. We also rely upon trade secrets, manufacturing know-how,technological innovations and licensing opportunities to maintain and improve our competitive position. We regularly monitor and review third-partyproprietary rights, including patents and patent applications, as available, to aid in the development of our intellectual property strategy, avoid infringementof third-party proprietary rights, and identify licensing opportunities.The Company owns an extensive portfolio of patents and patent applications in the United States and in certain foreign countries. The portfolio alsoincludes exclusive licenses to third party patents and applications.Most of our products are sold under the AngioDynamics trade name or trademark. Additionally, products are also sold under product trademarks and/orregistered product trademarks owned by AngioDynamics, Inc., or an affiliate or subsidiary. Some products contain trademarks of companies other thanAngioDynamics.See Part I. Item 3 of this report for additional details on litigation regarding proprietary technology.LITIGATIONWe operate in an industry characterized by extensive patent litigation. Patent litigation can result in significant damage awards and injunctions thatcould prevent the manufacture and sale of affected products or result in significant royalty payments in order to continue selling the products. While it is notpossible to predict the outcome of patent litigation incidents to our business, we believe the costs associated with this type of litigation could have a materialadverse impact on our consolidated results of operations, financial position, or cash flows. The medical device industry is also susceptible to significantproduct liability claims. These claims may be brought by individuals seeking relief on their own behalf or purporting to represent a class. In addition, productliability claims may be asserted against us in the future based on events we are not aware of at the present time. At any given time, we are involved in anumber of product liability actions. For additional information, see both Part I. Item 3 of this report and Note 15 to the consolidated financial statements inthis Annual Report on Form 10-K.9GOVERNMENT REGULATIONThe products we manufacture and market are subject to regulation by the Food and Drug Administration (FDA) under the Federal Food, Drug, andCosmetic Act, or FDCA, and international regulations to our specific target markets.United States FDA RegulationBefore a new medical device can be introduced into the market, a manufacturer generally must obtain marketing clearance or approval from the FDAthrough either a 510(k) submission (a premarket notification) or a premarket approval application (PMA).The 510(k) procedure is available only in particular circumstances. The 510(k) clearance procedure is available only if a manufacturer can establish thatits device is “substantially equivalent” in intended use and in safety and effectiveness to a “predicate device,” which is a legally marketed device with 510(k)clearance in class I or II or preamendment status based upon products commercially distributed on or before May 28, 1976. After a device receives 510(k)clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires anew 510(k) clearance. The 510(k) clearance procedure including questions and responses may take up to 12 months. In some cases, supporting clinical datamay be required. The FDA may determine that a new or modified device is not substantially equivalent to a predicate device or may require that additionalinformation, including clinical data, be submitted before a determination is made, either of which could significantly delay the introduction of new ormodified device products. If a device cannot demonstrate substantial equivalence, it may be subject to either a de novo submission or a PMA.The PMA application procedure is more comprehensive than the 510(k) procedure and typically takes more time to complete. The PMA application mustbe supported by scientific evidence providing pre-clinical and clinical data relating to the safety and efficacy of the device and must include otherinformation about the device and its components, design, manufacturing and labeling. The FDA will approve a PMA application only if a reasonableassurance that the device is safe and effective for its intended use can be provided. As part of the PMA application review, the FDA will inspect themanufacturer’s facilities for compliance with its Quality System Regulation, or QSR. As part of the PMA approval the FDA may place restrictions on thedevice, such as requiring additional patient follow-up for an indefinite period of time. If the FDA’s evaluation of the PMA application or the manufacturingfacility is not favorable, the FDA may deny approval of the PMA application or issue a “not approvable” letter. The FDA may also require additional clinicaltrials, which can delay the PMA approval process by several years. After the PMA is approved, if significant changes are made to a device, its manufacturingor labeling, a PMA supplement containing additional information must be filed for prior FDA approval.Historically, our products have been introduced into the market using the 510(k) procedure.The process of FDA submissions requires extensive and expensive validations and testing. The financial outlay for this is large and requires a significantamount of time. Recent changes in both regulations and FDA perspectives have increased both time and testing requirements, which have caused significantdelays and increased costs for approvals. The parameters for increased testing have and will continue to cause severe delays. The increased focus by the FDAon such issues as chemical identification of all colorants, non-acceptance of certain colorants (certain forms of carbon black) and other concerns, continue tocause problems and delays. In addition, changes to existing products call into question previously approved devices and result in additional costs for testingand material analysis.The devices manufactured by us also are subject to the QSR, which imposes elaborate testing, control, documentation and other quality assuranceprocedures. Every phase of production, including raw materials, components and subassembly, manufacturing, testing, quality control, labeling, tracing ofconsignees after distribution and follow-up and reporting of complaint information is governed by the FDA’s QSR. Device manufacturers are required toregister their facilities and list their products with the FDA and certain state agencies. The FDA periodically inspects manufacturing facilities and, if there arealleged violations, the operator of a facility must correct them or satisfactorily demonstrate the absence of the violations or face regulatory action. Penaltiesfor failure to maintain compliance to the QSR include warning letters and potentially consent decrees. Failure to maintain the QSR appropriately could resultin the development of further warning letters. In addition, non-compliance with applicable FDA requirements can result in, among other things, fines,injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure of the FDA to grant marketing approvals,withdrawal of marketing approvals, a recommendation by the FDA to disallow us to enter into government contracts, and criminal prosecutions. The FDAalso has the authority to request repair, replacement or refund of the cost of any device manufactured or distributed by us.10Other U.S. Regulatory BodiesWe and our products are also subject to a variety of state and local laws in those jurisdictions where our products are, or will be, marketed, and federal,state and local laws relating to matters such as safe working conditions, manufacturing practices, environmental protection, fire hazard control and disposalof hazardous or potentially hazardous substances. In addition, we are subject to various federal and state laws governing our relationships with the physiciansand others who purchase or make referrals for our products. For instance, federal law prohibits payments of any form that are intended to induce a referral forany item payable under Medicare, Medicaid or any other federal healthcare program. Many states have similar laws. There can be no assurance that we willnot be required to incur significant costs to comply with such laws and regulations now or in the future, or that such laws or regulations will not have amaterial adverse effect upon our ability to do business.International RegulationInternationally, all of our current products are considered medical devices under applicable regulatory regimes, and we anticipate that this will be true forall of our future products. Sales of medical devices are subject to regulatory requirements in many countries. The regulatory review process may vary greatlyfrom country to country. For example, the European Union has a dedicated set of regulations regarding medical devices, specifically regulating their design,manufacturing, clinical trials, labeling and adverse event reporting. Devices that comply with those requirements are entitled to bear a ConformitéEuropéenne, or CE Mark, indicating that the device conforms to the essential requirements of the applicable directives and can be commercially distributedin countries that are members of the European Union. Similar regulations are in place for Canada, Japan, China and most other countries.In some cases, we rely on our international distributors to obtain regulatory approvals, complete product registrations, comply with clinical trialrequirements and complete those steps that are customarily taken in the applicable jurisdictions.International sales of medical devices manufactured in the United States that are not approved or cleared by the FDA for use in the United States, or arebanned or deviate from lawful performance standards, are subject to FDA export requirements. Before exporting such products to a foreign country, we mustfirst comply with the FDA’s regulatory procedures for exporting unapproved devices.The process of obtaining approval to distribute medical products is costly and time-consuming in virtually all the major markets where we sell medicaldevices. We cannot assure that any new medical devices we develop will be approved in a timely or cost-effective manner or approved at all. There can be noassurance that new laws or regulations regarding the release or sale of medical devices will not delay or prevent sale of our current or future products.THIRD-PARTY REIMBURSEMENT AND ANTI-FRAUD AND CORRUPT PRACTICES REGULATIONUnited StatesThe delivery of our devices is subject to regulation by the Department of Health and Human Services (HHS) and comparable state and non-U.S. agenciesresponsible for reimbursement and regulation of health care items and services. U.S. laws and regulations are imposed primarily in connection with theMedicare and Medicaid programs, as well as the government’s interest in regulating the quality and cost of health care. Foreign governments also imposeregulations in connection with their health care reimbursement programs and the delivery of health care items and services.U.S. federal health care laws apply when we or customers submit claims for items or services that are reimbursed under Medicare, Medicaid, or otherfederally-funded health care programs. The principal U.S. federal laws include: (1) the Anti-kickback Statute which prohibits offers to pay or receiveremuneration of any kind for the purpose of including or rewarding referrals of items or services reimbursable by a federal health care program; (2) the FalseClaims Act which prohibits the submission of false or otherwise improper claims for payment to a federally-funded health care program, including claimsresulting from a violation of the Anti-kickback Statute; (3) the Stark law which prohibits physicians from referring Medicare or Medicaid patients to aprovider that bills these programs for the provision of certain designated health services if the physician (or a member of the physician’s immediate family)has a financial relationship with that provider; and (4) health care fraud statutes that prohibit false statements and improper claims to any third-party payer.There are often similar state false claims, anti-kickback, and anti-self-referral and insurance laws that apply to state-funded Medicaid and other health careprograms and private third-party payers. In addition, the U.S. Foreign Corrupt Practices Act (FCPA) can be used to prosecute companies in the U.S. forarrangements with physicians or other parties outside the U.S. if the physician or party is a government official of another country and the arrangementviolates the law of that country.11InternationalOur success in international markets will depend largely upon the availability of reimbursement from the third-party payors through which healthcareproviders are paid in those markets. Reimbursement and healthcare payment systems vary significantly by country. The main types of healthcare paymentsystems are government sponsored healthcare and private insurance. Reimbursement approval must be obtained individually in each country in which ourproducts are marketed. Outside the U.S., we generally rely on our distributors to obtain reimbursement approval in the countries in which they will sell ourproducts. There can be no assurance that reimbursement approvals will be received.INSURANCEOur product liability insurance coverage is limited to a maximum of $10 million per product liability claim and an annual aggregate policy limit of $10million, subject to a self-insured retention of $500,000 per occurrence and $2 million in the aggregate. The policy covers, subject to policy conditions andexclusions, claims of bodily injury and property damage from any product sold or manufactured by us.There is no assurance that this level of coverage is adequate. We may not be able to sustain or maintain this level of coverage and cannot assure you thatadequate insurance coverage will continue to be available on commercially reasonable terms, or at all. A successful product liability claim or other claimwith respect to uninsured or underinsured liabilities could have a material adverse effect on our business.ENVIRONMENTAL, HEALTH AND SAFETYWe are subject to federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluentdischarge, handling and disposal of certain hazardous and potentially hazardous substances used in connection with our operations. Our operations are alsosubject to laws and regulations related to occupational health and safety. We maintain safety, training and maintenance programs as part of our ongoingefforts to ensure compliance with applicable laws and regulations.Although we believe that we have complied with environmental, health and safety laws and regulations in all material respects and, to date, have notbeen required to take any action to correct any noncompliance, there can be no assurance that we will not be required to incur significant costs to complywith environmental regulations in the future.EMPLOYEESAs of May 31, 2018, we had approximately 1,145 full time employees. None of our employees are represented by a labor union and we have neverexperienced a work stoppage.Executive Officers of the CompanyThe following table sets forth certain information with respect to our executive officers. Name Age PositionJames C. Clemmer 54 President and Chief Executive OfficerMichael C. Greiner 45 Executive Vice President and Chief Financial OfficerStephen A. Trowbridge 44 Senior Vice President and General CounselDavid D. Helsel 54 Senior Vice President Global OperationsWarren G. Nighan 49 Senior Vice President Quality & Regulatory AffairsHeather J. Daniels-Cariveau 44 Senior Vice President Human ResourcesBenjamin H. Davis 53 Senior Vice President Business DevelopmentChad T. Campbell 47 Senior Vice President and General Manager, Vascular AccessBrent J. Boucher 51 Senior Vice President and General Manager, Oncology/SurgeryRobert A. Simpson 46 Senior Vice President and General Manager, Peripheral VascularKim L. Seabury 51 Senior Vice President, Information TechnologyJames C. Clemmer became our President and Chief Executive Officer in April 2016. Prior to joining AngioDynamics, Mr. Clemmer served as President ofthe $1.8 billion medical supplies segment at Covidien plc. where he directed the strategic12and day-to-day operations for global business divisions that collectively manufactured 23 different product categories. In addition, he managed globalmanufacturing, research and development, operational excellence, business development and all other functions associated with the medical suppliesbusiness. Prior to his role at Covidien, Mr. Clemmer served as Group President at Kendall Healthcare, where he managed the U.S. business across fivedivisions and built the strategic plan for the medical supplies segment before it was spun off from Tyco. Mr. Clemmer began his career at Sage Products, Inc.Mr. Clemmer currently serves on the Board of Directors for AngioDynamics and Lantheus Medical Imaging. Mr. Clemmer is a graduate of the MassachusettsCollege of Liberal Arts, where he served as interim president from August 2015 until March 1, 2016.Michael C. Greiner joined AngioDynamics as the Executive Vice President and Chief Financial Officer in August 2016. Mr. Greiner most recently servedas the Chief Financial Officer at Extreme Reach. Prior to Extreme Reach, Mr. Greiner served as Senior Vice President Corporate Finance and ChiefAccounting Officer at Cimpress N.V. (Vistaprint N.V.), Global Controller for GE’s Water and Processing Technologies division and in leadership roles atBausch & Lomb and Wyeth. Mr. Greiner is also an advisor for Mirah, Inc., a measurement-based behavioral health Company, and serves as the President ofthe Foundation for Faces of Children. Mr. Greiner received a Bachelor and Master of Science in Accounting from Fairleigh Dickinson University and Masterof Business Administration from the Columbia Business School. Mr. Greiner is also a Certified Public Accountant (inactive).Stephen A. Trowbridge joined AngioDynamics as corporate counsel in June 2008, becoming our Vice President and General Counsel in June 2010 andSenior Vice President and General Counsel in August 2013. Mr. Trowbridge manages AngioDynamics’ legal matters, including corporate governance,mergers and acquisitions, finance, securities regulation, litigation, regulatory matters, intellectual property and compliance. Mr. Trowbridge also oversees theCompany’s clinical affairs, medical affairs and healthcare economics departments. Prior to AngioDynamics, Mr. Trowbridge served as Corporate Counsel atPhilips Healthcare and Intermagnetics General Corporation. Mr. Trowbridge began his career with Cadwalader, Wickersham & Taft LLP in the firm’s Mergersand Acquisitions and Securities Group. Mr. Trowbridge received a Bachelor of Science in Science and Technology Studies from Rensselaer PolytechnicInstitute, a Juris Doctor from the University of Pennsylvania Law School, and a Master of Business Administration from Duke University’s Fuqua School ofBusiness.David D. Helsel currently services as Senior Vice President of Global Operations and R&D and has been with AngioDynamics since December 2017.Prior to joining AngioDynamics he was Senior Vice President, Global Supply Chain, at Hill-Rom Holdings for almost three years. Before that, Mr. Helselworked at Haemontiecs for three years where he served as Executive Vice President for Global Manufacturing and also spent almost nineteen years in variouspositions with increasing responsibility at Covidien, including Vice President of Operations for the Surgical Solutions Division and Medical SuppliesDivision. An expert in Lean and Six Sigma, Mr. Helsel also served as Global Director of Operational Excellence, supporting sixty-three manufacturingfacilities. Mr. Helsel holds a Bachelor of Science in Mechanical Engineering from LeTourneau University.Warren G. Nighan joined AngioDynamics as the Senior Vice President of Quality and Regulatory Affairs in April 2017. Before joining AngioDynamics,Mr. Nighan was as a quality and regulatory consultant to clients in FDA-regulated industries, specializing in execution and management of quality systemsimplementation and remediation. Previously, Mr. Nighan served as the Executive Vice President of Global Clinical, Quality Affairs and Regulatory Affairs atHaemonetics Corporation, Vice President of Quality/Regulatory/Clinical/Technical Services at St. Jude Medical’s Atrial Fibrillation Division, and CorporateVice President of Quality/Compliance at Tyco Healthcare/Covidien (Medtronic). Mr. Nighan earned a Bachelor and Master of Science in Nursing fromNortheastern University’s Bouvé College of Health Sciences.Heather J. Daniels Cariveau joined AngioDynamics in October 2016 as the Senior Vice President of Human Resources. Prior to joining AngioDynamics,Ms. Daniels Cariveau served as Human Resources Global Vice President at Zimmer Biomet, leading tactical and strategic HR initiatives for the Spine, Dental,Market Access/Healthcare Economics and Craniomaxillofacial/Thoracic businesses. Before Zimmer Biomet, Ms. Daniels Cariveau served in senior HR rolesat GE, Datacard, Honeywell International, Inc. and Cigna Corporation. Ms. Daniels Cariveau holds a Bachelor of Arts in Broadcast Journalism and Spanishfrom the University of St. Thomas in St. Paul, Minn. and a Master of Arts in Human Resources and Industrial Relations from the University of MinnesotaCarlson School of Management in Minneapolis, Minn.Benjamin H. Davis joined AngioDynamics as Senior Vice President of Business Development in March 2015. Prior to joining AngioDynamics, Mr. Davismost recently was the Vice President of Business Integration at C.R. Bard, Inc. where he also served as the Divisional Head of Business Development from2004-2013. Before joining C.R. Bard, Inc., Mr. Davis held the position of Chief Financial Officer and Treasurer at Axya Medical Inc. He holds a Bachelor ofScience in Business Administration from Bryant College and Master in Business Administration in Finance from Bentley University Graduate School ofBusiness.Chad T. Campbell joined AngioDynamics in May 2016 as the Senior Vice President and General Manager for the Vascular Access Global Business Unit.In his role, Mr. Campbell oversees research and development and global commercialization of13the Global Business Unit’s portfolio. Mr. Campbell joined AngioDynamics from Medtronic where he served as the Vice President of Marketing for the PatientCare and Safety business after serving as the Vice President of Marketing for the SharpSafety business at Covidien (Medtronic). During his tenure atCovidien, Mr. Campbell also held roles including Director of Marketing, Area Vice President of Sales, Region Manager, Product Manager and AccountManager. Mr. Campbell received a Bachelor of Arts from the University of Kentucky.Brent J. Boucher is our Senior Vice President and General Manager of our Oncology business. Prior to joining AngioDynamics in November 2017, Mr.Boucher served as Executive in Residence for PDI's Infection Prevention business. Prior to that, he spent 20 years at Covidien where he served as GeneralManager for several global businesses, including Lung Solutions, Surgical Solutions and Respiratory Care. Mr. Boucher is a graduate of North Dakota StateUniversity.Robert A. Simpson joined AngioDynamics in February 2017 as the Senior Vice President and General Manager for the Peripheral Vascular GlobalBusiness Unit. In his role, Mr. Simpson oversees research and development and global commercialization of the Global Business Unit’s portfolio. Prior toAngioDynamics, Mr. Simpson served as the Vice President and General Manager of the Patient Care Global Business at Medtronic. He was responsible forleading the business strategy and operations while ensuring global execution. Prior to his role within the Patient Care business, Mr. Simpson led strategy andbusiness development for Medtronic’s Patient Monitoring & Recovery business. Mr. Simpson also held various leadership roles in Sales and Marketingduring his time at Covidien (Medtronic) and Alcon (Novartis). Mr. Simpson received a Bachelor of Science in Management Science - Finance from the StateUniversity of New York at Geneseo and has completed a comprehensive, executive leadership development program at Babson College.Kim L. Seabury became the head of the AngioDynamics IT group in September, 2011. Prior to joining AngioDynamics, Mrs. Seabury served as VicePresident of Emerging Technologies and Product Development for Pitney Bowes Software, managing global software development teams for both coreproducts and emerging SaaS solutions. Prior to her role at Pitney Bowes, Mrs. Seabury held several key leadership positions at MapInfo Corporation,including Global Managing Director of IT, IT Business Applications Director and Director of Web Operations. Mrs. Seabury is certified in PSI, OperationalExcellence, ITIL and is a Six-Sigma Green Belt. In addition, Mrs. Seabury has extensive experience in project management and has participated in a varietyof leadership development programs. Mrs. Seabury holds a Bachelor of Science degree in Applied Arts and Science from Rochester Institute of Technology.AVAILABLE INFORMATIONOur corporate headquarters is located at 14 Plaza Drive, Latham, New York 12110. Our phone number is (518) 795-1400. Our website iswww.angiodynamics.com.We make available, free-of-charge through our website, our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-Kand amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonablypracticable after we electronically file or furnish such materials to the Securities and Exchange Commission, or SEC. In addition, our website includes, amongother things, charters of the various committees of our Board of Directors and our code of business conduct and ethics applicable to all employees, officersand directors. Any stockholder also may obtain copies of these documents, free of charge, by sending a request in writing to our investor relationsdepartment: AngioDynamics, 14 Plaza Drive, Latham, N.Y. 12210, Attention: Saleem Cheeks. Information on our website or connected to our website is notincorporated by reference into this Annual Report on Form 10-K.14Item 1A.Risk Factors.In addition to the other information contained in this Annual Report on Form 10-K, the following risk factors should be considered carefully inevaluating the Company's business. Our financial and operating results are subject to a number of factors, many of which are not within our control. Thesefactors include those set forth below. Our business, financial condition or results of operations could be materially and adversely affected by any of theserisks. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business, financial condition or results ofoperations.RISKS RELATED TO OUR BUSINESS Consolidation in the healthcare industry could have an adverse effect on our revenues and results of operations.Many healthcare industry companies, including medical device companies, are consolidating to create new companies with greater market power. Asthe healthcare industry consolidates, competition to provide goods and services to industry participants will become more intense. These industryparticipants may try to use their market power to negotiate price concessions or reductions for medical devices that incorporate components produced by us.If we are forced to reduce our prices because of consolidation in the healthcare industry, our revenues would decrease and our consolidated earnings,financial condition, or cash flow would suffer.We face intense competition in the medical device industry. We may be unable to compete effectively with respect to technological innovation and pricewhich may have an adverse effect on our revenues, financial condition or results of operations.The markets for our products are highly competitive, and we expect competition to continue to intensify. We may not be able to compete effectively,and we may lose market share to our competitors. Our primary device competitors include: Boston Scientific Corporation; Cook Medical; MedicalComponents, Inc. (Medcomp); TeleFlex Medical; BD Medical Technology; Smiths Medical, a subsidiary of Smiths Group plc; Medtronic; Merit Medical;Terumo Medical Corporation; Johnson and Johnson and Total Vein Systems. Many of our competitors have substantially greater:•financial and other resources to devote to product acquisitions, research and development, marketing and manufacturing;•variety of products;•technical capabilities;•history of developing and introducing new products;•patent portfolios that may present an obstacle to our conduct of business;•name recognition; and•distribution networks and in-house sales forces.Our competitors may succeed in developing technologies and products earlier, in obtaining patent protection or regulatory clearance earlier, or incommercializing new products or technologies more rapidly than us. Our competitors may also develop products and technologies that are superior to thosewe are developing or that otherwise could render our products obsolete or noncompetitive. In addition, we may face competition from providers of othermedical therapies, such as pharmaceutical companies, that may offer non-surgical therapies for conditions that are currently, or in the future, may be treatedusing our products. Our products are generally sold at higher prices than those of our competitors. However, in the current environment of managed care,which is characterized by economically motivated buyers, consolidation among healthcare providers, increased competition and declining reimbursementrates, we are increasingly being required to compete on the basis of price. If we are not able to compete effectively, our market share and revenues maydecline.We face intense competition from other companies, and our inability to continue to effectively develop, acquire and/or market new products andtechnologies could have a material adverse effect on our business, results of operations and/or financial condition.The medical device business is intensely competitive and is characterized by rapid technological change, frequent product introductions and evolvingcustomer requirements. Our customers consider many factors when choosing among products, including features and reliability, quality, technology, clinicalor economic outcomes, availability, price and services provided by the manufacturer. We face competition globally from a wide range of companies, some ofwhich may have greater resources than us, which may enable them to adapt faster than us to customer needs or changes in customer requirements. Productintroductions, alternative products or enhancements by competitors that provide better features, clinical outcomes or economic15value and/or offer lower pricing may make our products or proposed products obsolete or less competitive. In addition, the trend of consolidation in themedical device industry and among our customers could result in greater competition and pricing pressures.As a result, we engage in product development and improvement programs to maintain and improve our competitive position. These development andimprovement programs involve significant investment in research and development, clinical trials and regulatory approvals and may require more time thananticipated to bring such products to market. We may not, however, be successful in enhancing existing products or developing new products ortechnologies that will achieve regulatory approval, be developed or manufactured in a cost effective manner, obtain appropriate intellectual propertyprotection or receive market acceptance and we may be unable to recover all or a meaningful part of our investment in such products or technologies.Additionally, there can be no assurance that the size of the markets in which we compete will increase above existing levels or not decline, that we will beable to maintain, gain or regain market share or that we can compete effectively on the basis of price or that the number of procedures in which our productsare used will increase above existing levels or not decline.As part of our business strategy, we also pursue the acquisition of complementary businesses, technologies and products. We may not be able toidentify appropriate acquisition candidates, consummate transactions or obtain agreements with favorable terms. Further, once a business is acquired, anyinability to successfully integrate the business, decreases in customer loyalty or product orders, failure to retain and develop its workforce, failure to establishand maintain appropriate controls or unknown or contingent liabilities could adversely affect our ability to realize the anticipated benefits of anyacquisition. The integration of an acquired business, whether or not successful, requires significant efforts which may result in additional expenses and divertthe attention of our management and technical personnel from other projects. These transactions are inherently risky, and there can be no assurance that anypast or future transaction will be successful. If we fail to develop and successfully manufacture and launch new products, generate satisfactory clinical results,provide sufficient economic value, enhance existing products, or identify, acquire and integrate complementary businesses, technologies and products or ifwe experience a decrease in market size or market share or declines in average selling price or procedural volumes, or otherwise fail to compete effectively,our business, results of operations and/or financial condition could be adversely affected.If we do not maintain our reputation with interventional physicians, interventional and surgical oncologists and critical care nurses our growth will belimited and our business could be harmed.Physicians typically influence the medical device purchasing decisions of the hospitals and other healthcare institutions in which they practice.Consequently, our reputation with interventional physicians, interventional and surgical oncologists and critical care nursers is crucial to our continuedgrowth. We believe that we have built a positive reputation based on the quality of our products, our physician-driven product development efforts, ourmarketing and training efforts and our presence at medical society meetings. Any actual or perceived diminution in the quality of our products, or our failureor inability to maintain these other efforts, could damage our reputation with interventional physicians and cause our growth to be limited and our businessto be harmed.If we fail to develop or market new products and enhance existing products, we could lose market share to our competitors and our results of operationscould suffer.The market for interventional devices is characterized by rapid technological change, new product introductions, technological improvements, changesin physician requirements and evolving industry standards. To be successful, we must continue to develop and commercialize new products and to enhanceversions of our existing products. Our products are technologically complex and require significant research, planning, design, development and testingbefore they may be marketed. This process generally takes at least 12 to 18 months from initial concept and may take up to several years. In addition, productlife cycles are relatively short because medical device manufacturers continually develop smaller, more effective and less expensive versions of existingdevices in response to physician demand.Our success in developing and commercializing new and enhanced versions of our products is affected by our ability to:•recruit engineers;•timely and accurately identify new market trends;•accurately assess customer needs;•minimize the time and costs required to obtain regulatory clearance or approval;•adopt competitive pricing;•timely manufacture and deliver products;•accurately predict and control costs associated with the development, manufacturing and support of our products; and16•anticipate and compete effectively with our competitors’ efforts.Market acceptance of our products depends in part on our ability to demonstrate that our products are cost-effective and easier to use, as well as offertechnological advantages. Additionally, we may experience design, manufacturing, marketing or other difficulties that could delay or prevent ourdevelopment, introduction or marketing of new products or new versions of our existing products. As a result of such difficulties and delays, our developmentexpenses may increase and, as a consequence, our results of operations could suffer.Development and sales of our products are dependent on a number of factors beyond our control, and our inability to make and complete research anddevelopment investments, enhance the product development process and be innovative to solve customer needs with respect to the respective products mayadversely affect our business, financial condition and results of operations.A significant aspect of our growth strategy is the continued market development of products including NanoKnife, AngioVac, Venacure EVLT andBioFlo products.There can be no guarantee that we will be able to develop and manufacture additional next generation or updated products on commercially favorableterms, or at all. NanoKnife and AngioVac are developing technologies and the inability of either of them to achieve clinical acceptance, as well as ourinability to generate meaningful clinical data to convince providers of the clinical and economic benefits of our BioFlo platform, could severely limit ourability to drive revenue growth.We currently have FDA 510(k) clearance to market NanoKnife products for soft tissue ablation. If we are not able to secure FDA approval to conductinvestigational device exemption (IDE) trials or marketing approval for additional or more specific indications, through 510(k) clearance, pre-marketapproval or otherwise, our ability to market our NanoKnife products will be restricted which may have an adverse effect on our business, financial conditionand results of operations.Undetected defects may increase our costs and impair the market acceptance of our products.Our products have occasionally contained, and may in the future contain, undetected defects. When these problems occur, we must divert the attentionof our engineering personnel to address them. There is no assurance that we will not incur warranty or repair costs, be subject to liability claims for damagesrelated to product defects, or experience manufacturing, shipping or other delays or interruptions as a result of these defects in the future. Our insurancepolicies may not provide sufficient protection should a claim be asserted. In addition, the occurrence of defects may result in significant customer relationsproblems and injury to our reputation, and may impair market acceptance of our products.We, our competitors or other third parties, may engage in clinical trials with respect to our products. The results of these trials may be unfavorable, orperceived as unfavorable by the market, and could have a material adverse effect on our business, financial condition or results of operations.Our products may be the subject of clinical trials conducted by us, our competitors or third parties for the purposes of obtaining regulatory clearances orto gather market data. Unfavorable or inconsistent clinical data from existing or future clinical trials conducted by us, by our competitors or by third parties,or the FDA's or the market's perception of this clinical data, may adversely impact our ability to obtain product approvals, our position in, and share of, themarkets in which we participate and our business, financial condition, results of operations or future prospects.If we are unable to convince customers that our products can improve the cost structure of their business, our revenue growth and profitability may bematerially adversely impacted.Worldwide initiatives to contain healthcare costs have led government and the private sector to enact cost containment efforts as a means ofmanaging the growth of health care utilization. Common techniques include policies on price regulation, competitive pricing, bidding and tender mechanics,coverage and payment, comparative effectiveness of therapies, technology assessments, and managed-care arrangements. These changes are causing themarketplace to put increased emphasis on the delivery of more cost-effective medical devices and therapies. Government programs, including Medicare andMedicaid, private health care insurance, and managed-care plans have attempted to control costs by limiting the amount of reimbursement they will pay forparticular procedures or treatments, tying reimbursement to outcomes, shifting to population health management, and other mechanisms designed toconstrain utilization and contain costs. Simultaneously, hospitals are redefining their role in health care delivery as many assume much more risk and controlof the total cost of patient care. To successfully make this transformation health systems are consolidating, purchasing or partnering with physicians, post-acute care providers, while also narrowing networks thus allowing greater control over outcomes. Today, many systems are17becoming ‘mini’ payer/provider organizations. These newly redesigned health systems are creating mechanisms such as value analysis and centralizedpurchasing functions that set pricing and in some cases limit the number of vendors that can participate in the purchasing program. Hospitals are alsoaligning interests with physicians through employment and other arrangements, such as gainsharing, where a hospital agrees with physicians to share anyrealized cost savings resulting from the physicians’ collective change in practice patterns such as standardization of devices where medically appropriate.This has created an increasing level of price sensitivity among customers for our products. Some third-party payers must also approve coverage and setreimbursement levels for new or innovative devices or therapies before they will reimburse health care providers who use the medical devices or therapies.Even though a new medical device may have been cleared for commercial distribution, we may find limited demand for the device until coverage andsufficient reimbursement levels have been obtained from governmental and private third-party payers. In addition, some private third-party payers requirethat certain procedures or that the use of certain products be authorized in advance as a condition of reimbursement. International examples of costcontainment initiatives and health care reforms advancing clinical outcomes as the key to market access are emerging in France, Germany, the Netherlandsand the UK. This new criteria can severely restrict coverage, reduce reimbursement and delay access to key markets with requirements for incremental clinicalbenefit and coverage with evidence development.Cost-containment efforts of group purchasing organizations could adversely affect our selling prices, financial position and results of operations.Many of our existing and potential customers have become members of group purchasing organizations, or GPOs, and integrated delivery network, orIDNs, in an effort to reduce costs. GPOs and IDNs negotiate pricing arrangements with healthcare product manufacturers and distributors and offer thenegotiated prices to affiliated hospitals and other members. GPOs and IDNs typically award contracts on a category-by-category basis through a competitivebidding process. Bids are generally solicited from multiple manufacturers with the intention of driving down pricing. Due to the highly competitive nature ofthe GPO and IDN contracting processes, we may not be able to obtain market prices for our products or obtain or maintain contract positions with major GPOsand IDNs, which could adversely impact our profitability. Also, sales through a GPO or IDN can be significant to our business and if we are unable to retaincontracts with our customers, or acquire additional contracts, our financial results may be negatively impacted.We are dependent on single and limited source suppliers which subjects our business and results of operations to risks of supplier business interruptions.We currently purchase significant amounts of several key products and product components from single and limited source suppliers and anticipatethat we will do so for future products as well. Any delays in delivery of or shortages in those or other products and components could interrupt and delaymanufacturing of our products and result in the cancellation of orders for our products. Any or all of these suppliers could discontinue the manufacture orsupply of these products and components at any time. Due to FDA and other business considerations, we may not be able to identify and integrate alternativesources of supply in a timely fashion or at all. Any transition to alternate suppliers may result in production delays and increased costs and may limit ourability to deliver products to our customers. Furthermore, if we are unable to identify alternative sources of supply, we would have to modify our products touse substitute components, which may cause delays in shipments, increased design and manufacturing costs and increased prices for our products.In addition, we purchase certain products as a distributor for the manufacturer of those products, including Asclera. Operational, quality or regulatoryissues of the manufacturers of the products we distribute could constrain or interrupt the availability of those products or services. Any constraint orinterruption in the supply of finished products that we distribute could have a material adverse effect on our ability to sell products, our financial conditionand our results of operations.We are heavily dependent on third-party distributors to generate a substantial portion of international revenues and are at the risk of these distributorsalso selling for our competitors along with being financially viable to be able to effectively distribute our products and make timely payment.Outside of North America we rely heavily on third party distributors, either on a country-by-country basis or on a multi-country, regional basis, tomarket, sell and distribute our products. International distributors accounted for approximately 81% of international revenues for the year ended May 31,2018. In certain circumstances, distributors may also sell competing products to our own or products for competing diagnostic modalities and may haveincentives to shift sales towards those competing products. As a result, we cannot assure you that our international distributors will increase or maintain ourcurrent levels of unit sales or increase or maintain our current unit pricing, which, in turn, could have a material adverse effect on our business, results ofoperations, financial condition and cash flows. In addition, there is a risk that our distributors will not be financially viable due to current economic and/orregulatory events in their respective countries.18Failure to secure adequate reimbursement for our products could materially impair our ability to grow revenue and drive profitability.Our products are used in medical procedures generally covered by government or private health plans.In general, a third-party payor only covers a medical product or procedure when the plan administrator is satisfied that the product or procedureimproves health outcomes, including quality of life or functional ability, in a safe and cost-effective manner. Even if a device has received clearance orapproval for marketing by the FDA, there is no assurance that third-party payors will cover the cost of the device and related procedures.In many instances, third-party payors use price schedules that do not vary to reflect the cost of the products and equipment used in performing thoseprocedures. In other instances, payment or reimbursement is separately available for the products and equipment used, in addition to payment orreimbursement for the procedure itself. Even if coverage is available, third-party payors may place restrictions on the circumstances where they providecoverage or may offer reimbursement that is not sufficient to cover the cost of our products.Third-party payors who cover the cost of medical products or equipment, in addition to allowing a general charge for the procedure, often maintain listsof exclusive suppliers or approved lists of products deemed to be cost-effective. Authorization from those third-party payors is required prior to usingproducts that are not on these lists as a condition of reimbursement. If our products are not on the approved lists, healthcare providers must determine if theadditional cost and effort required in obtaining prior authorization, and the uncertainty of actually obtaining coverage, is justified by any perceived clinicalbenefits from using our products.Finally, the advent of contracted fixed rates per procedure has made it difficult to receive reimbursement for disposable products, even if the use ofthese products improves clinical outcomes. In addition, many third-party payors are moving to managed care systems in which providers contract to providecomprehensive healthcare for a fixed cost per person. Managed care providers often attempt to control the cost of healthcare by authorizing fewer electivesurgical procedures. Under current prospective payment systems, such as the diagnosis related group system and the hospital out-patient prospective paymentsystem, both of which are used by Medicare and in many managed care systems used by private third-party payors, the cost of our products will beincorporated into the overall cost of a procedure and not be separately reimbursed. As a result, we cannot be certain that hospital administrators andphysicians will purchase our products, despite the clinical benefits and opportunity for cost savings that we believe can be derived from their use. If hospitalsand physicians cannot obtain adequate reimbursement for our products or the procedures in which they are used, our business, financial condition, results ofoperations, and cash flows could suffer a material adverse impact.Our success in international markets will depend largely upon the availability of reimbursement from the third-party payors through which healthcareproviders are paid in those markets. Reimbursement and healthcare payment systems vary significantly by country. The main types of healthcare paymentsystems are government sponsored healthcare and private insurance. Reimbursement approval must be obtained individually in each country in which ourproducts are marketed. Outside the United States, we generally rely on our distributors to obtain reimbursement approval in the countries in which they willsell our products. There can be no assurance that reimbursement approvals will be received. The failure to secure reimbursement approvals in internationalmarkets could materially impact our financial position and results of operations.If a product liability claim is brought against us or our product liability insurance coverage is inadequate, our business could be harmed.The design, manufacture and marketing of the types of medical devices we sell entail an inherent risk of product liability. Our products are used byphysicians to treat seriously ill patients. We are periodically subject to product liability claims, and patients or customers may in the future bring claimsagainst us in a number of circumstances and for a number of reasons, including if our products were misused, if a component of our product fails, if ourmanufacture or design was flawed, if the product produced unsatisfactory results or if the instructions for use and operating manuals and disclosure of productrelated risks for our products were found to be inadequate. In addition, individuals or groups seeking to represent a class may file suit against us. Theoutcome of litigation, particularly class action lawsuits, is difficult to assess or quantify. Plaintiffs in these types of lawsuits often seek recovery of very largeor indeterminate amounts, including not only actual damages, but also punitive damages. The magnitude of the potential losses relating to these lawsuitsmay remain unknown for substantial periods of time.We carry a product liability policy with a limit of $10,000,000 per product liability claim and an aggregate policy limit of $10,000,000, subject to aself-insured retention of $500,000 per occurrence and $2,000,000 in the aggregate. We believe, based on claims made against us in the past, our existingproduct liability insurance coverage is reasonably adequate to protect us19from any liabilities we might incur. However, there is no assurance that this coverage will be sufficient to satisfy any claim made against us. In addition, wemay not be able to continue to maintain adequate coverage at a reasonable cost and on reasonable terms, if at all. Any product liability claim brought againstus, with or without merit, could increase our product liability insurance rates or prevent us from securing any coverage in the future. Additionally, if one ormore product liability claims is brought against us for uninsured liabilities or is in excess of our insurance coverage, our financial condition and results ofoperations could be negatively impacted. Further, such claims may require us to recall some of our products, which could result in significant costs to us andcould divert management’s attention from our business.We may be exposed to risks associated with acquisitions, including integration risks and risks associated with methods of financing. Accordingly,completed acquisitions may not enhance our financial position or results of operations or create value for our shareholders as they are based onprojections and assumptions which are uncertain and subject to change.Part of our growth strategy is to acquire businesses and technologies that are complementary to ours. There is no assurance that acquisitionopportunities will be available on acceptable terms, or at all, or that we will be able to obtain necessary financing or regulatory approvals. Any acquisitionsthat we do undertake would be accompanied by the risks commonly encountered in acquisitions, including the:•potential disruption of our business while we evaluate opportunities, complete acquisitions and develop and implement new business strategiesto take advantage of these opportunities;•inability of our management to maximize our financial and strategic position by incorporating an acquired technology or business into ourexisting offerings;•our inability to achieve the cost savings and operating synergies anticipated in the acquisition, which would prevent us from achieving thepositive earnings gains expected as a result of the acquisition;•diversion of management attention from ongoing business concerns to integration matters;•difficulty of maintaining uniform standards, controls, procedures and policies;•challenges in demonstrating to our customers that the acquisition will not result in adverse changes in customer service standards or businessfocus;•possible cash flow interruption or loss of revenue as a result of change of ownership transition matters;•difficulty of assimilating the operations and personnel of acquired businesses;•potential loss of key employees of acquired businesses, and the impairment of relationships with employees and customers as a result of changesin management; and•uncertainty as to the long-term success of any acquisitions we may make including the impact on contingent liabilities.There is no assurance that any completed acquisition will be accretive to our margins or profits in the short term or in the long term. If we proceed withone or more significant acquisitions in which the consideration consists of cash, a substantial portion of our available cash could be used to consummate theacquisitions. If we consummate one or more acquisitions in which the consideration consists of capital stock, our stockholders could suffer significantdilution of their interest in us. In addition, we could incur or assume significant amounts of indebtedness in connection with acquisitions. Further,acquisitions could also result in significant goodwill and/or amortization charges for acquired businesses or technologies.Failure to attract additional capital which we may require to expand our business could curtail our growth.We may require additional capital to expand our business. If cash generated internally is insufficient to fund capital requirements, we will requireadditional debt or equity financing. In addition, we may require financing to fund any significant acquisitions we may seek to make. Needed financing maynot be available or, if available, may not be available on terms satisfactory to us and may result in significant stockholder dilution. Covenants in our existingfinancing agreements may also restrict our ability to obtain additional debt financing. If we fail to obtain sufficient additional capital in the future, we couldbe forced to curtail our growth strategy by reducing or delaying capital expenditures and acquisitions, selling assets, restructuring our operations orrefinancing our indebtedness.International and national economic and industry conditions constantly change, and could materially and adversely affect our business, financialcondition and results of operations.Our business, financial condition and results of operation are affected by many changing economic, industry and other conditions beyond our control.Actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, inflation andtrade protection measures, may negatively affect consumer preferences, perceptions, spending patterns or demographic trends, any of which could adverselyaffect our business, financial condition or results of operations. Our customers may experience financial difficulties or be unable to borrow money to fundtheir20operations, which may adversely impact their ability or decision to purchase or pay for our products. Disruptions in the credit markets have previouslyresulted, and could again result, in volatility, decreased liquidity, widening of credit spreads, and reduced availability of financing. There can be noassurance that future financing will be available to us on acceptable terms, if at all. An inability to obtain necessary additional financing on acceptable termsmay have an adverse impact on us and on our ability to execute on our business plan.We are subject to a variety of market and financial risks due to our international operations that could adversely affect those operations or ourprofitability and operating results.Although our stock is traded on the NASDAQ Global Select Market, we are a global Company. Operations in countries outside of the U.S., whichaccount for approximately 21% percent of our net sales for the fiscal year ended May 31, 2018, are accompanied by certain financial and other risks thatwould not be faced by a Company operating purely within the U.S. We intend to continue to pursue growth opportunities in sales outside the U.S., especiallyin emerging markets, which could expose us to greater risks associated with international sales and operations. Our profitability and international operationsare, and will continue to be, subject to a number of risks and potential costs, including:•fluctuations in currency exchange rates;•healthcare reform legislation;•multiple non-U.S. regulatory requirement that are subject to change and could restrict our ability to manufacture and sell our products;•local product preferences and product requirements;•longer-term receivables than are typical in the U.S.;•trade protection measures and import or export licensing requirements;•less intellectual property protection in some countries outside the U.S. than exists in the U.S.;•different labor regulations and workforce instability;•political instability;•the potential payment of U.S. income taxes on earnings of certain foreign subsidiaries subject to U.S. taxation upon repatriation;•the expiration and non-renewal of foreign tax rulings;•potential negative consequences from changes in or interpretation of tax laws; and•economic instability and inflation, recession or interest rate fluctuations.There are recent legislative proposals to tax profits of U.S. affiliates which are earned abroad. While it is impossible for us to predict whether these andother proposals will be implemented, or how they will ultimately impact us, they may materially impact our results of operations if, for example, our profitsearned abroad are subject to U.S. income tax, or we are otherwise disallowed deductions as a result of these profits.On June 23, 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the E.U., commonly referred to as “Brexit”. As aresult of the referendum, it is expected that the British government will begin negotiating the terms of the U.K.’s future relationship with the E.U. Although itis unknown what those terms will be, it is possible that there will be greater restrictions on imports and exports between the U.K. and E.U. countries andincreased regulatory complexities. These changes may adversely affect our operations and financial results.Finally, changes in currency exchange rates may reduce the reported value of our revenues outside the U.S, net of expenses, and cash flows. We cannotpredict changes in currency exchange rates, the impact of exchange rate changes, nor the degree to which we will be able to manage the impact of currencyexchange rate changes.Continuing worldwide economic instability, including challenges faced by the Eurozone countries, could adversely affect our revenues, financial conditionor results of operations.Since fiscal year 2008, the global economy has been impacted by the sequential effects of an ongoing global financial crisis. There can be no assurancethat there will not be further deterioration in the global economy. Our customers and vendors may experience financial difficulties or be unable to borrowmoney to fund their operations which may adversely impact their ability to purchase our products or to pay for our products on a timely basis, if at all. Aswith our customers and vendors, these economic conditions make it more difficult for us to accurately forecast and plan our future business activities. Inaddition, trade receivables are in many countries (including, but not limited to, Greece, Ireland, Portugal, and Spain). Repayment of these receivables isdependent upon the financial stability of the economies of those countries.21In light of these global economic fluctuations, we continue to monitor the creditworthiness of customers located outside the U.S. Failure to receivepayment of all or a significant portion of these receivables could adversely affect our results of operations. Further, there are concerns for the overall stabilityand suitability of the Euro as a single currency, given the economic and political challenges facing individual Eurozone countries. Continuing deteriorationin the creditworthiness of the Eurozone countries, the withdrawal of one or more member countries from the EU, or the failure of the Euro as a commonEuropean currency could adversely affect our revenues, financial condition or results of operations.Our business could be harmed if we lose the services of our key personnel.Our business depends upon our ability to attract and retain highly qualified personnel, including managerial, sales and technical personnel. Wecompete for key personnel with other companies, healthcare institutions, academic institutions, government entities and other organizations. We do not havewritten employment agreements with our executive officers, other than the CEO. Our ability to maintain and expand our business may be impaired if we areunable to retain our current key personnel or hire or retain other qualified personnel in the future. In addition, our sales force is highly talented and there ishigh competition in the sales industry which could have an adverse effect on our business if there is significant turnover.RISKS RELATED TO OPERATIONSIf we are unable to manage our growth profitably, our business, financial results and stock price could suffer.Our future financial results will depend in part on our ability to profitably manage our growth. Management will need to maintain existing customersand attract new customers, recruit, retain and effectively manage employees, as well as expand operations and integrate customer support and financialcontrol systems. If integration-related expenses and capital expenditure requirements are greater than anticipated or if we are unable to manage our growthprofitably, our financial results and the market price of our common stock may decline.In recent years we have begun to implement our operational excellence initiatives which include a number of restructuring, realignment and costreduction initiatives. While we have realized some efficiencies from these actions, we may not realize the benefits of these initiatives to the extent weanticipated. Further, such benefits may be realized later than expected, and the ongoing difficulties in implementing these measures may be greater thananticipated, which could cause us to incur additional costs or result in business disruptions. In addition, if these measures are not successful or sustainable, wemay undertake additional realignment and cost reduction efforts, which could result in significant additional charges. Moreover, if our restructuring andrealignment efforts prove ineffective, our ability to achieve our other strategic goals and business plans may be adversely affected.We have incurred significant indebtedness which imposes operating and financial restrictions on us which, together with our debt service obligations,could significantly limit our ability to execute our business strategy and increase the risk of default under our debt obligations.We have debt outstandingba of approximately $92.5 million as of May 31, 2018. The interest rate on these borrowings is a floating rate which couldexpose us to the risk of increased interest expense in the future. The terms of our credit facilities require us to comply with certain financial maintenancecovenants. In addition, the terms of our indebtedness also include certain covenants restricting or limiting our ability to take certain actions.These covenants may adversely affect our ability to finance future operations or limit our ability to pursue certain business opportunities or take certaincorporate actions. The covenants may also restrict our flexibility in planning for changes in our business and the industry and make us more vulnerable toeconomic downturns and adverse developments.Our ability to meet our cash requirements, including our debt service obligations, will be dependent upon our operating performance, which will besubject to general economic and competitive conditions and to financial, business and other factors affecting our operations, many of which are or may bebeyond our control. We cannot provide assurance that our business operations will generate sufficient cash flows from operations to fund these cashrequirements and debt service obligations. If our operating results, cash flow or capital resources prove inadequate, we could face substantial liquidityproblems and might be required to dispose of material assets or operations to meet our debt and other obligations. If we are unable to service our debt, wecould be forced to reduce or delay planned expansions and capital expenditures, sell assets, restructure or refinance our debt or seek additional equity capital,and we may be unable to take any of these actions on satisfactory terms or in a timely manner. Further, any of these actions may not be sufficient to allow usto service our debt obligations or may have an adverse impact on our business. Our debt agreements limit our ability to take certain of these actions. Ourfailure to generate sufficient22operating cash flow to pay our debts or to successfully undertake any of these actions could have a material adverse effect on us.In addition, the degree to which we are leveraged as a result of the indebtedness incurred in connection with an acquisition or otherwise couldmaterially and adversely affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements orother purposes, could make us more vulnerable to general adverse economic, regulatory and industry conditions, could limit our flexibility in planning for,or reacting to, changes and opportunities in the markets in which we compete, could place us at a competitive disadvantage compared to our competitors thathave less debt or could require us to dedicate a substantial portion of our cash flow to service our debt.Despite our indebtedness, we may incur more debt, which could exacerbate the risks described above.We may be able to incur substantial additional indebtedness in the future subject to the limitations contained in the agreements governing our debt.Although these agreements restrict us from incurring additional indebtedness, these restrictions are subject to important exceptions and qualifications. Forexample, we are generally permitted to incur certain indebtedness, including indebtedness arising in the ordinary course of business and indebtednessrelating to acquisition activities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and CapitalResources”.Our international sales and operations are subject to risks and uncertainties that vary by country and could have a material adverse effect on our businessand/or results of operations.Sales outside the United States accounted for approximately 21% of our net sales during our fiscal year ended May 31, 2018. We anticipate that salesfrom international operations will continue to represent a significant portion of our total sales, and we intend to continue our expansion into emerging and/orfaster-growing markets outside the United States. Our sales and profitability from our international operations are subject to risks and uncertainties that canvary by country, and include those related to political and economic conditions, foreign currency exchange rate fluctuations, changes in tax laws, regulatoryand reimbursement programs and policies, and the protection of intellectual property rights. These risks and uncertainties could have a material adverse effecton our business and/or results of operations.Foreign currency exchange rate may adversely affect our business, financial condition and results of operations.We are exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates. Products manufactured in, and soldinto, foreign markets represent a significant portion of our operations. When the United States dollar strengthens or weakens in relation to the foreigncurrencies of the countries in which we sell our products, such as the euro, our United States dollar-reported revenue and income will fluctuate. As a result ofthe June 23, 2016 referendum by British voters to exit the European Union, global markets and foreign currencies have been adversely impacted and thevalue of the Pound Sterling has sharply declined as compared to the U.S. Dollar and other currencies. This volatility in foreign currencies is expected tocontinue as the U.K. negotiates and executes its exit from the European Union but it is uncertain over what time period this will occur. The effects of currencyrate fluctuations and changes in the relative values of currencies may, in some instances, have a significant effect on our business, financial condition, resultsof operations and cash flows.Our goodwill, intangible assets and fixed assets are subject to potential impairment.A significant portion of our assets consists of goodwill, intangible assets and fixed assets, the carrying value of which may be reduced if we determinethat those assets are impaired.Most of our intangible and fixed assets have finite useful lives and are amortized or depreciated over their useful lives on either a straight-line basis orover the expected period of benefit or as revenues are earned from the sales of the related products. The underlying assumptions regarding the estimateduseful lives of these intangible assets are reviewed quarterly and more often if an event or circumstance occurs making it likely that the carrying value of theassets may not be recoverable and are adjusted through accelerated amortization if necessary. Whenever events or changes in circumstances indicate that thecarrying value of the assets may not be recoverable we test intangible assets for impairment based on estimates of future cash flows. If an intangible asset isconsidered to be impaired, the amount of the impairment will equal the excess of the carrying value over the fair value of the asset.We review our single reporting unit for potential goodwill impairment in the third fiscal quarter of each year as part of our annual goodwill impairmenttesting, and more often if an event or circumstance occurs making it likely that impairment exists. We conduct impairment testing based on our currentbusiness strategy in light of present industry and economic23conditions, as well as future expectations. The annual goodwill impairment review performed in December 2017 indicated no goodwill impairments.If actual results differ from the assumptions and estimates used in the goodwill and intangible asset calculations, we could incur future impairment oramortization charges, which could negatively impact our results of operations.We may be limited in our ability to utilize, or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability.IRC Section 382 and related provisions contain rules that limit for U.S. federal income tax purposes the ability of a Company that undergoes an“ownership change” to utilize its net operating loss carryforwards and certain other tax attributes existing as of the date of such ownership change. OurFederal net operating loss carryforwards as of May 31, 2018 after considering IRC Section 382 limitations are $157.8 million. The expiration of the Federalnet operating loss carryforwards is as follows: $28.8 million between 2018 and 2023 and $129.0 million between 2027 and 2037. Our state net operatingloss carryforwards as of May 31, 2018 after considering remaining IRC Section 382 limitations are $19.1 million which expire in various years from 2018 to2038. Future ownership changes within the meaning of IRC Section 382 may also subject our tax loss carryforwards to annual limitations which wouldrestrict our ability to use them to offset our taxable income in periods following the ownership changes. See Note 9 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2018 for a furtherdiscussion of our tax loss carryovers.Fluctuations in our effective tax rate and changes to tax laws may adversely affect us.As an international Company, we are subject to taxation in numerous countries, states and other jurisdictions. Our effective tax rate is derived from acombination of applicable tax rates in the various countries, states and other jurisdictions in which we operate. In preparing our financial statements, weestimate the amount of tax that will become payable in each of these jurisdictions. Our effective tax rate may, however, differ from the estimated amount dueto numerous factors, including a change in the mix of our profitability from country to country and changes in tax laws. Any of these factors could cause us toexperience an effective tax rate significantly different from previous periods or our current expectations, which could have an adverse effect on our business,financial condition and results of operations and cash flows.We rely on the proper function, availability and security of information technology systems to operate our business and a cyber-attack or other breach ofthese systems could have a material adverse effect on our business, financial condition or results of operations.We rely on information technology systems to process, transmit, and store electronic information in our day-to-day operations. Similar to other largemulti-national companies, the size and complexity of our information technology systems makes them vulnerable to a cyber-attack, malicious intrusion,breakdown, destruction, loss of data privacy, or other significant disruption. Our information systems require an ongoing commitment of significant resourcesto maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology,evolving systems and regulatory standards, the increasing need to protect patient and customer information, and changing customer patterns. In addition,third parties may attempt to hack into our products to obtain data relating to patients with our products or our proprietary information. Any failure by us tomaintain or protect our information technology systems and data integrity, including from cyber-attacks, intrusions or other breaches, could result in theunauthorized access to patient data and personally identifiable information, theft of intellectual property or other misappropriation of assets, or otherwisecompromise our confidential or proprietary information and disrupt our operations. Any of these events, in turn, may cause us to lose existing customers,have difficulty preventing, detecting, and controlling fraud, have disputes with customers, physicians, and other health care professionals, be subject to legalclaims and liability, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of adata privacy breach or theft of intellectual property, or suffer other adverse consequences, any of which could have a material adverse effect on our business,financial condition or results of operations.Any disaster at our manufacturing facilities could disrupt our ability to manufacture our products for a substantial amount of time, which could cause ourrevenues to decrease.We conduct our manufacturing and assembly at facilities in Queensbury, New York and Glens Falls, New York. It would be difficult, expensive andtime-consuming to transfer resources from one facility to the other, replace, or repair these facilities and our manufacturing equipment if they weresignificantly affected by a disaster. Additionally, we might be forced to rely on24third-party manufacturers or to delay production of our products. Insurance for damage to our properties and the disruption of our business from disasters maynot be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. In addition, if one of ourprincipal suppliers were to experience a similar disaster, uninsured loss or under-insured loss, we might not be able to obtain adequate alternative sources ofsupplies or products or could face significant delays and incur substantial expense in doing so. Any significant uninsured loss, prolonged or repeateddisruption, or inability to operate experienced by us or any of our principal suppliers could cause significant harm to our business, financial condition andresults of operations.Manufacturing and assembly takes place in Queensbury, New York and Glens Falls, New York. If we were significantly affected by a disaster, we nolonger have an option to transfer manufacturing to another facility so we would be forced to rely on third-party manufacturers or would have to delayproduction of our products.Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition wouldbe beneficial to our stockholders, which could cause our stock price to decline and prevent attempts by our stockholders to replace or remove our currentmanagement.Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that may enable our management toresist a change in control. These provisions may discourage, delay or prevent a change in the ownership of our Company or a change in our management. Inaddition, these provisions could limit the price that investors would be willing to pay in the future for shares of our common stock. Such provisions include:•our board of directors is authorized, without prior stockholder approval, to create and issue “blank check” preferred stock, with rights senior tothose of our common stock;•our board of directors is classified so that not all members of our board of directors are elected at one time, which may make it more difficult fora person who acquires control of a majority of our outstanding voting stock to replace our directors;•advance notice requirements for stockholders to nominate individuals to serve on our board of directors or for stockholders to submit proposalsthat can be acted upon at stockholder meetings;•stockholder action by written consent is prohibited; and•stockholders are not permitted to cumulatively vote for the election of directors.We are also subject to the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations withstockholders owning 15% or more of our outstanding voting stock.These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it moredifficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board ofdirectors, including delaying or impeding a merger, tender offer or proxy contest involving our Company. Any delay or prevention of a change of controltransaction or changes in our board of directors could cause the market price of our common stock to decline.RISKS RELATED TO THE REGULATORY ENVIRONMENTReforms to the United States healthcare system may adversely affect our business.In response to perceived increases in health care costs in recent years, there have been and continue to be proposals by the federal government, stategovernments, regulators and third-party payers to control these costs and, more generally, to reform the health care system, including U.S. health care reformlegislation. Certain of these proposals could, among other things, limit the prices we are able to charge for our products or the amounts of reimbursementavailable for our products and could limit the acceptance and availability of our products. The adoption of some or all of these proposals could have anadverse effect on our business, results of operations, financial condition and cash flows.25Our industry is experiencing greater scrutiny and regulation by governmental authorities, which has led to certain costs and business distractions as werespond to inquiries and comply with new regulations, and may lead to greater governmental regulation in the future.Our medical devices and our business activities are subject to rigorous regulation by the FDA and numerous other federal, state and foreigngovernmental authorities. These authorities and members of Congress have been increasing their scrutiny of our industry. In addition, certain states,including Massachusetts, have recently passed or are considering legislation restricting our interactions with health care providers and requiring disclosure ofmany payments to them. The federal government has recently introduced similar legislation, which may or may not preempt state laws. Recent SupremeCourt case law has clarified that the FDA’s authority over medical devices preempts state tort laws, but legislation has been introduced at the federal level toallow state intervention, which could lead to increased and inconsistent regulation at the state level. We anticipate that the government will continue toscrutinize our industry closely, and that additional regulation by governmental authorities may increase compliance costs, exposure to litigation and otheradverse effects to our operations.We are subject to a comprehensive system of federal, state and international laws and regulations, and we could be the subject of investigations,enforcement actions or face lawsuits and monetary or equitable judgments.We operate in many parts of the world, and our operations are affected by complex state, federal and international laws relating to healthcare,environmental protection, antitrust, anti-corruption, anti-bribery, fraud and abuse, export control, tax, employment and laws regarding privacy, personallyidentifiable information and protected health information, including, for example, the Food, Drug and Cosmetic Act (“FDCA”), various FDA andinternational regulations relating to, among other things, the development, quality assurance, manufacturing, importation, distribution, marketing and saleof, and billing for, our products, the federal Anti-Kickback Statute and Federal False Claims Act (see Note 15), the U.S. Foreign Corrupt Practices Act(“FCPA”), the UK Bribery Act of 2010, the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), General Data ProtectionRegulation ("GDPR") and other foreign data protection and privacy laws, and laws and regulations relating to sanctions and money laundering. We aresubject to periodic inspections to determine compliance with the FDA’s Quality System Regulation requirements, current medical device adverse eventreporting regulations, and similar foreign rules and regulations. Despite our training and compliance programs, our internal control policies and proceduresmay not always protect us from negligent, reckless or criminal acts committed by our employees or agents. The failure to comply with these laws andregulatory standards, allegations of such non-compliance or the discovery of previously unknown problems with a product or manufacturer: (i) could result inFDA Form-483 notices and/or warning letters or the foreign equivalent, fines, delays or suspensions of regulatory clearances, investigations, detainment,seizures or recalls of products (with the attendant expenses), the banning of a particular device, an order to replace or refund the cost of any device previouslymanufactured or distributed, operating restrictions and/or civil or criminal prosecution, and/or penalties, as well as decreased sales as a result of negativepublicity and product liability claims; and (ii) could disrupt our business and could have a material adverse effect on our business, results of operations,financial condition and/or liquidity.Most of our products must receive clearance or approval from the FDA or comparable regulatory agencies abroad before they can be marketed or sold.State, federal and foreign registration regulations are both evolving and subject to varied levels of interpretation and enforcement. It can be costly and time-consuming to obtain and maintain regulatory approvals to market a medical device. Approvals might not be granted on a timely basis, if at all, for newdevices, new indications for use or certain modifications or enhancements to previously approved products. Even after a device receives regulatory approvalit remains subject to significant regulatory and quality requirements, such as manufacturing, recordkeeping, renewal, recertification or reporting and otherpost market approval requirements, which may include clinical, laboratory or other studies. Product approvals by the FDA and other foreign regulators can bewithdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial approval or may be re-classified to ahigher regulatory classification, such as requiring a Pre-Market Approval (“PMA”) for a previously cleared 510(k) device. Regulations are also subject tochange as a result of legislative, administrative or judicial action, which may further increase our costs or reduce sales. Our failure to maintain approvals,obtain approval for new products or comply with other applicable regulatory requirements could adversely affect our business, results of operations, financialcondition and/or liquidity.The healthcare industry is under continued scrutiny from state, federal and international governments with respect to industry practices in the area ofsales and marketing, including provisions of the Physician Payment Sunshine Act. If our marketing, sales or other activities fail to comply with the FDA’s orother comparable foreign regulatory agencies’ regulations or guidelines, or other applicable laws, we may be subject to warnings from the FDA orinvestigations or enforcement actions from the FDA, Medicare, the Office of Inspector General of the U.S. Department of Health and Human Services or othergovernment agencies or enforcement bodies. Additionally, in the European Union, a new draft Medical Device Regulation was published in 2016 imposingstricter requirements for the marketing and sale of medical devices and grants Notified Bodies increased post-market surveillance authority. The Company ismonitoring the implementation of the regulation and has26undertaken initial actions to move toward compliance based on the published draft of the regulation. The Company’s failure to comply with any marketingor sales regulations or any other applicable regulatory requirements could adversely affect our business, results of operations, financial condition and/orliquidity.In the recent past, medical device manufacturers have been the subject of investigations from government agencies related to their relationships withdoctors, product sales and marketing and off-label promotion of products, among other activities or practices. If an enforcement action involving theCompany were to occur, it could result in penalties, fines, detainment, seizures, recalls, product bans, operating restrictions (which may include loss of alicense or authorization), the exclusion of our products from reimbursement under government-funded programs and/or prohibitions on our ability to sell ourproducts, and could have a material adverse effect on our business, results of operations, financial condition and/or liquidity. In addition, remediation of anyissues identified by the FDA or other regulators could require facility upgrades, process changes, additional labeling requirements or other measures, any ofwhich could have a material adverse effect on our business and/or results of operations.In addition, lawsuits by or otherwise involving employees, customers, licensors, licensees, suppliers, vendors, business partners, distributors,shareholders or competitors with respect to how we conduct our business could be very costly and could substantially disrupt our business. Disputes fromtime-to-time with companies or individuals are not uncommon, and we cannot assure you that we will be able to resolve these disputes on terms favorable tous. The occurrence of an adverse monetary or equitable judgment or a large expenditure in connection with a settlement of any of these matters could have amaterial adverse effect on our business, results of operations, financial condition and/or liquidity.We are subject to healthcare fraud and abuse regulations that could result in significant liability, require us to change our business practices and restrictour operations in the future.We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, including anti-kickback and false claimslaws. Violations of these laws are punishable by criminal or civil sanctions, including substantial fines, imprisonment and exclusion from participation inhealthcare programs such as Medicare and Medicaid and health programs outside the United States. These laws and regulations are wide ranging and subjectto changing interpretation and application, which could restrict our sales or marketing practices. Furthermore, since many of our customers rely onreimbursement from Medicare, Medicaid and other governmental programs to cover a substantial portion of their expenditures, our exclusion from suchprograms as a result of a violation of these laws could have a material adverse effect on our business, results of operations, financial condition and cash flow.If we or some of our suppliers fail to comply with the FDA’s Quality System Regulation, or QSR, and other applicable postmarket requirements, ourmanufacturing operations could be disrupted, our product sales and profitability could suffer, and we may be subject to a wide variety of FDA enforcementactions.After a device is placed on the market, numerous regulatory requirements apply. We are subject to inspection and marketing surveillance by the FDA todetermine our compliance with all regulatory requirements. Our failure to comply with applicable regulatory requirements could result in the FDA or a courtinstituting a wide variety of enforcement actions against us, including a public "Warning Letter"; an order to shut down some or all manufacturingoperations; a recall of products; fines or civil penalties; seizure or detention of our products; refusing our requests for 510(k) clearance or a PMA of new ormodified products; withdrawing 510(k) clearance or PMA approvals already granted to us; and criminal prosecution.Our manufacturing processes and those of some of our suppliers must comply with the FDA’s Quality System Regulation, or QSR, which governs themethods used in, and the facilities and controls used for, the design, testing, manufacture, control, quality assurance, installation, servicing, labeling,packaging, storage and shipping of medical devices. The FDA enforces the QSR through unannounced inspections. If we, or one of our suppliers, fail a QSRinspection, or if a corrective action plan adopted by us or one of our suppliers is not sufficient, the FDA may bring an enforcement action, and our operationscould be disrupted and our manufacturing delayed. We are also subject to the FDA’s general prohibition against promoting our products for unapproved or“off-label” uses, the FDA’s adverse event reporting requirements and the FDA’s reporting requirements for field correction or product removals. The FDA hasrecently placed increased emphasis on its scrutiny of compliance with the QSR and these other postmarket requirements.If we, or one of our suppliers, violate the FDA’s requirements or fail to take adequate corrective action in response to any significant compliance issueraised by the FDA, the FDA can take various enforcement actions which could cause our product sales and profitability to suffer.27In addition, most other countries require us and our suppliers to comply with manufacturing and quality assurance standards for medical devices thatare similar to those in force in the United States before marketing and selling our products in those countries. If we, or our suppliers, should fail to do so, wewould lose our ability to market and sell our products in those countries.If we cannot obtain and maintain marketing clearance or approval from governmental agencies, we will not be able to sell our products.Our products are medical devices that are subject to extensive regulation in the United States and in the foreign countries in which they are sold. Unlessan exemption applies, each medical device that we wish to market in the United States must receive either 510(k) clearance or premarket approval (PMA)from the FDA before the product can be sold. Either process can be lengthy and expensive. The FDA’s 510(k) clearance procedure, also known as “premarketnotification,” is the process we have used for our current products. This process usually takes from four to twelve months from the date the premarketnotification is submitted to the FDA, but may take significantly longer. Although we have obtained 510(k) clearances for our current products, our clearancesmay be revoked by the FDA if safety or effectiveness problems develop with the devices. The PMA process is much more costly, lengthy and uncertain. Itgenerally takes from one to three years from the date the application is submitted to, and filed with the FDA, and may take even longer. Regulatory regimes inother countries similarly require approval or clearance prior to our marketing or selling products in those countries. We rely on our distributors to obtainregulatory clearances or approvals of our products outside of the United States. If we are unable to obtain additional clearances or approvals needed to marketexisting or new products in the United States or elsewhere or obtain these clearances or approvals in a timely fashion or at all, or if our existing clearances arerevoked, our revenues and profitability may decline.Modifications to our current products may require new marketing clearances or approvals or require us to cease marketing or recall the modified productsuntil such clearances or approvals are obtained.Any modification to an FDA-cleared medical device that could significantly affect its safety or effectiveness, or that would constitute a major change ormodification in its intended use, requires a new FDA 510(k) clearance or, possibly, a premarket approval. The FDA requires every manufacturer to make itsown determination as to whether a modification requires a new 510(k) clearance or premarket approval, but the FDA may review and disagree with anydecision reached by the manufacturer. We have modified aspects of some of our devices since receiving regulatory clearance. We believed that some of thesemodifications did not require new 510(k) clearance or premarket approval and, therefore, we did not seek new 510(k) clearances or premarket approvals. Inthe future, we may make additional modifications to our products after they have received FDA clearance or approval and, in appropriate circumstances,determine that new clearance or approval is unnecessary. Regulations in other countries in which we market or sell, or propose to market or sell, our productsmay also require that we make judgments about changes to our products and whether or not those changes are such that regulatory approval or clearanceshould be obtained. In the United States and elsewhere, regulatory authorities may disagree with our past or future decisions not to seek new clearance orapproval and may require us to obtain clearance or approval for modifications to our products. If that were to occur for a previously cleared or approvedproduct, we may be required to cease marketing or recall the modified device until we obtain the necessary clearance or approval. Under these circumstances,we may also be subject to significant regulatory fines or other penalties. If any of the foregoing were to occur, our financial condition and results ofoperations could be negatively impacted.Even after receiving regulatory clearance or approval, our products may be subject to product recalls, which may harm our reputation and divertmanagerial and financial resources.The FDA and similar governmental authorities in other countries have the authority to order mandatory recall of our products or order their removalfrom the market if there are material deficiencies or defects in design, manufacture, installation, servicing or labeling of the device, or if the governmentalentity finds that our products would cause serious adverse health consequences. A government mandated voluntary recall or field action by us could occur asa result of component failures, manufacturing errors or design defects, including labeling defects. Any recall of our products may harm our reputation withcustomers and divert managerial and financial resources.We may be subject to fines, penalties, injunctions or costly investigations if we are determined to be promoting the use of our products for unapproved or“off-label” uses.If we are incorrect in our belief that our promotional materials and training methods regarding physicians are conducted in compliance with regulationsof the FDA and other applicable regulations, and the FDA determines that our promotional materials or training constitutes promotion of an unapproved use,the FDA could request that we modify our training or promotional materials or subject us to regulatory enforcement actions, including the issuance of awarning letter, injunction,28seizure, civil fine and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they considerpromotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutoryauthorities, such as laws prohibiting false claims for reimbursement. Any of these results could have a material adverse effect on our financial position orresults of operations.In June 2014 we received a subpoena from the U.S. Department of Justice (the “DOJ”) requesting documents in relation to a criminal and civilinvestigation the DOJ is conducting regarding BTG International, Inc.’s LC Bead product beginning in 2003. RITA Medical Systems and AngioDynamics,Inc., after our acquisition of RITA, was the exclusive distributor of LC Beads in the United States from 2006 through December 31, 2011. We are cooperatingfully with this investigation and at this time are unable to predict its scope, duration or outcome. In April 2015 we received a subpoena from the DOJrequesting documents in relation to a criminal and civil investigation the DOJ is conducting regarding purported promotion of certain of our VenaCureEVLT products for un-cleared indications. As of May 31, 2017 the Company accrued $12.5 million for these matters and in August 2017, the Companyagreed in principle with the government to resolve these matters for approximately $12.5 million. This balance was still accrued as of May 31, 2018 and waspaid in the first quarter of fiscal year 2019. If our employees or agents violate the U.S. Foreign Corrupt Practices Act or anti-bribery laws in other jurisdictions, we may incur fines or penalties, orexperience other adverse consequences.We are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws in international jurisdictions, including the UK Anti-Bribery Act, which generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtainingor retaining business. Because of the predominance of government-sponsored healthcare systems around the world, many of our customer relationshipsoutside of the United States are with governmental entities and are therefore subject to such anti-bribery laws. Our sales to customers and distributors outsideof the United States have been increasing and we expect them to continue to increase in the future. If our employees or agents violate the provisions of theFCPA or other anti-bribery laws, we may incur fines or penalties, we may be unable to market our products in other countries or we may experience otheradverse consequences which could have a material adverse effect on our operating results or financial condition.Laws and regulations governing the export of our products could adversely impact our business.The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the Bureau of Industry and Security at the U.S. Department ofCommerce (BIS), administer certain laws and regulations that restrict U.S. persons and, in some instances, non-U.S. persons, in conducting activities,transacting business with or making investments in certain countries, governments, entities and individuals subject to U.S. economic sanctions. Due to ourinternational operations, we are subject to such laws and regulations, which are complex, restrict our business dealings with certain countries and individuals,and are constantly changing. Further restrictions may be enacted, amended, enforced or interpreted in a manner that materially impacts our operations.From time to time, certain of our subsidiaries have limited business dealings in countries subject to comprehensive sanctions, including Iran. Certain ofour subsidiaries sell medical devices and surgical tools, and may provide related services, to distributors and other purchasing bodies in such countries. Thesebusiness dealings represent an insignificant amount of our consolidated revenues and income, but expose us to a heightened risk of violating applicablesanctions regulations. Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, assetseizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment. We have establishedpolicies and procedures designed to assist with our compliance with such laws and regulations. However, there can be no assurance that our policies andprocedures will effectively prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adverselyaffect our reputation, business, financial condition, results of operations and cash flows.Changes in reimbursement levels by governmental or other third-party payors for procedures using our products may cause our revenues to decline.Our products are purchased principally by hospitals or physicians which typically bill various third-party payors, such as governmental programs (e.g.Medicare, Medicaid and comparable foreign programs), private insurance plans and managed care plans, for the healthcare services provided to their patients.The ability of our customers to obtain appropriate reimbursement for products and services from third-party payors is critical to the success of medical devicecompanies because it affects which products customers purchase and the prices they are willing to pay. Reimbursement varies by country and cansignificantly impact the acceptance of new technology. Implementation of healthcare reforms in the United States and in other countries may limit, reduce oreliminate reimbursement for our products and adversely affect both our pricing flexibility and the demand for29our products. Even when we develop a promising new product, we may find limited demand for the product unless reimbursement approval is obtained fromprivate and governmental third party payors.Third-party payors have adopted, and are continuing to adopt, a number of healthcare policies intended to curb rising healthcare costs. These policiesinclude:•controls on government-funded reimbursement for healthcare services and price controls on medical products and services providers;•challenges to the pricing of medical procedures or limits or prohibitions on reimbursement for specific devices and therapies through othermeans; and•the introduction of managed care systems in which healthcare providers contract to provide comprehensive healthcare for a fixed cost perperson.We are unable to predict whether federal, state or local healthcare reform legislation or regulation affecting our business may be proposed or enacted inthe future, or what effect any such legislation or regulation would have on our business. Changes in healthcare systems in the United States or elsewhere in amanner that significantly reduces reimbursement for procedures using our medical devices or denies coverage for these procedures, or adverse decisionsrelating to our products by administrators of these systems in coverage or reimbursement issues, would have an adverse impact on the acceptance of ourproducts and the prices which our customers are willing to pay for them.RISKS RELATED TO INTELLECTUAL PROPERTYIf we fail to adequately protect our intellectual property rights, we may not be able to generate revenues from new or existing products and our businessmay suffer.Our success depends in part on obtaining, maintaining and enforcing our patents, trademarks and other proprietary rights, and our ability to avoidinfringing the proprietary rights of others. We take precautionary steps to protect our technological advantages and intellectual property. We rely uponpatent, trade secret, copyright, know-how and trademark laws, as well as license agreements and contractual provisions, to establish our intellectual propertyrights and protect our products. However, no assurances can be made that any pending or future patent applications will result in the issuance of patents, thatany current or future patents issued to, or licensed by, us will not be challenged or circumvented by our competitors, or that our patents will not be foundinvalid.Patent positions of medical device companies, including our Company, are uncertain and involve complex and evolving legal and factual questions.The coverage sought in a patent application can be denied or significantly reduced either before or after the patent is issued. Consequently, there can be noassurance that any of our pending patent applications will result in an issued patent. There is also no assurance that any existing or future patent will providesignificant protection or commercial advantage, or whether any existing or future patent will be circumvented by a more basic patent, thus requiring us toobtain a license to produce and sell the product. Generally, patent applications can be maintained in secrecy for at least 18 months after their earliest prioritydate. In addition, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Therefore, we cannot be certain that wewere the first to invent the subject matter covered by each of our pending U.S. patent applications or that we were the first to file non-U.S. patent applicationsfor such subject matter.Additionally, we rely on trade secret protection for certain unpatented aspects of our proprietary technology. There can be no assurance that others willnot independently develop or otherwise acquire substantially equivalent proprietary information or techniques, that others will not gain access to ourproprietary technology or disclose such technology, or that we can meaningfully protect our trade secrets. We have a policy of requiring key employees andconsultants to execute confidentiality agreements upon the commencement of an employment or consulting relationship with us. Our confidentialityagreements also require our employees to assign to us all rights to any inventions made or conceived during their employment with us. We also generallyrequire our consultants to assign to us any inventions made during the course of their engagement by us. There can be no assurance, however, that theseagreements will provide meaningful protection or adequate remedies for us in the event of unauthorized use, transfer or disclosure of confidential informationor inventions.If we are not able to adequately protect our intellectual property, our market share, financial condition and results of operations may suffer.30If third parties claim that our products infringe their intellectual property rights, we may be forced to expend significant financial resources andmanagement time defending against such actions and our financial condition and our results of operations could suffer.Third parties may claim that our products infringe their patents and other intellectual property rights. Identifying third-party patent rights can beparticularly difficult because, in general, patent applications can be maintained in secrecy for at least 18 months after their earliest priority date. Somecompanies in the medical device industry have used intellectual property infringement litigation to gain a competitive advantage. If a competitor were tochallenge our patents, licenses or other intellectual property rights, or assert that our products infringe its patent or other intellectual property rights, we couldincur substantial litigation costs, be forced to make expensive changes to our product design, pay royalties or other fees to license rights in order to continuemanufacturing and selling our products, or pay substantial damages. Third-party infringement claims, regardless of their outcome, would not only consumeour financial resources but also divert our management’s time and effort. Such claims could also cause our customers or potential customers to purchasecompetitors’ products or defer or limit their purchase or use of our affected products until resolution of the claim. See Note 15 in the consolidated financialstatements.RISKS RELATED TO OUR STOCK PRICEOur future operating results are difficult to predict and may vary significantly from quarter to quarter, which may adversely affect the price of our commonstock.The ongoing introduction of new products and services that affect our overall product mix make the prediction of future operating results difficult. Youshould not rely on our past results as any indication of future operating results. The price of our common stock will likely fall in the event that our operatingresults do not meet the expectations of analysts and investors. Comparisons of our quarterly operating results are an unreliable indication of our futureperformance because they are likely to vary significantly based on many factors, including:•the level of sales of our products and services in our markets;•our ability to introduce new products or services and enhancements in a timely manner;•the demand for and acceptance of our products and services;•the success of our competition and the introduction of alternative products or services;•our ability to command favorable pricing for our products and services;•the growth of the market for our devices and services;•the expansion and rate of success of our direct sales force in the United States and internationally and our independent distributorsinternationally;•actions relating to ongoing FDA compliance;•the effect of intellectual property disputes;•the size and timing of orders from independent distributors or customers;•the attraction and retention of key personnel, particularly in sales and marketing, regulatory, manufacturing and research and development;•unanticipated delays or an inability to control costs;•general economic conditions as well as those specific to our customers and markets; and•seasonal fluctuations in revenue due to the elective nature of some procedures.Our stock price may be volatile, which may cause the value of our stock to decline or subject us to a securities class action litigation.The trading price of our common stock price may be volatile and could be subject to wide fluctuations in price in response to various factors, many ofwhich are beyond our control, including:•general economic, industry and market conditions;•actions by institutional or other large stockholders;•the depth and liquidity of the market for our common stock;•volume and timing of orders for our products;•developments generally affecting medical device companies;•the announcement of new products or product enhancements by us or our competitors;•changes in earnings estimates or recommendations by securities analysts;•investor perceptions of us and our business, including changes in market valuations of medical device companies; and•our results of operations and financial performance.31In addition, the stock market in general, and the NASDAQ Stock Market and the market for medical devices in particular, have experienced substantialprice and volume volatility that is often seemingly unrelated to the operating performance of particular companies. These broad market fluctuations maycause the trading price of our common stock to decline. In the past, securities class action litigation has often been brought against a company after a periodof volatility in the market price of its common stock. We may become involved in this type of litigation in the future. Any securities litigation claims broughtagainst us could result in substantial expense and the diversion of management’s attention from our business.Item 1B.Unresolved Staff Comments.None. 32Item 2.Properties.During the year ended May 31, 2018, we operated in the following locations:LocationPurpose Approx.Sq. Ft. PropertyTypeLatham, NYCorporate headquarters 55,000 LeasedGlens Falls, NYManufacturing 189,000 OwnedQueensbury, NYManufacturing and distribution 129,000 OwnedManchester, GA*Manufacturing and distribution 60,000 LeasedMarlborough, MAResearch & Development 31,000 LeasedDenmead, U.K.*Manufacturing 7,500 LeasedAmsterdam, NLSelling, Marketing & Administrative 8,100 LeasedIn addition, we lease sales offices in various other jurisdictions. *These two locations were closed as part of the operational consolidation plan during fiscal year 2018.33Item 3.Legal Proceedings.C.R. Bard, Inc. v. AngioDynamics, Inc.On January 11, 2012, C.R. Bard, Inc. (“Bard”) filed a suit in the United States District Court of Utah claiming certain of our implantable port productsinfringe on three U.S. patents held by Bard (the “Utah Action”). Bard’s Complaint sought unspecified damages and other relief. We filed petitions forreexamination in the U.S. Patent and Trademark Office (“USPTO”) seeking to invalidate all three patents asserted by Bard in the litigation. Our petitions weregranted and 40 of Bard's 41 patent claims were rejected and, following further proceedings, the Patent Office issued a Final Rejection of all 40 claims subjectto reexamination. Thereafter, Bard filed appeals to the USPTO Board of Appeals and Interferences for all three reexaminations. The Patent Office issueddecisions in all three appeals. In one (issued on March 11, 2016 for U.S. Patent No. 7,785,302), the rejections of six of the ten claims under reexaminationwere affirmed, but were reversed on four of the ten claims. In the second (issued on March 24, 2016 for U.S. Patent No. 7,959,615), the rejections of eight ofthe ten claims under reexamination were affirmed but the rejections of the other two of the ten claims were reversed. In the third (issued on March 29 for U.S.Patent No. 7,947.022) the rejections of all twenty claims under reexamination were affirmed. Thereafter, Bard filed Requests for Rehearing inall three reexamination appeals and the Company filed Requests for Rehearing in two of the reexamination appeals (the ‘302 and ‘615 patentreexaminations). The PTO denied all three Rehearing Requests - - on February 1, 2017 for the ‘302 reexam; on February 17, 2017 for the ‘022 reexam; and onFebruary 21, 2017 for the ‘615 reexam, but modified its characterization of one prior art reference for the ‘302 and ‘022 decisions. Bard filed a Notice ofAppeal to the Federal Circuit Court of Appeals in all three reexams and the Company filed Cross-Appeals for the ‘302 and the ‘615 reexams. The parties havecompleted the process of filing the various appellate briefs. MedComp also filed an Amicus Brief in support of the Company on November 22, 2017. A datefor the oral hearing has not yet been set. The Utah Action has been stayed pending final resolution of the USPTO process. We believe these claims are withoutmerit and intend to defend them vigorously. We have not recorded an expense related to the outcome of this litigation because it is not yet possible todetermine if a potential loss is probable nor reasonably estimable.On March 10, 2015, C.R. Bard, Inc. (“Bard”) and Bard Peripheral Vascular, Inc. (“BPV”) filed suit in the United States District Court for the District ofDelaware claiming certain of our implantable port products infringe on three U.S. patents held by Bard (the “Delaware Action”). Bard's complaint seeksunspecified damages and other relief. The patents asserted in the Delaware Action are different than those asserted in the Utah Action. On June 1, 2015, theCompany filed two motions in response to Bard’s Complaint - one sought transfer to the District of Utah where the Utah Action is currently pending, and theother sought dismissal of the entire complaint on grounds that none of the claims in the asserted patents is directed to patent eligible subject matter underSection 101 of the Patent Statute and in light of recent authority from the U. S. Supreme Court. On January 12, 2016, the Court issued a decision denyingboth motions. A Markman hearing was held on March 10, 2017 and the Court issued its Claim Construction Order on May 19, 2017. On May 19, 2017, Bardserved its Final Infringement Contentions and on June 2, 2017, the Company served its Final Invalidity Contentions.On October 20, 2017, the scheduling order for the case was amended to, among other things, set a trial date commencing July 23, 2018. The partiescompleted Expert Discovery in January 2018. The parties completed briefing on their respective case dispositive motions on April 27, 2018. On June 26,2018, the Court denied all case dispositive motions, ruling that issues of material fact remained in dispute. On July 9, 2018, the Court continued the trial to alater date to be determined by the Court and the parties. We believe these claims are without merit and intend to defend them vigorously. We have notrecorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonablyestimable.AngioDynamics, Inc. v. C.R. Bard, Inc.On May 30, 2017, we commenced an action in the United States District Court for the Northern District of New York entitled AngioDynamics, Inc. v.C.R. Bard, Inc. and Bard Access Systems, Inc. (“Bard”). In this action, we allege that Bard has illegally tied the sales of its tip location systems to the sales ofits PICCs. We allege that this practice violates the federal antitrust laws and has had, and continues to have, an anti-competitive effect in the market forPICCs. We seek both monetary damages and injunctive relief. Bard moved to dismiss on September 8, 2017 and the motion has been submitted to the court. The court has adjourned the initial conference in the case pending its resolution of the motion to dismiss.Governmental InvestigationsIn June 2014 we received a subpoena from the U.S. Department of Justice (the “DOJ”) requesting documents in relation to a criminal and civilinvestigation the DOJ is conducting regarding BTG International, Inc.’s LC Bead® product beginning in342003. RITA Medical Systems and AngioDynamics, Inc., after its acquisition of RITA, was the exclusive distributor of LC Beads in the United States from2006 through December 31, 2011. We are cooperating fully with this investigation.In April 2015 we received a subpoena from the DOJ requesting documents in relation to a criminal and civil investigation the DOJ is conductingregarding purported promotion of certain of AngioDynamics’ VenaCure EVLT products for un-cleared indications. We are cooperating fully with thisinvestigation.As of May 31, 2017 the Company accrued $12.5 million for these matters and in August 2017, the Company agreed in principle with the government toresolve these matters for approximately $12.5 million. This amount was still accrued for at May 31, 2018 and was paid in the first quarter of fiscal year 2019. Item 4.Mine Safety Disclosures.Not applicable.Part II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of EquitySecurities.Our common stock is traded on The Global Select Market tier of The NASDAQ Stock Market LLC (formerly the Nasdaq National Market), under thesymbol “ANGO.”The following table sets forth, for the fiscal quarters indicated, the high and low sale prices for our common stock as reported by The NASDAQ StockMarket. Sale Price High LowYear ended May 31, 2018 Fourth Quarter$21.04 $16.13Third Quarter$17.70 $15.71Second Quarter$18.76 $16.29First Quarter$17.12 $15.12 Sale Price High LowYear ended May 31, 2017 Fourth Quarter$17.58 $15.08Third Quarter$17.81 $15.89Second Quarter$17.54 $15.40First Quarter$16.83 $12.16As of July 20, 2018, there were 184 holders of record of our common stock.DividendsWe did not declare any cash dividends on our common stock during our last three fiscal years. We do not anticipate paying any cash dividends on ourcommon stock for the foreseeable future.Performance GraphThe graph below matches AngioDynamics, Inc.’s cumulative 5-year total shareholder return on common stock with the cumulative total returns of theNASDAQ Composite index, the RDG SmallCap Medical Devices index, and the NASDAQ Medical Equipment index. The graph tracks the performance of a$100 investment in our common stock and in each index (with the reinvestment of all dividends) from May 31, 2013 to May 31, 2018. The stock priceperformance included in this graph is not necessarily indicative of future stock price performance.3536Item 6.Selected Financial Data.You should read the following selected financial data in conjunction with our consolidated financial statements and the related notes and“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K.The consolidated statements of operations data for the fiscal years ended May 31, 2018, May 31, 2017, and May 31, 2016, and the consolidatedbalance sheet data as of May 31, 2018 and May 31, 2017, are derived from the consolidated financial statements that are included elsewhere in this AnnualReport on Form 10-K. The consolidated statements of operations data for the fiscal years ended May 31, 2015 and May 31, 2014, and the consolidatedbalance sheet data as of May 31, 2016, May 31, 2015 and May 31, 2014, are derived from our audited consolidated financial statements not included in thisAnnual Report on Form 10-K. Historical results are not necessarily indicative of the results of operations to be expected for future periods. See Note 14 of“Notes to Consolidated Financial Statements” for a description of the method that we used to compute our historical basic and diluted net income per shareattributable to common stockholders. Year ended May 31,(in thousands, except per share information)2018 2017 2016 2015 2014Consolidated Statements of Operations Data: Net sales$344,285 $349,643 $353,890 $356,534 $354,425Gross profit (exclusive of intangible amortization)176,875 176,169 174,316 175,796 180,174Operating expenses Research and development25,459 25,269 25,053 26,594 28,124Sales and marketing77,276 78,819 83,743 82,351 85,696General and administrative31,265 31,406 30,583 30,031 26,511Amortization of intangibles16,635 17,296 17,964 17,966 16,562Change in fair value of contingent consideration250 (15,261) 948 (8,096) (1,908)Acquisition, restructuring and other items, net (a)15,432 27,510 12,591 26,257 10,873Medical device excise tax— (1,837) 2,416 4,142 3,829Total operating expenses166,317 163,202 173,298 179,245 169,687Operating income (loss)10,558 12,967 1,018 (3,449) 10,487Total other (expenses), net(3,093) (3,120) (4,271) (4,682) (5,301)Net income (loss)$16,335 $5,008 $(43,590) $(3,388) $2,347Earnings (loss) per share Basic$0.44 $0.14 $(1.21) $(0.09) $0.07Diluted$0.44 $0.14 $(1.21) $(0.09) $0.07(a)Acquisition, restructuring and one-time items include restructuring expenses or expenses incurred as part of M&A, product discontinuance, legalsettlements and legal costs that are related to litigation that is not in the ordinary course of business.37 As of May 31,(in thousands)2018 2017 2016 2015 2014Consolidated Balance Sheet Data: Cash, cash equivalents and marketable securities$75,413 $48,759 $33,986 $20,080 $17,914Working capital110,731 82,398 79,527 90,283 81,071Total assets705,472 707,961 726,194 773,058 798,576Long-term debt, including current portion91,621 96,320 120,541 137,660 142,660Contingent consideration3,261 12,761 38,275 47,384 67,231Total long-term liabilities105,576 121,418 152,239 167,444 195,750Total stockholders’ equity542,595 515,027 507,228 545,099 536,885Item 7.Management’s Discussion and Analysis of Financial Conditions and Results of Operations.The following information should be read together with the audited consolidated financial statements and the notes thereto and other informationincluded elsewhere in this annual report on Form 10-K.Forward-Looking StatementsThis Annual Report on Form 10-K, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results ofOperations”, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regardingAngioDynamics’ expected future financial position, results of operations, cash flows, business strategy, budgets, projected costs, capital expenditures,products, competitive positions, growth opportunities, acquisitions, plans and objectives of management for future operations, as well as statements thatinclude the words such as “expects,” “reaffirms,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” or variations of such words and similarexpressions, are forward-looking statements. These forward looking statements are not guarantees of future performance and are subject to risks anduncertainties. Investors are cautioned that actual events or results may differ from our expectations. Factors that may affect the actual results include, withoutlimitation, our ability to develop our existing and new products, future actions by the FDA or other regulatory agencies, results of pending or future clinicaltrials, the results of ongoing litigation, overall economic conditions, general market conditions, market acceptance, foreign currency exchange ratefluctuations, the effects on pricing from group purchasing organizations and competition, the loss of any of our key customers or reduction in the purchase ofour products by any such customers, and our ability to integrate acquired businesses as well as the risk factors listed in Part I, Item 1A of this Annual Reporton Form 10-K.Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could beinaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Annual Report on Form 10-K will prove to beaccurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not beregarded as a representation by us or any other person that our objectives and plans will be achieved. Any forward-looking statements are made pursuant tothe Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We disclaim any obligation to update the forward-lookingstatements. Investors are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date stated, or if no date isstated, as of the date of this document.EXECUTIVE OVERVIEWCompany and MarketWe design, manufacture and sell a wide range of medical, surgical and diagnostic devices used by professional healthcare providers for vascular access,for the treatment of peripheral vascular disease and for use in oncology and surgical settings. Our devices are generally used in minimally invasive, image-guided procedures. Most of our products are intended to be used once and then discarded, or they may be temporarily implanted for short- or longer-term use.Our business operations cross a variety of markets. Our financial performance is impacted by changing market dynamics, which have included anemergence of value-based purchasing by healthcare providers, consolidation of healthcare providers, the increased role of the consumer in health caredecision-making and an aging population, among others. In addition, our38growth is impacted by changes within our sector, such as the merging of competitors to gain scale and influence; changes in the regulatory environment formedical device; and fluctuations in the global economy.Our sales and profitability growth also depends, in part, on the introduction of new and innovative products, together with ongoing enhancements to ourexisting products. Expansions to our product offerings are created through internal product development, technology licensing and strategic alliances. Werecognize the importance of, and intend to continue to make investments in, research and development activities and business development opportunitiesand feel confident that our existing capital structure and free cash flow generation will allow us to properly fund those activities.We sell our products in the United States through a direct sales force, and outside the U.S. through a combination of a direct sales and distributorrelationships. We expect our businesses to grow in both sales and profitability through geographic expansion, market penetration, new product introductionsand increasing our direct presence internationally.In evaluating the operating performance of our business, management focuses on revenue, gross margin, operating income, earnings per share and cashflow from operations. A summary of these key financial metrics for the twelve months ended May 31, 2018 compared to the twelve months ended May 31,2017 follows:Twelve months ended May 31, 2018:•Revenue decreased by 1.5% to $344.3 million•Gross margin as a percentage of sales increased by 100 bps to 51.4%•Operating income decreased by $2.4 million to $10.6 million•Earnings per share increased by $0.30 to $0.44•Cash flow from operations decreased by $14.5 million to $41.3 millionThe decline in revenue for the year was primarily driven by declines in the Venous portfolio within Peripheral Vascular, non-BioFlo products withinVascular Access and Radiofrequency Ablation within Oncology/Surgery. The decrease in Radiofrequency Ablation was primarily due to the discontinuationof this product line in Japan. The decline was partially offset by increased sales of Solero, a microwave ablation device that received FDA clearance duringthe first quarter of fiscal year 2018, and NanoKnife capital sales in Oncology/Surgery. Other areas of growth include Fluid Management and AngioVac withinPeripheral Vascular and the BioFlo family of products within Vascular Access.Strategic Initiatives to Drive GrowthThroughout the year, we introduced strategic moves designed to streamline our business, improve our overall business operations and position ourselvesfor growth. Those initiatives included:•Operational Consolidation. The Company announced a planned consolidation of operations from the Manchester, GA and Denmead, UK facilitiesinto the Glens Falls and Queensbury, NY manufacturing facilities in the third quarter of fiscal year 2017. The consolidation was completed duringfiscal year 2018 and resulted in streamlined operations, reduced costs, optimized inventory management and gross margin improvement. As part ofthe plan, the Company incurred restructuring expenses, including severance and retention, equipment transfer, set-up and purchases, regulatoryexpenses, lease termination expenses and other miscellaneous expenses.•Product development process. The Company continued its robust product development process which is intended to improve the Company’s abilityto bring new products to market.•New members of the executive leadership team. President and Chief Executive Officer James C. Clemmer continued to welcome new members to theAngioDynamics leadership team, including Brent Boucher, Senior Vice President and General Manager of Oncology/Surgery Global Business Unitand David Helsel, Senior Vice President Global Operations.•Value Creation. To create value, the Company plans to practice dispassionate portfolio optimization and continue to focus on areas of compellingunmet needs including those that are patient-centric and evidenced-based. This is evident through the updated GBU's effective June 1, 2018 whichwill allow for call point expansion and sales force realignment. In addition, the Company is pursuing targeted global expansion opportunities.39Critical Accounting Policies and Use of EstimatesOur significant accounting policies are summarized in Note 1 to Notes to Consolidated Financial Statements included elsewhere in this Annual Reporton Form 10-K. While all these significant accounting policies affect the reporting of our financial condition and results of operations, we view certain ofthese policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require usto use a greater degree of judgment and/or estimates. Actual results may differ from those estimates. The accounting policies identified as critical are asfollows:Revenue RecognitionWe recognize revenue in accordance with generally accepted accounting principles as outlined in the SEC’s authoritative guidance on revenuerecognition which requires that four criteria be met before revenue can be recognized: (i) persuasive evidence that an arrangement exists; (ii) the price is fixedor determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered. Decisions relative tocriterion (iii) regarding collectability are based upon our judgments, as discussed under “Accounts Receivable” in Note 1, and should conditions change inthe future and cause us to determine this criterion is not met; our results of operations may be affected. We recognize revenue, net of sales taxes assessed byany governmental authority, as products are shipped, based on F.O.B. shipping point terms when title and risk of loss passes to customers. We negotiateshipping and credit terms on a customer-by-customer basis and products are shipped at an agreed upon price. All product returns must be pre-approved by usand customers may be subject to a 20% restocking charge. To be accepted, a returned product must be unadulterated, undamaged and have at least 12 monthsremaining prior to its expiration date. Charges for discounts, returns, rebates and other allowances are recognized as a deduction from revenue on an accrualbasis in the period in which the revenue is recorded. The accrual for product returns, discounts and other allowances is based on the Company’s history.Acquisitions and Contingent ConsiderationIn a business combination, the acquisition method of accounting requires that the identifiable assets acquired and liabilities assumed be measured attheir fair value, with goodwill being the excess value of consideration paid over the fair value of the net identifiable assets acquired. IP R&D is capitalizedand recorded as an indefinite-lived intangible asset at the acquisition date, contingent consideration is recorded at fair value at the acquisition date, andtransaction costs are expensed as incurred. When the Company acquires net assets that are not accounted for as a business combination, no goodwill isrecognized.The fair value of the liability for contingent consideration recorded on the acquisition date is based on probability weighted estimated cash flowstreams, discounted back to present value using a discount rate determined in accordance with accepted valuation methods. The liability for contingentconsideration is remeasured to fair value at each reporting period with changes recorded in earnings until the contingency is resolved.Goodwill and Intangible AssetsIntangible assets other than goodwill, indefinite lived intangible assets and in process research and development ("IP R&D") are amortized over theirestimated useful lives, which range between two to eighteen years, on either a straight-line basis over the expected period of benefit or as revenues are earnedfrom the sales of the related products. We periodically review the estimated useful lives of our intangible assets and review such assets for impairmentwhenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If an intangible asset is considered to beimpaired, the amount of the impairment will equal the excess of the carrying value over the fair value of the asset.Goodwill and other intangible assets that have indefinite useful lives are not amortized, but rather, are tested for impairment annually or morefrequently if impairment indicators arise. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiableintangible assets acquired in each business combination. Goodwill and intangible assets have been recorded at either incurred or allocated cost. Allocatedcosts were based on respective fair market values at the date of acquisition.For goodwill, the impairment test requires a comparison of the estimated fair value of the reporting unit to which the goodwill is assigned to carryingvalue of the assets and liabilities of that reporting unit. The determination of reporting units also requires management judgment. The Company considerswhether a reporting unit exists within a reportable segment based on the availability of discrete financial information. If carrying value of the reporting unitexceeds the fair value of the reporting40unit, the carrying value of the reporting unit’s goodwill is reduced to its fair value through an adjustment to the goodwill balance, resulting in an impairmentcharge.The Company operates as a single operating segment with one reporting unit and consequently evaluates goodwill for impairment based on anevaluation of the fair value of the Company as a whole. The Company determines the fair value of the reporting unit based on the market valuation approachand concluded that it was not more-likely-than-not that the fair value of the Company's reporting unit was less than its carrying value.ContingenciesWe are involved, both as a plaintiff and a defendant, in various legal proceedings that arise in the ordinary course of business, including productliability, as further discussed in Note 15 to our consolidated financial statements. Accruals recorded for various contingencies including legal proceedings,self insurance and other claims, are based on judgment, the probability of losses and, where applicable, the consideration of opinions of internal and/orexternal legal counsel, internal and/or external technical consultants and actuarially determined estimates. When a range is established but a best estimatecannot be made, we record the minimum loss contingency amount, which could be zero. An estimate is often initially developed substantially earlier than theultimate loss is known and is reevaluated each accounting period. As information becomes known, additional loss provision is recorded when either a bestestimate can be made or the minimum loss amount is increased. When events result in an expectation of a more favorable outcome than previously expected,our best estimate is changed to a lower amount. We record receivables from third-party insurers up to the amount of the related liability when we havedetermined that existing insurance policies will provide reimbursement. In making this determination, we consider applicable deductibles, policy limits andthe historical payment experience of the insurance carriers. Receivables are not netted against the related liabilities for financial statement presentation.Results of Operations for the years ended May 31, 2018 and 2017For the fiscal year ended May 31, 2018, we reported net income of $16.3 million, or $0.44 income per diluted share, on net sales of $344.3 millioncompared to a fiscal year 2017 net income of $5.0 million, or $0.14 income per diluted share, on net sales of $349.6 million.Net SalesNet sales - Net sales are derived from the sale of our products and related freight charges, less discounts and returns.Net sales for the year ended May 31, 2018 and 2017 were: Year ended May 31,(in thousands)2018 2017 % GrowthNet Sales by Product Category Peripheral Vascular$202,334 $208,602 (3)% Vascular Access92,760 96,481 (4)% Oncology/Surgery49,191 44,560 10%Total$344,285 $349,643 (2)% Net Sales by Geography United States$273,327 $282,168 (3)% International70,958 67,475 5%Total$344,285 $349,643 (2)%For year ended May 31, 2018, net sales decreased $5.4 million to $344.3 million compared to the year ended May 31, 2017.•Consolidated and U.S. net sales decreased from the prior year as a result of decreased net sales from Peripheral Vascular and Vascular Access. Thisdecrease was partially offset by 10% year over year growth in our Oncology/Surgery GBU.41Peripheral Vascular•Total Peripheral Vascular sales decreased $6.3 million primarily attributable to decreased sales volume of Venous by $9.3 million and Angiographicand Core products of $1.6 million. The decrease in Venous is primarily attributed to our largest customer discontinuing their exclusive use of ourEVLT product. This decreased sales volume was offset by an increase of volume in Fluid Management of $4.0 million and AngioVac of $0.9million. The increase in Fluid Management was attributed to the Fluid Management dedicated sales team being fully staffed and promoting newcustom kits along with targeted R&D investments.•U.S. Peripheral Vascular sales decreased $5.6 million primarily due to decreased sales volume of Venous of $9.1 million and Angiographic and Coreproducts of $0.9 million. This decreased sales volume was offset by an increase in volume in Fluid Management of $3.5 million and AngioVac of$1.0 million.•International Peripheral Vascular sales decreased $0.7 million.Vascular Access•Total Vascular Access sales decreased $3.7 million primarily in our non-BioFlo businesses. Our BioFlo product lines, other than BioFlo PICCs,increased $2.4 million. This was partially offset by decreased sales of BioFlo PICCs of $2.5 million and non-BioFlo products of $3.1 million. BioFloproduct lines comprise 49% of our overall Vascular Access sales, compared to 47% a year ago.•U.S. Vascular Access sales declined by $3.8 million due to softness across the portfolio offset by Midline, BioFlo dialysis and ports which continuedto gain traction in the marketplace.•International Vascular Access sales increased $0.1 million.Oncology/Surgery•Total Oncology/Surgery sales increased $4.6 million year over year primarily due to increased sales of the Solero Microwave generators of $1.3million, Solero Microwave probes of $6.4 million and other sales of $0.7 million. Solero Microwave was approved in the first quarter of fiscal year2018. This was partially offset by decreased Radiofrequency Ablation sales of $3.4 million and Nanoknife disposable sales of $0.6 million. Thedecrease in Radiofrequency Ablation sales was primarily due to the discontinuation of the product in Japan.•U.S. Oncology/Surgery increased by $0.6 million, driven primarily through increased Microwave sales of $3.4 million. This increase was partiallyoffset by decreases in Radiofrequency Ablation of $1.7 million and NanoKnife of $1.4 million.•International Oncology/Surgery sales increased $4.0 million year over year as a result of increased NanoKnife capital and disposable sales of $1.1million and Solero Microwave capital and disposable sales of $4.3 million. This increase was partially offset by a $1.7 million decrease inRadioFrequency Ablation.Gross Profit, Operating expenses, and Other income (expense) Year ended May 31,(in thousands) 2018 2017 % ChangeGross profit (exclusive of intangible amortization) $176,875 $176,169 0.4 %Gross profit % of sales 51.4% 50.4% Research and development $25,459 $25,269 0.8 %% of sales 7.4% 7.2% Selling and marketing $77,276 $78,819 (2.0)%% of sales 22.4% 22.5% General and administrative $31,265 $31,406 (0.4)%% of sales 9.1% 9.0% Gross profit - Gross profit consists of net sales less the cost of goods sold, which includes the costs of materials, products purchased from third parties and soldby us, manufacturing personnel, royalties, freight, business insurance, depreciation of property and equipment and other manufacturing overhead, exclusiveof intangible amortization.Gross profit increased by $0.7 million compared to the prior year. The increase is attributable to the following:42 •The expiration of a royalty agreement of approximately $4.8 million, net productivity of $1.7 million, $0.9 million of mix and FX of $0.8 millionwere partially offset by volume softness and pricing headwinds of approximately $4.8 million.•$2.3 million in deferred revenue was recognized in fiscal year 2018 related to the Acculis probe recall announced in the fourth quarter of fiscal year2017 which was partially offset by additional expense of $3.2 million that was incurred as a result of the market withdrawal of Microwavegenerators.•In the second quarter of fiscal year 2018, the Company decided to discontinue selling our RadioFrequency Ablation product in Japan which resultedin a $1.7 million inventory provision.Research and development expenses - Research and development (“R&D”) expenses include internal and external costs to develop new products, enhanceexisting products, validate new and enhanced products, manage clinical, regulatory and medical affairs.R&D expense increased $0.2 million compared to the prior year. The increase is attributable to the following:•Increased headcount in the R&D department compared to the prior year resulted in $0.6 million in additional expense. These increases were partiallyoffset by less project spend of $0.4 million.Sales and marketing expenses - Sales and marketing (“S&M”) expenses consist primarily of salaries, commissions, travel and related business expenses,attendance at medical society meetings, product promotions and marketing activities.S&M expense decreased by $1.5 million compared to the prior year. The decrease is attributable to the following:•Compensation and benefits decrease of approximately $2.7 million was primarily the result of decreased variable compensation of $2.3 million andopen headcount of $0.5 million.•Open headcount resulted in increased travel of $0.5 million and recruiting expense of $0.3 million.•Lower consulting spend of $0.7 million was partially offset by increased trade show and meeting expense of $0.5 million and increased samplesexpense related to the Solero launch of $0.2 million.General and administrative expenses - General and administrative (“G&A”) expenses include executive management, finance, information technology,human resources, business development, legal, and the administrative and professional costs associated with those activities.G&A expense remained consistent year over year.•Compensation and benefits increase of approximately $1.9 million was primarily the result of increased headcount year over year which waspartially offset by a decrease in variable compensation expense of $0.5 million.•These increases were offset by lower depreciation expense of $0.8 million, a decrease in bad debt expense of $0.3 million and a decrease inrecruiting expenses of $0.4 million. Year ended May 31,(in thousands) 2018 2017 $ ChangeAmortization of intangibles $16,635 $17,296 $(661)Change in fair value of contingent consideration $250 $(15,261) $15,511Acquisition, restructuring and other items, net $15,432 $27,510 $(12,078)Medical device excise tax $— $(1,837) $1,837Other expense $(3,093) $(3,120) $27Amortization of intangibles - Represents the amount of amortization expense that was taken on intangibles assets held by the Company.•The decrease of $0.7 million is primarily related to intangible assets that became fully amortized in the prior year.Change in fair value of contingent consideration - Represents changes in contingent consideration driven by changes to estimated future payments on earn-out liabilities created through acquisitions and amortization of present value discounts on long-term contingent consideration.43•In the prior year, a gain of $13.4 million was taken on the AngioVac product as a result of decreases in future sales projections that eliminated anypayments above minimums and a gain of $3.1 million on the TiLo product as the milestone was determined to not be achieved. The normalamortization of the present value discount on the contingent liabilities was approximately $0.1 million for the first two quarters of fiscal year 2018.For the last two quarters of fiscal year 2018, amortization is now less than $0.1 million per quarter as the final minimum payment was made onAngioVac in the second quarter of fiscal year 2018.Acquisition, restructuring and other items, net - Acquisition, restructuring and other items, net represents costs associated with mergers and acquisitions,restructuring expenses, legal costs that are related to litigation that is not in the ordinary course of business, legal settlements and other one-time items.Acquisition, restructuring and other items, net decreased by $12.1 million compared to the prior year. The decrease is attributable to the following:•In the current year there was $4.7 million of expense related to the plant consolidation that was announced in the third quarter of fiscal year 2017.The expense consisted mainly of severance of $1.4 million, costs to move the product lines including equipment transfer expenses, accelerateddepreciation for assets that will not be transferred, product validation and other start-up costs of $2.9 million and $0.2 million in contracttermination expenses.•In the prior year, there was $1.3 million of expense related to the plant consolidation that was announced in the third quarter of fiscal year 2017. Theexpense consisted of severance of $0.8 million and start-up costs to move the product lines including equipment transfer expenses and accelerateddepreciation for assets that will not be transferred of $0.5 million.•In the prior year there was a $2.0 million write-off of Embomedics due to termination of the agreement and a $3.6 million write-off related to thedecision to discontinue our investment in the TiLo product.•A litigation settlement accrual of $12.5 million was recorded in the fourth quarter of fiscal year 2017 for the agreement that was reached with theDOJ.•Legal expenses, related to litigation that is outside of the normal course of business, of $10.1 million were recorded in the current year compared to$7.0 million in the prior year.Cost savings from the plant consolidation will primarily impact cost of goods sold. While some cost savings were recognized in 2018 we expect additionalsavings of approximately $4.0 million to $5.0 million in fiscal year 2019.Medical device excise tax - Medical device excise tax has been assessed on our U.S. product sales subject to exclusions and adjustments.•The Medical Device Excise Tax was suspended on January 1, 2016 and the suspension was upheld in January 2018. In the prior year, there was a$1.8 million refund from the Internal Revenue Service related to prior medical device taxes paid.Other expenses - Other expenses include interest expense, foreign currency impacts, bank fees, and amortization of deferred financing costs and remainedconsistent with the prior year. Income Tax Provision (Benefit) For year ended May 31,(in thousands) 2018 2017Income tax expense (benefit) $(8,870) $4,839Effective tax rate including discrete items (119)% 49%Our effective tax rate was a benefit of 119% for fiscal 2018 compared with an effective tax rate of 49% for the prior year.The current year rate reflects an income tax benefit of $8.9 million primarily driven by the impact of the U.S. Tax Reform, the valuation allowancerecorded and the deferred tax liability related to intangibles that have an indefinite reversal period ("naked credit deferred tax liability"), which as a result ofU.S. Tax Reform can now be considered as a source of income to recover indefinite lived NOLs.44The Company is required to record deferred tax assets and liabilities based on the enacted tax rates at which they are expected to reverse in thefuture. The Company has remeasured its deferred tax positions as of December 31, 2017 at the new enacted tax rate, resulting in a decrease to it net deferredtax assets and a corresponding decrease to its valuation allowance, with no net impact to tax expense. The Company recorded an income tax benefit ofapproximately $9.3 million due to the revaluation of the naked credit deferred tax liability. The Tax Reform Act changed the NOL carryover rules andcreated a new limitation on their use. NOLs created in fiscal 2018 and beyond may be carried forwarded indefinitely in any year. As a result, the Company’snaked credit deferred tax liability can now be considered as a source of income to recover indefinite lived NOLs. Consequently, the Company has offsetcertain of its naked credit deferred tax liability against its deferred tax assets resulting in a reduction in the valuation allowance and a $3.0 million benefit inthe year ended May 31, 2018.The prior year rate primarily reflects income tax expense of $4.8 million primarily driven by the impact of the U.S. valuation allowance and the nakedcredit deferred tax liability that could not be considered as a source of income to recover the deferred tax assets.The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significantmanagement judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluated all available positive andnegative evidence, and weighted the evidence based on its objectivity. Evidence the Company considered included its history of net operating losses, whichresulted in the Company recording a full valuation allowance for its deferred tax assets in fiscal 2016 and each year thereafter. The Company was marginallyprofitable (pretax and adjusted for permanent items) on a cumulative basis for the three years ended May 31, 2018, but substantially all of that profitabilitywas achieved during 2018.Based on the review of all available evidence, the Company determined that it has not yet attained a sustained level of profitability and the objectivelyverifiable negative evidence outweighed the positive evidence and therefore the Company has provided a valuation allowance for the full amount, with theexception of the naked credit deferred tax liability, of its net deferred tax asset as of May 31, 2018. The Company will continue to assess the level of thevaluation allowance required. If sufficient positive evidence exists in future periods to support a release of some or all of the valuation allowance, such arelease would likely have a material impact on the Company’s results of operations.Results of Operations for the years ended May 31, 2017 and 2016For the fiscal year ended May 31, 2017, we reported net income of $5.0 million, or $0.14 loss per basic and diluted common share, on net sales of$349.6 million compared to a fiscal 2016 net loss of $43.6 million, or $1.21 per basic and diluted common share, on net sales of $353.9 million.Net SalesNet sales - Net sales are derived from the sale of our products and related freight charges, less discounts and returns.Net sales for the year ended May 31, 2017 and 2016 were: Year ended May 31,(in thousands)2017 2016 % GrowthNet Sales by Product Category Peripheral Vascular$208,602 $205,620 1% Vascular Access96,481 99,375 (3)% Oncology/Surgery44,560 48,895 (9)%Total$349,643 $353,890 (1)% Net Sales by Geography United States$282,168 $285,824 (1)% International67,475 68,066 (1)%Total$349,643 $353,890 (1)%For year ended May 31, 2017, net sales decreased $4.2 million to $349.6 million compared to the year ended May 31, 2016.45•Consolidated and U.S. net sales decreased from the prior year as a result of decreased net sales from Vascular Access and Oncology Surgery. Thisdecrease was partially offset by 1% year over year growth in our Peripheral Vascular franchise.Peripheral Vascular•Total Peripheral Vascular sales increased $3.0 million primarily attributable to increased sales volume of Angiographic and Core products of $9.9million. This increased sales volume was partially offset by a decrease of volume in Fluid Management, Venous and AngioVac of $5.6 million. Thedecrease in Fluid Management was attributed to a discontinuance of our inflation device and automation challenges in the European markets.Although AngioVac procedures were up year over year, AngioVac unit sales decreased by $1.4 million due to available inventory already in themarket place.•U.S. Peripheral Vascular sales increased $2.8 million and international Peripheral Vascular sales increased $0.2 million which was primarily due toincreased sales volume of Angiographic catheters. This increased sales volume was offset by a decrease in volume in Fluid Management, Venousand AngioVac.Vascular Access•Total Vascular Access sales decreased $2.9 million primarily in our non-BioFlo businesses. Our BioFlo product line grew by $4.8 million primarilydriven by growth in Midlines.•U.S. Vascular Access sales declined by 5% due to softness across the portfolio offset by Midline and BioFlo dialysis which continued to gaintraction in the marketplace.•International Vascular Access sales increased 15% due to the market penetration of BioFlo PICCs.Oncology/Surgery•Total Oncology/Surgery sales decreased $4.3 million year over year primarily due to fewer sales of capital units in Microwave and NanoKnife aswell as the $2.6 million deferral of revenue related to the Acculis probe recall that was announced in the fourth quarter of fiscal year 2017.•U.S. Oncology/Surgery declined by 8%, driven primarily through lower capital and disposable sales in Radio Frequency and Microwave offset byNanoKnife growth. The decrease is also attributed to a $1.4 million deferral of revenue related to the Acculis probe recall that was announced in thefourth quarter of fiscal year 2017.•International Oncology/Surgery sales decreased 10% year over year as a result of lower NanoKnife capital and disposable sales and a $1.2 milliondeferral of revenue related to the Acculis probe recall that was announced in the fourth quarter of fiscal year 2017.Gross Profit, Operating expenses, and Other income (expense) Year ended May 31,(in thousands) 2017 2016 % ChangeGross profit $176,169 $174,316 1.1 %Gross profit % of sales 50.4% 49.3% Research and development $25,269 $25,053 0.9 %% of sales 7.2% 7.1% Selling and marketing $78,819 $83,743 (5.9)%% of sales 22.5% 23.7% General and administrative $31,406 $30,583 2.7 %% of sales 9.0% 8.6% Gross profit - Gross profit consists of net sales less the cost of goods sold, which includes the costs of materials, products purchased from third parties and soldby us, manufacturing personnel, royalties, freight, business insurance, depreciation of property and equipment and other manufacturing overhead.Gross profit increased by $1.9 million compared to the prior year. The increase is attributable to the following: •In fiscal year 2017, a net charge of $4.5 million was recorded as a result of the Acculis probe recall.46•In fiscal year 2016, a $5.9 million charge related to the write-off of Celerity inventory on hand and hardware assets after the business decision to nolonger pursue the Celerity Navigation project.•The remaining increase is driven by net productivity offset by price and mix of products.•The increase in gross profit as a percentage of 1.1% is attributed to the factors noted above.Research and development expenses - Research and development (“R&D”) expenses include internal and external costs to develop new products, enhanceexisting products, validate new and enhanced products, manage clinical, regulatory and medical affairs.R&D expense increased $0.2 million compared to the prior year. The increase is attributable to the following:•Increased headcount in the R&D department compared to the prior year resulted in $1.2 million in additional expense as well as expenses associatedwith consultants of $0.6 million and severance of $0.4 million.•These increases were partially offset by less project spend of $1.2 million, $0.6 million in samples and $0.2 million in travel and other expenses.•R&D expense as a percentage of sales remained consistent year over year.Sales and marketing expenses - Sales and marketing (“S&M”) expenses consist primarily of salaries, commissions, travel and related business expenses,attendance at medical society meetings, product promotions and marketing activities.S&M expense decreased by $4.9 million compared to the prior year. The decrease is attributable to the following:•There was a decrease in headcount from the prior year which resulted in a $2.5 million decrease in salaries and benefits.•The decrease in headcount along with a focus on reduced travel spend resulted in a decrease in travel expenses of $1.3 million.•There was a $0.7 million decrease in trade shows and meeting expenses along with a $0.7 million decrease in samples as a result of a focus onreducing expenses.•These decreases were partially offset by severance of $0.8 million.•As a result of these decreases in S&M expenses, the percentage of S&M to sales decreased 1.2%.General and administrative expenses - General and administrative (“G&A”) expenses include executive management, finance, information technology,human resources, business development, legal, and the administrative and professional costs associated with those activities.G&A expense increased by $0.8 million compared to the prior year. The increase is attributable to the following:•Increased stock based compensation expense related to the new grant for the CEO along with two new board members of $1.7 million. Along withthe stock based compensation increase, bonus for fiscal year 2017 was accrued at a higher rate than the prior year which resulted in a $1.0 millionincrease to G&A expense.•Along with the appointment of new members in the executive leadership team, recruiting and relocation expenses resulted in an increase of $0.5million from the prior year•There was also an increase in professional fees of $0.3 million related to audit fees and director fees partially offset by a decrease in legal fees.•These increases were partially offset by decreases in compensation benefits of $0.5 million as a result of a reduction in benefit claims, depreciationexpense of $0.8 million, $0.2 million in facilities expenses including insurance, lease expenses and utilities, bad debt favorability of $0.4 millionand other miscellaneous decreases in expenses of $0.4 million. Year ended May 31,(in thousands) 2017 2016 $ ChangeAmortization of intangibles $17,296 $17,964 $(668)Change in fair value of contingent consideration $(15,261) $948 $(16,209)Acquisition, restructuring and other items, net $27,510 $12,591 $14,919Medical device excise tax $(1,837) $2,416 $(4,253)Other expense $(3,120) $(4,271) $1,15147Amortization of intangibles - Represents the amount of amortization expense that was taken on intangibles assets held by the Company.•The decrease of $0.7 million is primarily related to intangible assets that became fully amortized.Change in fair value of contingent consideration - Represents changes in contingent consideration driven by changes to estimated future payments on earn-out liabilities created through acquisitions and amortization of present value discounts on long-term contingent consideration.•The decrease is due to a write-off of $13.4 million that was taken on the AngioVac product as a result of decreases in future sales projections thateliminated any payments above minimums and a write-off of $3.1 million on the TiLo product as the milestone will not be achieved. This waspartially offset by normal amortization of the present value discount on the contingent liabilities.Acquisition, restructuring and other items, net - Acquisition, restructuring and other items, net represents costs associated with mergers and acquisitions,restructuring expenses, legal costs that are related to litigation that is not in the ordinary course of business, legal settlements and other one-time items.Acquisition, restructuring and other items, net increased by $14.9 million compared to the prior year. The increase is attributable to the following:•In Q2 fiscal year 2017, the intangible assets associated with TiLo were written off for $3.6 million as a result of the decision to discontinue ourinvestment in the TiLo product along with a $2.0 million write-off of the investment in Embomedics due to termination of the agreement. The prioryear had asset impairments of $0.4 million.•There was $1.3 million of expense related to the plant consolidation which consisted mainly of severance and start-up costs to move the productlines including equipment transfer expenses, accelerated depreciation for assets that will not be transferred, validation and other start up costs. Theprior year had accelerated depreciation related to the Operational Excellence program of $1.0 million along with $0.5 million in other expenses.•A litigation settlement accrual for $12.5 million was recorded in the fourth quarter of fiscal year 2017.•Legal expenses of $7.0 million which was a decrease of $0.5 million from the prior year.•Other miscellaneous items decreased $2.2 million from the prior year primarily attributable to a decrease in M&A expenses of $2.5 million offset bya gain in the prior year of $0.7 million related to the modification of stock based compensation awards for the former CEO.Medical device excise tax - Medical device excise tax is assessed on our U.S. product sales subject to exclusions and adjustments.•The Medical Device Excise Tax was suspended on January 1, 2016 therefore, fiscal year 2016 had seven months of the tax. In the current year, thereis a $1.8 million refund from the Internal Revenue Service related to prior medical device taxes paid.Other expenses - Other expenses include interest expense, foreign currency impacts, bank fees, and amortization of deferred financing costs.•The decrease in other expenses of $1.2 million was due to lower interest expense on lower outstanding debt and lower interest rates under the CreditAgreement along with unrealized foreign currency gains from re-measurement offset by the write off of the deferred financing fees from the originalcredit facility.Income Tax Provision (Benefit) Year ended May 31,(in thousands) 2017 2016Income tax expense (benefit) $4,839 $40,337Effective tax rate including discrete items 49% (1,240)%48Our effective tax rate was 49% for fiscal 2017 compared with a benefit of 1,240% for the prior year. The current year rate reflects expense of $4.8 millionprimarily driven by the impact of the U.S. valuation allowance and the deferred tax liability related to intangibles that have an indefinite reversal period andcannot be considered as a source of income to recover the deferred tax assets. The prior year rate primarily reflects income tax expense of $40.4 millionrelated to full valuation allowance on our U.S. net deferred tax assets that was established during fiscal 2016 and the deferred tax liability related tointangibles that have an indefinite reversal period and cannot be considered as a source of income to recover the deferred tax assets.At May 31, 2017, we had a net deferred tax liability of $26.1 million, after a valuation allowance on our U.S. deferred tax assets of $48.3 million. Theincrease in the valuation allowance during fiscal 2017 was $6.1 million.A valuation allowance is provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assetswill not be realized. After careful consideration and weighing of all the available positive and negative evidence, the weight given to the threeyear cumulative loss and lack of a recent history of core earnings was difficult to overcome and a full valuation allowance related to the U.S. deferred taxassets was established in the period ending May 31, 2016. Management considered all available positive and negative evidence at May 31, 2017, andconsidering the cumulative loss in the U.S. over the three year period, determined that the valuation allowance is still required. Management will continue toreevaluate the positive and negative evidence at each reporting period and if future results as projected in the U.S. and the Company's tax planning strategiesare favorable, the valuation allowance may be removed, which could have a favorable material impact on the Company's results of operations in the period inwhich it is recorded.Liquidity and Capital ResourcesOur cash and cash equivalents totaled $74.1 million as of May 31, 2018, compared with $47.5 million as of May 31, 2017. Marketable securitiestotaled $1.3 million and $1.2 million as of May 31, 2018 and 2017, respectively, and consist of auction rate securities. As of May 31, 2018, total debtoutstanding was $92.5 million comprised of a term loan. The net debt to Consolidated EBITDA, as defined by the Credit Agreement (see Note 11), is 1.4x.The fair value of the contingent consideration liability as of May 31, 2018 was $3.3 million.The table below summarizes our cash flows for the years ended May 31, 2018, 2017 and 2016: Year ended May 31,(in thousands)2018 2017 2016Cash provided by (used in): Operating activities$41,287 $55,745 $45,216Investing activities(3,656) (2,551) (7,569)Financing activities(11,551) (37,983) (23,663)Effect of exchange rate changes on cash and cash equivalents472 — (42)Net change in cash and cash equivalents$26,552 $15,211 $13,942During the twelve months ended May 31, 2018, 2017 and 2016, cash flows consisted of the following:Cash provided by operating activities:Year ended 2018:•Net income was driven by higher gross margin, lower operating expenses in selling and marketing, general and administrative and acquisition,restructuring and other items, net. Partially offsetting the positive cash impact was a $9.3 million non-cash discrete tax benefit as a result of theTax Reform Act and the revaluation of the Company's deferred tax assets and liabilities to reflect the lower statutory rate.•The Company continues to focus on optimizing days sales outstanding ("DSO") which contributed $5.0 million to working capitalimprovement. Working capital was also positively impacted by decreased inventory on hand of $5.7 million. Even though the Companycontinued to optimize days payables outstanding ("DPO"), the decrease in raw material purchases at year end negatively impacted workingcapital from accounts payable and accrued liabilities.49Year ended 2017:•Net income was driven by higher gross margins, lower sales and marketing expenses as well as the medical device tax refund. Also impactingnet income, were non-cash items which consisted of $15.3 million of contingent consideration gains, $2.0 million in the write-off of theEmbomedics investment and $3.6 million in intangible write-offs related to TiLo.•With regards to working capital, the Company focused on optimizing both DSO and DPO which contributed to $15.2 million of workingcapital improvement. With respect to inventory, the $2.4 million reserve for Acculis inventory partially offset the inventory build related tothe plant consolidation.Year ended 2016:•DSO improvement and inventory management, coupled with reductions in payables and accrued expenses contributed to $12.9 millionimprovement in operating activities. The $12.9 million improvement includes approximately $4.8 million in non-cash changes to inventoryreserves.Cash used in investing activities:Year ended 2018:•$2.4 million in fixed asset additions.•In the third quarter, we entered into a distribution and license agreement where we recorded the upfront license fee of $1.3 million as anintangible asset that will be amortized over thirty-six months.Year ended 2017:•$3.0 million in fixed asset additions.•$0.5 million in proceeds from an auction rate security that was called during fiscal year 2017.Year ended 2016:•$2.3 million in fixed asset additions.•$2.0 million in warrant additions related to EmboMedics and $3.3 million in intangible asset additions related to the Asclera DistributionAgreement.Cash used in financing activities:Year ended 2018:•$5.0 million in repayments on long-term debt, consistent with the required amortization payment on the Term Loan.•$2.9 million of proceeds from stock option and ESPP activity.•$9.5 million payment on earn-out liabilities.Year ended 2017:•Net $23.9 million in repayments on long-term debt after the proceeds from the Credit Agreement and repayment of the old credit agreement.•$1.3 million in deferred financing fees related to the new credit agreement.•$10.7 million of proceeds from stock option and ESPP. The large increase is related to the exercise of stock based awards from executivemanagement turnover that took place in fiscal year 2017.•$9.9 million payment on earn-out liabilities.•$13.6 million from the repurchase of common shares in fiscal 2017.Year ended 2016:•Net $16.3 million in repayments on long-term debt.•$2.4 million of proceeds from stock option and ESPP activity.50•$9.9 million payment on earn-out liabilities. On November 7, 2016, the Company entered into a Credit Agreement that provides for a $100.0 million senior secured term loan facility and a $150.0million senior secured revolving credit facility, which includes up to a $20.0 million sublimit for letters of credit and a $5.0 million sublimit for swinglineloans. On May 24, 2018, the Company entered into Amendment One of the Credit Agreement. This amendment increased the amount of U.S. cash that can beutilized to calculate net debt from $10.0 million to $20.0 million.We believe that our current cash and investment balances, together with cash generated from operations and access to our revolving credit facility, willprovide sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months. If we seek to make significant acquisitions of otherbusinesses or technologies in the future for cash, we may require external financing.Our contractual obligations as of May 31, 2018 are set forth in the table below (in thousands). We have no variable interest entities or other off-balancesheet obligations. Cash Payments Due By Period as of May 31, 2018(in thousands)Total Less thanOne Year 1-3 Years 3-5 Years After 5YearsContractual Obligations: Long term debt and interest$103,281 $8,383 $94,898 $— $—Operating leases (1)7,608 2,234 3,706 1,668 —Purchase obligations (1)56,201 11,751 38,917 5,533 —Acquisition-related future obligations (2)3,308 2,100 1,208 — —Royalties45,000 3,000 10,500 10,500 21,000Litigation matters (3)12,500 12,500 — — — Other667 167 500 — — $228,565 $40,135 $149,729 $17,701 $21,000 (1)The non-cancelable operating leases and inventory purchase obligations are not reflected on our consolidated balance sheets under accountingprinciples generally accepted in the United States of America.(2)Acquisition-related future obligations include scheduled minimum payments and contingent payments based upon achievement of performancemeasures or milestones such as sales or profitability targets, the achievement of research and development objectives or the receipt of regulatoryapprovals. The amount represents the undiscounted value of contingent liabilities recorded on the balance sheet. Timing of payments are ascontractually scheduled, or where contingent, the Company's best estimate of payment timing.(3)This was paid in the first quarter of fiscal year 2019.Recent Accounting PronouncementsRefer to Note 1 for Recently issued Accounting Pronouncements.51Item 7A.Quantitative and Qualitative Disclosures about Market Risk.FOREIGN CURRENCY EXCHANGE RATE RISKWe are exposed to market risk from changes in currency exchange rates, as well as interest rate fluctuations on our credit facility and investments thatcould impact our results of operations and financial position.We transact sales in currencies other than the U.S. Dollar, particularly the Euro, British pound and Canadian dollar. Approximately 7.1% of our sales infiscal 2018 were denominated in foreign currencies. We do not have expenses denominated in foreign currencies at the level of our sales and as a result, ourprofitability is exposed to currency fluctuations. When the U.S. Dollar strengthens, our sales and gross profit will be negatively impacted. In addition, wehave assets and liabilities denominated in non-functional currencies which are remeasured at each reporting period, with the offset to changes presented as acomponent of Other (Expenses) Income. Significant non-functional balances include accounts receivable due from a sub-section of our internationalcustomers.INTEREST RATE RISKOn November 7, 2016, we entered into the Credit Agreement which provides for a $100 million senior secured Term Loan and a $150 millionRevolving Facility. Interest on both the Term Loan and Revolving Facility is based on a base rate or Eurodollar rate plus an applicable margin whichincreases as our total leverage ratio increases, with the base rate and Eurodollar rate having ranges of 0.50% to 1.25% and 1.50% to 2.25% respectively. In theevent of default, the interest rate may be increased by 2.0%. A 50 basis point (0.50%) increase or decrease in the interest rate would result approximately in a$2.0 million increase or decrease in interest expense over the remaining life of the agreement.CONCENTRATION OF CREDIT RISKFinancial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash and cashequivalents, our credit facility and trade accounts receivable.The Company maintains cash and cash equivalents at various institutions and performs periodic evaluations of the relative credit standings of thesefinancial institutions to ensure their credit worthiness. In addition, the Credit Agreement is structured across five investment grade banks. The Company hasthe ability to draw equally amongst the five banks which limits the concentration of credit risk of one institution.Concentration of credit risk with respect to trade accounts receivable is limited due to the large number of customers that purchase products from theCompany. No single customer represents more than 10% of total sales. The Company monitors the creditworthiness of its customers to which it grants creditterms in the normal course of business. Although the Company does not currently foresee a significant credit risk associated with the outstanding accountsreceivable, repayment is dependent upon the financial stability of our customers.Item 8.Financial Statements and Supplementary Data.Financial statements and supplementary data required by Part II, Item 8 are included in Part IV of this report as indexed as Item 15 (a) (1) and (2) of thisreport, and are incorporated by reference into this Item 8. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None. Item 9A.Controls and Procedures.Evaluation of disclosure controls and proceduresAs of the end of the period covered by this report, our management, under the supervision and with the participation of our Chief Executive Officerand our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b)of the Securities Exchange Act of 1934, as amended. Based on52that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the periodcovered by this report were effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the SecuritiesExchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and isaccumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisionsregarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting for our Company. Internal controlover financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a processdesigned by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management andother personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with accounting principles generally accepted in the United States and includes those policies and procedures that:•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accountingprinciples generally accepted in the United States, and that our receipts and expenditures are being made only in accordance with authorizations ofour management and members of our board of directors; and•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have amaterial effect on our financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.Our management has assessed the effectiveness of our internal control over financial reporting as of May 31, 2018. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-IntegratedFramework (2013). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of May 31, 2018.The effectiveness of our internal control over financial reporting as of May 31, 2018 has been audited by Deloitte & Touche LLP, an independentregistered public accounting firm, as stated in their report which appears herein.Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting for the fiscal quarter ended May 31, 2018 that has materially affected, or isreasonably likely to materially affect, our internal control over financial reporting.53Report of Independent Registered Public Accounting FirmTo the shareholders and the Board of Directors ofAngioDynamics, Inc.Latham, New YorkOpinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of AngioDynamics, Inc. and subsidiaries (the “Company”) as of May 31, 2018, based on criteriaestablished in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2018, based on criteriaestablished in Internal Control - Integrated Framework (2013) issued by COSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedfinancial statements as of and for the year ended May 31, 2018, of the Company and our report dated July 23, 2018, expressed an unqualified opinion onthose financial statements.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ Deloitte & Touche LLPBoston, MassachusettsJuly 23, 201854Item 9B.Other Information.None.55Part IIICertain information required by Part III is omitted from this Annual Report on Form 10-K because we will file a definitive proxy statement within 120days after the end of our fiscal year end pursuant to Regulation 14A (the “Proxy Statement”) for our annual meeting of Stockholders, currently scheduled forOctober 2018. The information included in the Proxy Statement under the respective headings noted below is incorporated herein by reference.Item 10.Directors, Executive Officers and Corporate Governance.Information required in this Annual Report on Form 10-K with respect to Executive Officers is contained in the discussion titled “Executive Officers ofthe Company” in Part I of this Annual Report on Form 10-K. The balance of the information required by Item 10 is incorporated herein by reference to ourProxy Statement under the heading “Election of Directors”. Item 11.Executive Compensation.The information required by Item 11 is incorporated herein by reference to our Proxy Statement under the heading “Executive Compensation”. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The information required by this caption is incorporated herein by reference to our Proxy Statement under the heading “Ownership of Securities”. Item 13.Certain Relationships and Related Transactions, and Director Independence.The information required by this caption is incorporated herein by reference to our Proxy Statement under the heading “Certain Relationships andRelated Transactions”. Item 14.Principal Accounting Fees and Services.The information required by this caption is incorporated herein by reference to our Proxy Statement under the headings “Audit Matters—PrincipalAccounting Fees and Services and—Policy on Audit Committee Pre-approval of Audit and Permissible Non-Audit Services of Independent Registered PublicAccounting Firm”.56Part IVItem 15.Exhibits, Financial Statement Schedules.(a)(1) Financial StatementsThe following consolidated financial statements and supplementary data of Registrant and its subsidiaries required by Part II, Item 8, are included inPart IV of this report: Report of Independent Registered Public Accounting Firms 58Consolidated statements of operations—Year ended May 31, 2018, 2017 and 2016 60Consolidated statements of comprehensive income (loss) – Year ended May 31, 2018, 2017 and 2016 61Consolidated balance sheets—May 31, 2018 and May 31, 2017 62Consolidated statements of stockholders’ equity—Year ended May 31, 2018, 2017 and 2016 63Consolidated statements of cash flows—Year ended May 31, 2018, 2017 and 2016 64Notes to consolidated financial statements 66(2) Financial Statement SchedulesThe following consolidated financial statement schedule is included in Part IV of this report: Schedule II—Valuation and qualifying accounts95All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidatedfinancial statements or notes thereto. (b) Exhibits9657Report of Independent Registered Public Accounting FirmTo the shareholders and the Board of Directors ofAngioDynamics, Inc.Latham, New YorkOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of AngioDynamics, Inc. and subsidiaries (the "Company") as of May 31, 2018 and 2017, therelated consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the two years in the period endedMay 31, 2018, and the related notes and the schedule for the years ended May 31, 2018 and 2017 listed in the Index at Item 15 (collectively referred to as the“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31,2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended May 31, 2018, in conformity with accountingprinciples generally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sinternal control over financial reporting as of May 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our report dated July 23, 2018 expressed an unqualified opinion on theCompany's internal control over financial reporting.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ Deloitte & Touche LLPBoston, MassachusettsJuly 23, 2018 We have served as the Company’s auditor since 2016. 58Report of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of AngioDynamics, Inc.In our opinion, the consolidated statement of operations, of comprehensive income (loss), of stockholders’ equity, and of cash flows for the year ended May31, 2016 present fairly, in all material respects, the results of operations and cash flows of AngioDynamics, Inc. and its subsidiaries (the Company) for theyear ended May 31, 2016, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, thefinancial statement schedule listed in the index appearing under Item 15(a)(2) for the year ended May 31, 2016, presents fairly, in all material respects, theinformation set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statementschedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financialstatement schedule based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion./s/ PricewaterhouseCoopers LLPBoston, MassachusettsAugust 1, 201659AngioDynamics, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data) Year ended May 31, 2018 2017 2016Net sales$344,285 $349,643 $353,890Cost of sales (exclusive of intangible amortization)167,410 173,474 179,574Gross profit176,875 176,169 174,316Operating expenses Research and development25,459 25,269 25,053Sales and marketing77,276 78,819 83,743General and administrative31,265 31,406 30,583Amortization of intangibles16,635 17,296 17,964Change in fair value of contingent consideration250 (15,261) 948Acquisition, restructuring and other items, net15,432 27,510 12,591Medical device excise tax— (1,837) 2,416Total operating expenses166,317 163,202 173,298Operating income10,558 12,967 1,018Other expenses Interest expense, net(3,062) (2,839) (3,385)Other expense(31) (281) (886)Total other expenses, net(3,093) (3,120) (4,271)Income (loss) before income tax expense (benefit)7,465 9,847 (3,253)Income tax expense (benefit)(8,870) 4,839 40,337Net income (loss)$16,335 $5,008 $(43,590)Earnings (loss) per share Basic$0.44 $0.14 $(1.21)Diluted$0.44 $0.14 $(1.21)Weighted average shares outstanding Basic37,075 36,617 36,161Diluted37,539 36,959 36,161The accompanying notes are an integral part of these consolidated financial statements.60AngioDynamics, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(in thousands) Year ended May 31, 2018 2017 2016Net income (loss)$16,335 $5,008 $(43,590)Other comprehensive income (loss), before tax: Unrealized gain (loss) on marketable securities102 12 (11)Unrealized gain on interest rate swap— — 257Foreign currency translation gain (loss)270 (545) (112)Other comprehensive income (loss), before tax372 (533) 134Income tax benefit (expense) related to items of other comprehensive income (loss)— — (92)Other comprehensive income (loss), net of tax372 (533) 42Total comprehensive income (loss), net of tax$16,707 $4,475 $(43,548)The accompanying notes are an integral part of these consolidated financial statements.61AngioDynamics, Inc. and SubsidiariesCONSOLIDATED BALANCE SHEETS(in thousands, except share data) May 31, 2018 May 31, 2017Assets Current Assets Cash and cash equivalents$74,096 $47,544Marketable securities, at fair value1,317 1,215Accounts receivable, net of allowances of $2,466 and $2,945, respectively39,401 44,523Inventories48,916 54,506Prepaid expenses and other4,302 6,126Total current assets168,032 153,914Property, plant and equipment, net42,461 45,234Other assets3,417 1,886Intangible assets, net130,310 145,675Goodwill361,252 361,252Total Assets$705,472 $707,961Liabilities and Stockholders' Equity Current Liabilities Accounts payable$15,775 $18,087Accrued liabilities34,426 38,804Current portion of long-term debt5,000 5,000Current portion of contingent consideration2,100 9,625Total current liabilities57,301 71,516Long-term debt, net of current portion86,621 91,320Deferred income taxes17,173 26,112Contingent consideration, net of current portion1,161 3,136Other long-term liabilities621 850Total Liabilities162,877 192,934Commitments and Contingencies (Note 15) Stockholders’ Equity Preferred stock, par value $.01 per share, 5,000,000 shares authorized; no shares issued and outstanding— —Common stock, par value $.01 per share, 75,000,000 shares authorized; 37,594,493 and 37,210,091 sharesissued and 37,224,493 and 36,840,091 shares outstanding at May 31, 2018 and 2017, respectively370 367Additional paid-in capital543,762 532,705Retained earnings (accumulated deficit)5,129 (11,007)Treasury stock, 370,000 shares, at cost at May 31, 2018 and 2017, respectively(5,714) (5,714)Accumulated other comprehensive loss(952) (1,324)Total Stockholders' Equity542,595 515,027Total Liabilities and Stockholders' Equity$705,472 $707,961The accompanying notes are an integral part of these consolidated financial statements.62AngioDynamics, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(in thousands, except share data) Common Stock Additionalpaid incapital Retainedearnings(accumulateddeficit) Accumulatedothercomprehensiveloss Treasury Stock TotalShares Amount Shares AmountBalance at May 31, 201536,043,725 $360 $520,101 $27,575 $(833) (142,305) $(2,104) $545,099Net loss (43,590) (43,590)Exercise of stock options101,040 1 1,296 1,297Issuance/cancellation of restrictedstock units137,681 1 (332) (331)Purchase of common stock underEmployee Stock Purchase Plan137,957 1 1,470 1,471Stock-based compensation 3,240 3,240Other comprehensive income, netof tax 42 42Balance at May 31, 201636,420,403 $363 $525,775 $(16,015) $(791) (142,305) $(2,104) $507,228Net income 5,008 5,008Exercise of stock options751,062 7 9,858 9,865Issuance/cancellation of restrictedstock units158,341 1 (587) (586)Issuance of performance share units23,405 — — —Purchase of common stock underEmployee Stock Purchase Plan129,185 1 1,418 1,419Stock-based compensation 6,183 6,183Treasury stock retirement(642,305) (2) (9,942) 642,305 9,944 —Common stock repurchased370,000 (3) (870,000) (13,554) (13,557)Other comprehensive loss, net oftax (533) (533)Balance at May 31, 201737,210,091 $367 $532,705 $(11,007) $(1,324) (370,000) $(5,714) $515,027Adjustment for ASU 2016-09 199 (199) —Net income 16,335 16,335Exercise of stock options148,937 1 1,916 1,917Issuance/cancellation of restrictedstock units145,522 1 (232) (231)Purchase of common stock underEmployee Stock Purchase Plan89,943 1 1,262 1,263Stock-based compensation 7,912 7,912Other comprehensive income, netof tax 372 372Balance at May 31, 201837,594,493 $370 $543,762 $5,129 $(952) (370,000) $(5,714) $542,595The accompanying notes are an integral part of these consolidated financial statements.63AngioDynamics, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Year ended May 31, 2018 2017 2016Cash flows from operating activities: Net income (loss)$16,335 $5,008 $(43,590)Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization23,163 24,811 28,115Stock based compensation7,912 6,183 3,240Change in fair value of contingent consideration250 (15,261) 948Deferred income tax provision(8,947) 4,428 39,983Changes in accounts receivable allowances179 (313) 2,377Fixed and intangible asset impairments and disposals540 3,930 1,190Write-off of other assets— 2,685 —Other(605) (586) 90Changes in operating assets and liabilities: Accounts receivable5,044 8,479 3,131Inventories5,740 687 11,976Prepaid expenses and other(1,231) (3,520) 712Accounts payable, accrued and other liabilities(7,093) 19,214 (2,956)Net cash provided by operating activities41,287 55,745 45,216Cash flows from investing activities: Additions to property, plant and equipment(2,391) (3,001) (2,326)Acquisition of intangibles(1,265) — (3,268)Acquisition of warrants— — (2,000)Proceeds from sale or maturity of marketable securities— 450 25Net cash used in investing activities(3,656) (2,551) (7,569)Cash flows from financing activities: Proceeds from issuance of and borrowings on long-term debt— 116,471 —Repayment of long-term debt(5,000) (140,381) (16,250)Deferred financing costs on long-term debt— (1,364) —Payment of acquisition related contingent consideration(9,500) (9,850) (9,850)Repurchase of common stock— (13,557) —Proceeds from exercise of stock options and employee stock purchase plan2,949 10,698 2,437Net cash used in financing activities(11,551) (37,983) (23,663)Effect of exchange rate changes on cash and cash equivalents472 — (42)Increase in cash and cash equivalents26,552 15,211 13,942Cash and cash equivalents at beginning of year47,544 32,333 18,391Cash and cash equivalents at end of year$74,096 $47,544 $32,333 The accompanying notes are an integral part of these consolidated financial statements.64AngioDynamics, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)(in thousands) Year ended May 31, 2018 2017 2016Supplemental disclosure of non-cash investing and financing activities: Contractual obligations for purchase of fixed assets$56 $26 $75Cash paid (received) during the year for: Interest$3,190 $2,969 $3,063Income taxes36 (102) 332 The accompanying notes are an integral part of these consolidated financial statements.65AngioDynamics, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. BASIS OF PRESENTATION, BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Presentation and Description of BusinessThe consolidated financial statements include the accounts of AngioDynamics, Inc. and its wholly owned subsidiaries, (collectively, the “Company”).The Company designs, manufactures and sells a wide range of medical, surgical and diagnostic devices used by professional healthcare providers for vascularaccess, for the treatment of peripheral vascular disease and in oncology and surgical settings. The devices are generally used in minimally invasive, image-guided procedures. Most of the Company's products are intended to be used once and then discarded, or they may be temporarily implanted for short- orlong-term use.Accounting PrinciplesThe consolidated financial statements and accompanying notes have been prepared in conformity with accounting principles generally accepted in theUnited States of America ("GAAP").Principles of ConsolidationThe consolidated financial statements include the accounts of AngioDynamics and it subsidiaries (all of which are wholly owned). All intercompanybalances and transactions have been eliminated.Use of EstimatesThe preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the consolidated financial statements. Estimates also affect reported amounts of sales and expenses during the reporting period. Actual resultscould differ from those estimates.Cash and Cash EquivalentsThe Company considers all unrestricted highly liquid investments with an initial maturity of less than three months at the date of purchase to be cashequivalents. The Company maintains cash and cash equivalent balances with financial institutions in the United States in excess of amounts insured by theFederal Deposit Insurance Corporation.Marketable SecuritiesMarketable securities, which include auction rate investments, are classified as “available-for-sale securities” and are reported at fair value, withunrealized gains and losses excluded from operations and reported as a component of accumulated other comprehensive income (loss), net of the related taxeffects, in stockholders’ equity. Cost is determined using the specific identification method. The Company holds an investment in auction rate securities inorder to generate higher than typical money market rate investment returns. Auction rate securities typically are high credit quality, generally achieved withmunicipal bond insurance. As of May 31, 2018 and 2017, the Company had $1.3 million and $1.2 million, respectively, in an auction rate security issued bya local government authority. The authority is current in its interest payments on the security.Fair Value InstrumentsThe carrying amount of the Company's cash and cash equivalents, accounts receivable, accounts payable and long-term debt approximates fair valuedue to the short-term nature or market interest rates of these items. The Company bases the fair value of short-term investments on quoted market prices orother relevant information generated by market transactions involving identical or comparable assets. The Company measures and records derivativefinancial instruments at fair value. See Note 3 for further discussion of financial instruments that are carried at fair value on a recurring and nonrecurring basis.66Accounts ReceivableAccounts receivable, principally trade receivables, are generally due within 30 to 90 days and are stated at amounts due from customers, net of anallowance for estimated sales returns and doubtful accounts. The Company performs ongoing credit evaluations of customers and adjusts credit limits basedupon payment history and the customer’s current creditworthiness, as determined by a review of their current credit information. The Company continuouslymonitors aging reports, collections and payments from customers, and a provision for estimated credit losses is maintained based upon historical experienceand any specific customer collection issues that have been identified. While such credit losses have historically been within expectations and the provisionsestablished, the Company cannot guarantee that the same credit loss rates will be experienced in the future. The Company writes off accounts receivablewhen they are determined to be uncollectible.InventoriesInventories are stated at the lower of cost (using the first-in, first-out method) or market. Appropriate consideration is given to deterioration,obsolescence, expiring and other factors in evaluating net realizable value.Property, Plant and EquipmentProperty, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over theestimated useful lives of the assets. Refer below for useful lives by category: Estimated useful livesBuilding and building improvements 39 yearsMachinery and equipment 5 to 8 yearsComputer software and equipment 3 to 5 yearsThe Company evaluates property, plant and equipment for impairment periodically to determine if changes in circumstances or the occurrence of eventssuggest the carrying value of the asset or asset group may not be recoverable. Expenditures for repairs and maintenance are charged to expense as incurred.Renewals and betterments are capitalized.Goodwill and Intangible AssetsIntangible assets other than goodwill and acquired IP R&D are amortized over their estimated useful lives, on either a straight-line basis orproportionately to the benefit being realized. Useful lives range from two to eighteen years. The Company periodically reviews the estimated useful lives ofintangible assets and reviews such assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset or assetgroup is not recoverable. If an intangible asset or asset group is considered to be impaired, the amount of the impairment will equal the excess of the carryingvalue over the fair value of the asset.Goodwill is the amount by which the cost of acquired net assets in a business combination exceeded the fair value of net identifiable assets on the dateof purchase. Goodwill and other intangible assets that have indefinite useful lives are not amortized, but rather, are tested for impairment annually or morefrequently if impairment indicators arise.For goodwill, the impairment test requires a comparison of the estimated fair value of the reporting unit to which the goodwill is assigned to carryingvalue of the assets and liabilities of that reporting unit. The determination of reporting units also requires management judgment. The Company considerswhether a reporting unit exists within a reportable segment based on the availability of discrete financial information. If carrying value of the reporting unitexceeds the fair value of the reporting unit, the carrying value of the reporting unit’s goodwill is reduced to its fair value through an adjustment to thegoodwill balance, resulting in an impairment charge.The Company's annual testing for impairment of goodwill was completed as of December 31, 2017. The Company operates as a single operatingsegment with one reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole.The Company determines the fair value of the reporting unit based on the market valuation approach and concluded that it was not more-likely-than-not thatthe fair value of the Company's reporting unit was less than its carrying value.67Contingent ConsiderationThe fair value of the liability for contingent consideration recorded on the acquisition date for a business combination is based on probability weightedestimated cash flow streams, discounted back to present value using a discount rate determined in accordance with accepted valuation methods and reflectiveof the risk associated with the estimated cash flow streams. The liability for contingent consideration is remeasured to fair value at each reporting period withchanges recorded in earnings until the contingency is resolved.Revenue RecognitionThe Company recognizes revenue when the following four criteria has been met: (i) persuasive evidence that an arrangement exists; (ii) the price isfixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered. The Companyrecognizes revenue, net of sales taxes assessed by any governmental authority, as products are shipped, based on shipping terms, and when title and risk ofloss passes to customers. The Company negotiates shipping and credit terms on a customer-by-customer basis and products are shipped at an agreed uponprice. All product returns must be pre-approved by the Company and customers may be subject to a 20% restocking charge. To be accepted, a returnedproduct must be unadulterated, undamaged and have at least twelve months remaining prior to its expiration date. Charges for discounts, returns, rebates andother allowances are recognized as a deduction from revenue on an accrual basis in the period in which the revenue is recorded. The accrual for productreturns, discounts and other allowances is based on the Company’s history.Shipping and handling costs, associated with the distribution of finished products to customers, are recorded in costs of goods sold and are recognizedwhen the related finished product is shipped to the customer. Amounts charged to customers for shipping are recorded in net sales.Research and DevelopmentResearch and development costs, including salaries, consulting fees, building costs, utilities and administrative expenses that are related to developingnew products, enhancing existing products, validating new and enhanced products, managing clinical, regulatory and medical affairs are expensed asincurred.Income TaxesThe Company calculates income tax expense for each jurisdiction in which it operates. This involves estimating actual current taxes due plus assessingtemporary differences arising from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities. The Companyperiodically evaluates deferred tax assets, capital loss carryforwards and tax credit carryforwards to determine their recoverability based primarily on theCompany's ability to generate future taxable income and capital gains. Where it is more-likely-than-not these will not be recovered, the Company estimates avaluation allowance and records a corresponding additional tax expense in the consolidated statement of operations.The Company recognizes and measures uncertain tax positions taken or expected to be taken in a tax return utilizing a two-step approach. TheCompany first determines if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit,including resolution of any related appeals or litigation processes. The second step is that the Company measures the tax benefit as the largest amount that ismore likely than not to be realized upon ultimate settlement. The Company recognizes interest and penalties related to uncertain tax positions in theprovision for income taxes on the consolidated statements of operations.Warranty CostsThe Company makes periodic provisions for expected warranty costs. Historically, warranty costs have been insignificant.Stock Based CompensationStock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant serviceperiod. The Company estimates the fair value of each stock-based award on the measurement date using either the current market price of the stock, theBlack-Scholes option valuation model, or the Monte Carlo Simulation valuation model. The Black-Scholes and Monte Carlo Simulation valuation modelsincorporate assumptions as to stock price volatility, the expected life of options or restricted stock units, a risk-free interest rate and dividend yield. The68Company recognizes stock-based compensation expense related to options, restricted stock units and market based performance stock units on a straight-linebasis over the service period of the award, which is generally 4 years for options and restricted stock units and 3 years for market based performance stockunits.Foreign Currency TranslationThe functional currency of the Company's foreign subsidiaries is the local currency in which the subsidiary operates. For foreign operations where thelocal currency is considered to be the functional currency, the Company translates assets and liabilities into U.S. dollars at the exchange rate on the balancesheet date. The Company translates income and expense items at average rates of exchange prevailing during each period. The Company accumulatestranslation adjustments in accumulated other comprehensive loss, a component of stockholders’ equity.Transaction gains or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency areincluded in other expense in the statements of operations as incurred.Derivative Financial InstrumentsThe Company is exposed to market risks, including changes in foreign currency and interest rates. The Company periodically enters into certainderivative financial instruments to hedge the underlying economic exposure.Derivative instruments are presented in the consolidated financial statements at their fair value. Changes in the fair value of derivative financialinstruments are either recognized periodically in income or in stockholders’ equity as a component of accumulated other comprehensive income (loss)depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value or cash flow hedge.Generally, the changes in the fair value of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in thefair value of hedged items that relate to the hedged risks. Changes in the fair value of derivatives accounted for as cash flow hedges, to the extent they areeffective as hedges, are recorded in accumulated other comprehensive income (loss).ContingenciesThe Company is subject to various legal proceedings that arise in the ordinary course of business, including patent infringement and product liabilitymatters. The Company records accruals for contingencies when it is probable the liability has been incurred and the amount can be reasonably estimated.Legal fees are expensed as incurred. Insurance recoveries related to potential claims are recognized up to the amount of the recorded liability when coverageis confirmed and the estimated recoveries are probable of payment. These recoveries are not netted against the related liabilities for financial statementpresentation.69The following table provides a description of recent accounting pronouncements that may have a material effect on the Company's consolidatedfinancial statements:Recently Issued Accounting Pronouncements - AdoptedStandardDescriptionDate AdoptedEffect on the Consolidated Financial StatementsASU 2016-09, Compensation -Stock Based Compensation(Topic 718: Improvements toEmployee Share-Based PaymentAccounting)This ASU simplifies and improves various aspects ofASC 718 for share-based payments, includingincome tax items and the classification of theseitems on the statement of cash flows.June 1, 2017The Company now recognizes unrealized excesstax benefits and will classify such benefits as anoperating activity in the statement of cash flowson a prospective basis. Due to the full valuationallowance on our federal and state income taxes,the adoption of ASU 2016-09 did not impact ouraccounting for income taxes. The Company elected the accounting policychange to account for forfeitures as they occur.This was adopted using the modified retrospectivetransition method by means of a cumulative-effectadjustment to equity as of June 1, 2017. Theadoption of ASU 2016-09 did not materiallyimpact the Company's consolidated statements ofincome, consolidated balance sheet, equity or cashflows.ASU 2017-04, Intangibles -Goodwill and Other (Topic 350)This ASU simplifies the subsequent measurement ofgoodwill by eliminating steps from the goodwillimpairment test.June 1, 2017This adoption did not have an impact on theCompany's financial statements.ASC Update No. 2015-11,Inventory (Topic 330):Simplifying the Measurement ofInventory. Update No. 2015-11This ASU more closely aligns the measurement ofinventory in U.S. GAAP with the measurement ofinventory in International Financial ReportingStandards by requiring companies using the first-in,first-out and average costs methods to measureinventory using the lower of cost and net realizablevalue, where net realizable value is the estimatedselling prices in the ordinary course of business, lessreasonably predictable costs of completion,disposal, and transportation.June 1, 2017This adoption did not have an impact on theCompany's financial statements.70Recently Issued Accounting Pronouncements - Not Yet Applicable or AdoptedStandardDescriptionEffective DateEffect on the Consolidated Financial StatementsASU No. 2014-09, Revenue fromContracts with Customers (Topic606, ASU 2014-09)Under Topic 606, an entity is required to recognizerevenue upon transfer of promised goods or servicesto customers in an amount that reflects the expectedconsideration to be received in exchange for thosegoods or services. Topic 606 defines a five-stepprocess in order to achieve this core principle, whichmay require the use of judgment and estimates, andalso requires expanded qualitative and quantitativedisclosures relating to the nature, amount, timingand uncertainty of revenue and cash flows arisingfrom contracts with customers, including significantjudgments and estimates used. The new standardalso defines accounting for certain costs related toorigination and fulfillment of contracts withcustomers, including whether such costs should becapitalized.June 1, 2018The Company established an implementation teamwhich included third-party specialists to assist inthe evaluation and implementation of the newstandard. The Company’s assessment has includedperforming analysis for each revenue streamidentified, assessing the potential differences inrecognition and measurement that may result fromadopting this standard and assessing whether theCompany meets certain practical expedients.Based on the results of the assessment, theadoption of this standard will not have a materialimpact on the timing or amount of revenuerecognized upon adoption and there is nocumulative prior period adjustment to be recordedto the opening balance of retained earnings uponadoption. The Company will adopt the standardusing the modified retrospective method. TheCompany is implementing changes to accountingpolicies, business processes and internal controlsto support the new standard as necessary. Uponadoption of Topic 606, as the disclosurerequirements under the new guidance have beensignificantly expanded in comparison to thedisclosure requirements under the currentguidance, we will provide additional disclosuresin the notes to the consolidated financialstatements, specifically related to performanceobligations, the judgments made in revenuerecognition determinations, costs to obtain orfulfill contracts and contract balances.ASU No. 2016-15, Statement ofCash Flows (Topic 230):Classification of Certain CashReceipts and Cash Payments(ASU 2016-15)This ASU identifies how certain cash receipts andcash payments are presented and classified in theStatement of Cash Flows under Topic 230.June 1, 2018This adoption is not expected to have a materialimpact on the Company's financial statements.ASU 2016-02, Leases (Topic 842)This ASU increases transparency and comparabilityamong organizations by recognizing lease assetsand liabilities on the balance sheet and disclosingkey information about leasing arrangements. Forleases with a term of twelve months or less, a lesseeis permitted to make an accounting policy electionby class of underlying asset not to recognize leaseassets and liabilities.June 1, 2019The Company is currently in the process ofevaluating the impact of this ASU on itsconsolidated financial statements.712. OTHER ASSETSIn 2015, the Company filed an 8-K stating that it executed a non-binding letter of intent to enter into a strategic relationship with privately-heldEmboMedics Inc., which develops injectable and resorbable embolic microspheres.The Company made an initial $2.0 million purchase of non-transferable warrants in a subsidiary of EmboMedics which become exercisable upon achange of control of EmboMedics. The Company did not have significant influence, or control of the subsidiary. This initial investment was recorded at costand the Company reviewed for impairment at each balance sheet date.In the second quarter of fiscal year 2017, the Company decided to terminate its agreements with EmboMedics. The termination of these agreementsresulted in a write-off of the initial $2.0 million investment in EmboMedics which is included in acquisition, restructuring and other items, net on theconsolidated statements of operations.3. FAIR VALUE OF FINANCIAL INSTRUMENTSOn a recurring basis, the Company measures certain financial assets and financial liabilities at fair value based upon quoted market prices, whereavailable. Where quoted market prices or other observable inputs are not available, the Company applies valuation techniques to estimate fair value. FASBASC Topic 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. Thecategorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to themeasurement of fair value. The three levels of the hierarchy are defined as follows:•Level 1 - Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.•Level 2 - Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.•Level 3 - Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants woulduse in pricing the asset or liability at the measurement date, including assumptions about risk.The Company's financial instruments include cash and cash equivalents, marketable securities, accounts receivable, accounts payable and contingentconsideration. The carrying amount of cash and cash equivalents, accounts receivable, and accounts payable approximates fair value due to their immediateor short-term maturities. The recurring fair value measurements using significant unobservable inputs (Level 3) relate to marketable securities, which arecomprised of auction rate securities, and contingent consideration liabilities. 72The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis: Fair Value Measurements using inputs considered as:(in thousands)Level 1 Level 2 Level 3 Fair Value at May 31,2018Financial Assets Short-term investments*$2,100 $— $— $2,100Marketable securities— — 1,317 1,317Total Financial Assets$2,100 $— $1,317 $3,417Financial Liabilities Contingent liability for acquisition earn outs$— $— $3,261 $3,261Total Financial Liabilities$— $— $3,261 $3,261 *included in cash and cash equivalents. Fair Value Measurements using inputs considered as:(in thousands)Level 1 Level 2 Level 3 Fair Value at May 31,2017Financial Assets Marketable securities$— $— $1,215 $1,215Total Financial Assets$— $— $1,215 $1,215Financial Liabilities Contingent liability for acquisition earn outs$— $— $12,761 $12,761Total Financial Liabilities$— $— $12,761 $12,761There were no transfers in and out of Level 1, 2 and 3 measurements for the years ended May 31, 2018 and 2017.The table below presents the changes in fair value components of Level 3 instruments in the year ended May 31, 2018 (in thousands of dollars):Financial Assets Financial Liabilities(in thousands)Fair Value MeasurementsUsing SignificantUnobservable Inputs(Level 3) Fair Value MeasurementsUsing SignificantUnobservable Inputs (Level 3)Balance at May 31, 2017$1,215 $12,761Change in fair value of contingent consideration, net (1)— 250Fair market value adjustments102 —Contingent consideration payments— (9,750)Balance at May 31, 2018$1,317 $3,26173The table below presents the changes in fair value components of Level 3 instruments in the year ended May 31, 2017 (in thousands of dollars): Financial Assets Financial Liabilities(in thousands)Fair Value MeasurementsUsing SignificantUnobservable Inputs(Level 3) Fair Value MeasurementsUsing SignificantUnobservable Inputs (Level 3)Balance at May 31, 2016$1,653 $38,275Change in fair value of contingent consideration (1)— (15,261)Currency (gain) loss from remeasurement— (153)Fair market value adjustments12 —Sale of securities(450) —Contingent consideration payments— (10,100)Balance at May 31, 2017$1,215 $12,761(1) Change in the fair value of contingent consideration is included in earnings and comprised of changes in estimated earn out payments based onprojections of Company performance and amortization of the present value discount.The Company made the decision to discontinue its investment in the TiLo product that was acquired in August 2013 as part of the Clinical Devicesacquisition. This decision resulted in the write-off of the acquired in-process research and development (IPR&D) of $3.6 million along with a $3.1 milliongain from the reduction in the fair value of contingent consideration liability associated with future milestones that will no longer be met during the secondquarter of fiscal year 2017. The write-off of the IPR&D is included in acquisition, restructuring and other, net on the consolidated statement of operations.The Company revised the sales projections for the AngioVac product as a result of reviews performed by executive management across all products. Theadjustments to the sales projections resulted in a $13.4 million gain in the second quarter of fiscal year 2017 from the reduction in the fair value of thecontingent liability that is based on lower projected sales volume over the contractual earn out period.Short-term InvestmentsShort-term investments consist of highly liquid investments in municipal bonds that reset on a weekly basis and can be called at any point in time.Marketable SecuritiesMarketable securities consist solely of an auction rate security. Assumptions associated with the auction rate security include the interest ratebenchmarks, the probability of full repayment of the principal considering the credit quality and guarantees in place, and the rate of return required byinvestors to own such securities given the current liquidity risk.Contingent Liability for Acquisition Earn OutsSome of our business combinations involve the potential for the payment of future contingent consideration upon the achievement of certain productdevelopment milestones or various other performance conditions. Payment of the additional consideration is generally contingent on the acquired companyreaching certain performance milestones, including attaining specified revenue levels or product development targets. Contingent consideration is recordedat the estimated fair value of the contingent payments on the acquisition date. The fair value of the contingent consideration is remeasured at the estimatedfair value at each reporting period with the change in fair value recognized as income or expense within change in fair value of contingent consideration inthe consolidated statements of income.We measure the initial liability and remeasure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fairvalue measurements and is determined using a discounted cash flow model applied to projected net sales, using probabilities of achieving projected net salesand projected payment dates. Projected net sales are based on our74internal projections and extensive analysis of the target market and the sales potential. Increases or decreases in any valuation inputs in isolation may resultin 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 ofMay 31, 2018: (in thousands)Fair value atMay 31, 2018 ValuationTechnique UnobservableInput RangeRevenue based payments$3,261 Discounted cash flow Discount rateProbability of paymentProjected fiscal year of payment 4%100%2019 - 2020At May 31, 2018, the estimated potential amount of undiscounted future contingent consideration that the Company expects to pay as a result of allcompleted acquisitions is approximately $3.3 million, which represents the remaining contractual minimum payments.754. MARKETABLE SECURITIESAs of May 31, 2018, marketable securities consisted of the following: AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses FairValue(in thousands) Available-for-sales securities New York State government agency obligations$1,350 $— $(33) $1,317 $1,350 $— $(33) $1,317As of May 31, 2017, marketable securities consisted of the following: AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses FairValue(in thousands) Available-for-sales securities New York State government agency obligations$1,350 $— $(135) $1,215 $1,350 $— $(135) $1,215The amortized cost and fair value of marketable securities as of May 31, 2018, by contractual maturity, are shown below. Expected maturities maydiffer from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. AmortizedCost FairValue(in thousands) As of May 31, 2018: Due in one year or less$— $—Due after one through five years— —Due after five through twenty years (1)1,350 1,317 $1,350 $1,317(1) This auction rate security represents investments available for current operations and are classified as current in the consolidated balance sheets.765. INVENTORIESAs of May 31, 2018 and 2017, inventories consisted of the following: May 31, 2018 May 31, 2017(in thousands) Raw materials$18,678 $17,563Work in process10,808 12,602Finished goods19,430 24,341Total$48,916 $54,506The Company periodically reviews its inventory for both obsolescence and loss of value. The Company makes assumptions about the future demand forand market value of the inventory. Based on these assumptions, the Company estimates the amount of obsolete, expiring and slow moving inventory. Thetotal inventory reserve at May 31, 2018 and 2017 was $6.1 million and $7.3 million, respectively. Of the $6.1 million reserve at May 31, 2018, $1.6 millionrelates to the inventory reserve for Acculis inventory as a result of the recall announced in the fourth quarter of fiscal year 2017 and $0.7 million relates to aspecific reserve related to the termination of an agreement with a Japanese distributor in the second quarter of fiscal year 2018. Of the $7.3 million in the prioryear, $2.4 million relates to the reserve for Acculis inventory.6. PREPAID EXPENSES AND OTHERAs of May 31, 2018 and 2017, prepaid expenses and other consisted of the following: May 31, 2018 May 31, 2017(in thousands) Software licenses$1,043 $582License fees143 118Trade shows223 162Rent134 121Other prepaid taxes254 544Medical device excise tax receivable— 1,837Other2,505 2,762Total$4,302 $6,126 777. PROPERTY, PLANT AND EQUIPMENT, NETAs of May 31, 2018 and 2017, property, plant and equipment are summarized as follows: May 31, 2018 May 31, 2017(in thousands) Building and building improvements$39,887 $40,597Machinery and equipment22,668 25,434Computer software and equipment24,899 25,668Construction in progress2,153 1,464 89,607 93,163Less accumulated depreciation and amortization(48,794) (49,652) 40,813 43,511Land and land improvements1,648 1,723 $42,461 $45,234Depreciation expense for fiscal 2018, 2017 and 2016 was $4.6 million, $6.0 million and $8.2 million, respectively.788. GOODWILL AND INTANGIBLE ASSETSThe Company's annual testing for impairment of goodwill was completed as of December 31, 2017. The Company operates as a single operatingsegment with one reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole.The Company determines the fair value of the reporting unit based on the market valuation approach and concluded that it was not more-likely-than-not thatthe fair value of the Company's reporting unit was less than its carrying value.Even though the Company determined that there was no goodwill impairment as of December 31, 2017, the future occurrence of a potential indicator ofimpairment, such as a significant adverse change in legal, regulatory, business or economic conditions or a more-likely-than-not expectation that thereporting unit or a significant portion of the reporting unit will be sold or disposed of, would require an interim assessment for the reporting unit prior to thenext required annual assessment as of December 31, 2018. The Company continued to assess for potential impairment through May 31, 2018 and noted noevents that would be considered a triggering event. There were no adjustments to goodwill for the years ended May 31, 2018 and 2017. As of May 31, 2018 and 2017, intangible assets consisted of the following: May 31, 2018 Gross carryingvalue Accumulatedamortization Net carryingvalue(in thousands) Product technologies$147,175 $(68,880) $78,295Customer relationships56,428 (23,237) 33,191Trademarks28,400 (11,809) 16,591Licenses5,752 (4,357) 1,395Distributor relationships1,250 (412) 838 $239,005 $(108,695) $130,310 May 31, 2017 Gross carryingvalue Accumulatedamortization Net carryingvalue(in thousands) Product technologies$147,172 $(59,696) $87,476Customer relationships56,375 (19,194) 37,181Trademarks28,400 (9,069) 19,331Licenses4,487 (3,821) 666Distributor relationships1,250 (229) 1,021 $237,684 $(92,009) $145,675Amortization expense was $16.6 million, $17.3 million and $18.0 million for fiscal years 2018, 2017 and 2016, respectively.Annual amortization of these intangible assets is expected to approximate the following amounts for each of the next five fiscal years: 79(in thousands) 2019$16,555202015,001202113,842202212,958202312,5072024 and thereafter59,447 $130,3109. INCOME TAXESThe components of income (loss) before income tax (benefit) expense for the years ended May 31 are as follows: 2018 2017 2016(in thousands) Income (loss) before tax expense: U.S.$6,274 $8,825 $(4,444)Non-U.S.1,191 1,022 1,191 $7,465 $9,847 $(3,253) Income tax (benefit) expense is comprised of the following: 2018 2017 2016(in thousands) Current Federal$(148) $— $34State and local152 141 103Non U.S.73 270 217 77 411 354Deferred(8,947) 4,428 39,983Income tax (benefit) expense$(8,870) $4,839 $40,33780Temporary differences that give rise to deferred tax assets and liabilities are summarized as follows: May 31, 2018 May 31, 2017(in thousands) Deferred tax assets Net operating loss carryforward$33,880 $55,975Stock-based compensation2,421 2,653Federal and state R&D tax credit carryforward3,644 2,548Inventories1,550 2,407Expenses incurred not currently deductible1,714 6,522Accrued liabilities277 1,289Gross deferred tax asset43,486 71,394Deferred tax liabilities Excess tax over book depreciation and amortization34,044 49,158 34,044 49,158Valuation Allowance(26,607) (48,348)Net deferred tax liability (1)$(17,165) $(26,112)(1) Net deferred tax liability is inclusive of a non-U.S. $0.08 million deferred tax asset that is included in other assets on the Company's balance sheet for the year ended May 31,2018.The net deferred tax liability as of May 31, 2018 and 2017 principally relates to tax amortization of intangibles that have an indefinite reversal periodfor book purposes, also known as a “naked credit deferred tax liability”, that cannot be considered as a source of income to recover the deferred tax asset.The Company's Federal net operating loss carryforwards as of May 31, 2018 after considering IRC Section 382 limitations are $157.8 million. Theexpiration of the Federal net operating loss carryforwards are as follows: $28.8 million between 2018 and 2023 and $129.0 million between 2027 and 2037.The Company's state net operating loss carryforwards as of May 31, 2018 after considering remaining IRC Section 382 limitations are $19.1 millionwhich expire in various years from 2018 to 2038.On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“Tax Reform Act”). The legislation significantlychanges U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system, expanding the tax base andimposing a tax deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate federal income tax rate froma maximum of 35% to a flat 21% rate, effective January 1, 2018.The Company’s estimated fiscal 2018 blended U.S. federal statutory corporate income tax rate of 28.6% was applied in the computation of the incometax provision for the year ended May 31, 2018 and represents the average rate between the pre-enactment U.S. federal statutory corporate tax rate of 35% andthe post-enactment U.S. federal statutory corporate tax rate of 21% thereafter.In December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (SAB 118), which addresses how acompany recognizes provisional amounts when a company does not have the necessary information available, prepared or analyzed (includingcomputations) in reasonable detail to complete its accounting for the effect of the changes in the Tax Reform Act. The measurement period ends when acompany has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year that begins on thedate of enactment of December 22, 2017. The Company has elected to apply the measurement period guidance provided in SAB 118. The final impact of theTax Reform Act may differ from the estimates reported due to, among other things, changes in interpretations and assumptions made by us, additionalguidance that may be issued by the U.S. Department of the Treasury and actions that we may take as a result.81The Company has estimated the provision for incomes taxes in accordance with the Tax Reform Act and guidance available as of the date of thisfiling and as a result recorded a provisional amount of one-time income tax benefit of $9.3 million in the third quarter of fiscal year 2018, the period in whichthe legislation was enacted. This estimate has not changed as of May 31, 2018.Due to various uncertainties as described above, the Company has not completed its accounting for certain tax impacts of the Act. A discussion ofthe most significant impacts of tax law changes under the Act for which the accounting is incomplete is as follows:The Company is required to record deferred tax assets and liabilities based on the enacted tax rates at which they are expected to reverse in thefuture. The Company has remeasured its deferred tax positions as of December 31, 2017 at the new enacted tax rate, resulting in a decrease to it net deferredtax assets and a corresponding decrease to its valuation allowance, with no net impact to tax expense. The Company recorded an income tax benefit ofapproximately $9.3 million due to the revaluation of the naked credit deferred tax liability. The Tax Reform Act changed the NOL carryover rules andcreated a new limitation on their use. NOLs created in fiscal 2018 and beyond may be carried forwarded indefinitely in any year. As a result, the Company’snaked credit deferred tax liability can now be considered as a source of income to recover indefinite lived NOLs. Consequently, the Company has offsetcertain of its naked credit deferred tax liability against its deferred tax assets resulting in a reduction in the valuation allowance and a $3.0 million benefit inthe year ended May 31, 2018.The Tax Reform Act imposes a one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiaries’ earnings. Basedon the information available as of December 31, 2017, the Company estimated undistributed foreign earnings of approximately $4.9 million. The taxableincome arising from this deemed repatriation is expected to result in the utilization of net operating loss carryforwards and other tax credits, offset by changesin the valuation allowance, resulting in no net impact to tax expense.The Tax Reform Act also creates a new requirement that certain income earned by foreign subsidiaries (“GILTI”), must be included in U.S. grossincome. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in futureyears or recognizing such taxes as a current period expense when incurred. The Company has not yet adopted an accounting policy.The other provisions of the Tax Reform Act are not expected to have a material impact on the Company's financial statements.The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significantmanagement judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluated all available positive andnegative evidence, and weighted the evidence based on its objectivity. Evidence the Company considered included its history of net operating losses, whichresulted in the Company recording a full valuation allowance for its deferred tax assets in fiscal 2016 and each year thereafter. The Company was marginallyprofitable (pretax and adjusted for permanent items) on a cumulative basis for the three years ended May 31, 2018, but substantially all of that profitabilitywas achieved during 2018.Based on the review of all available evidence, the Company determined that it has not yet attained a sustained level of profitability and the objectivelyverifiable negative evidence outweighed the positive evidence and therefore the Company has provided a valuation allowance for the full amount, with theexception of the naked credit deferred tax liability, of its net deferred tax asset as of May 31, 2018. The decrease in the valuation allowance during fiscal2018 was principally due to the impact of tax reform as discussed above. 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 amaterial impact on the Company’s results of operations.The Company's consolidated income tax expense has differed from the amount that would be provided by applying the U.S. Federal statutory incometax rate to the Company's income before income taxes for the following reasons:82 Year ended May 31, 2018 2017 2016(in thousands) Income tax (benefit) expense at statutory tax rate of 28.6%, 35.0% and 35.0%,respectively$2,136 $3,447 $(1,139)Effect of graduated tax rates— (98) 33State income taxes, net of Federal tax benefit120 (22) (215)Impact of Non-U.S. operations(288) 403 (162)Research and development tax credit(951) (403) (499)Impact of tax reform10,912 — —Meals and entertainment242 266 329Non-deductible interest on contingent payments— 174 262Non-taxable gain on revaluation of contingent consideration liability— (5,576) (170)Change in valuation allowance(21,741) 6,139 40,685Effect of elimination of stock compensation APIC pool— 1,380 739IPR&D intangible write-off— (1,224) —Other700 353 474Income tax (benefit) expense$(8,870) $4,839 $40,337The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits: Year ended May 31, 2018 2017 2016(in thousands) Unrecognized tax benefits balance at June 1$899 $899 $—Increase in gross amounts of tax positions related to prior years— — 899Decrease in gross amounts of tax positions related to prior years due to U.S.tax reform(287) — —Decrease due to lapse in statute of limitations(148) — —Unrecognized tax benefits balance at May 31$464 $899 $899The table above includes unrecognized tax benefits associated with the calculation of limitations placed on the utilization of tax attributes relatedto an acquired company. If recognized $0.5 million would result in adjustments to other tax accounts. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. There are no accruedinterest and penalties recognized in the consolidated balance sheet as of May 31, 2018 and May 31, 2017.The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business theCompany is subject to examination by taxing authorities throughout the world. Fiscal years 2015 through 2018 remain open to examination by the varioustax authorities.The Company does not anticipate that the amount of unrecognized tax benefits will significantly change in the next twelve months.The accumulated undistributed earnings of the Company’s foreign operations amounted to $4.9 million and $5.3 million at May 31, 2018 and 2017,respectively. These earnings are considered indefinitely reinvested. Beginning in 2018, except for83GILTI, the Company will no longer record United States federal income tax on its share of the income of its foreign subsidiaries, nor will it record a benefit forforeign tax credits related to that income. Upon distribution of these earnings in the form of dividends or otherwise, the Company would be subject towithholding taxes payable, where applicable, to foreign countries, but would have no further federal income tax liability.10. ACCRUED LIABILITIESAs of May 31, 2018 and 2017, accrued liabilities consist of the following: May 31, 2018 May 31, 2017(in thousands) Payroll and related expenses$10,235 $11,383Royalties1,537 2,885Accrued severance1,940 2,075Sales and franchise taxes683 856Outside services2,396 1,622Litigation matters (Note 15)12,500 12,500Acculis recall liability— 2,563Other5,135 4,920Total$34,426 $38,804In the fourth quarter of fiscal year 2017, the Company issued a voluntary recall of its Acculis probes that were sold over the past two years andrecorded a liability of $2.6 million. In the third quarter of fiscal year 2018, the Company completed the replacement of Acculis probes that were returned forSolero probes.11. LONG-TERM DEBTOn November 7, 2016, the Company entered into a Credit Agreement with the lenders party thereto, JPMorgan Chase Bank, N.A., as administrativeagent, Bank of America, N.A. and Keybank National Association as co-syndication agents, and JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner &Smith Incorporated and Keybank National Association as joint bookrunners and joint lead arrangers.The Credit Agreement provides for a $100.0 million senior secured term loan facility and a $150.0 million senior secured revolving credit facility,which includes up to a $20.0 million sublimit for letters of credit and a $5.0 million sublimit for swingline loans.On November 7, 2016, the Company borrowed $100.0 million under the Term Loan and approximately $16.5 million under the Revolving Facility torepay the balance of $116.5 million under the former credit agreement. As of May 31, 2018 and 2017 the carrying value of long-term debt approximates itsfair market value.The proceeds of the Revolving Facility may be used for general corporate purposes of the Company and its subsidiaries. The Facilities have a five yearmaturity. Interest on both the Term Loan and Revolving Facility are based on a base rate or Eurodollar rate plus an applicable margin which increases astotal leverage ratio increases, with the base rate and Eurodollar rate having ranges of 0.50% to 1.25% and 1.50% to 2.25% respectively. In case of default, theinterest rate may be increased by 2.0%. The Revolving Facility carries a commitment fee of 0.20% to 0.35% per annum on the unused portion. The interestrate on the Term Loan at May 31, 2018 was 3.41%.The Company's obligations under the Facilities are unconditionally guaranteed, jointly and severally, by the Company's material direct and indirectdomestic subsidiaries (the “Guarantors”). All obligations of the Company and the Guarantors under the Facilities are secured by first priority security interestsin substantially all of the assets of the Company and the Guarantors.The Credit Agreement includes customary representations, warranties and covenants, and acceleration, indemnity and events of default provisions,including, among other things, two quarterly financial covenants as follows: 84•maximum leverage ratio of consolidated total indebtedness* to consolidated EBITDA* of not greater than 3.50 to 1.00 (during certainperiods following material acquisitions shall be increased to 3.75 to 1.00).• fixed charge coverage ratio of consolidated EBITDA minus consolidated capital expenditures to consolidated interest expense paid orpayable in cash plus scheduled principal payments in respect of indebtedness under the Credit Agreement of not less than 1.25 to 1.00.* The definitions of consolidated total indebtedness and consolidated EBITDA are maintained in the credit agreement included as an exhibit to Form 8-k filed on November 10, 2016and in Amendment One, dated May 24, 2018 and included as an exhibit to the fiscal 2018 Form 10-K. This amendment increased the amount of U.S. cash that can be utilized tocalculate net debt from $10.0 million to $20.0 million.The Company was in compliance with both covenants as of May 31, 2018.The Company's maturities of principal obligations under the credit agreement are as follows, as of May 31, 2018:(in thousands) 2019$5,00020207,500202111,250202268,750 Total term loan92,500Revolving facility— Total debt92,500Less: Unamortized debt issuance costs(879) Total91,621Less: Current portion of long-term debt(5,000) Total long-term debt, net of current portion$86,62112. RETIREMENT PLANSThe Company has a 401(k) plan under which eligible employees can defer a portion of their compensation, part of which is matched by the Company.Matching contributions were $3.9 million, $4.2 million and $3.7 million in 2018, 2017 and 2016, respectively. There are also various immaterial foreignretirement plans.13. STOCKHOLDERS’ EQUITYCapitalizationOn October 29, 2014, the Board of Directors approved the Amended and Restated Certificate of Incorporation (the “Amended Certificate”). Under theAmended Certificate, the authorized capital stock is 80,000,000 shares, consisting of 75,000,000 shares of common stock, par value $.01 per share and5,000,000 shares of preferred stock, par value $.01 per share.The holders of common stock are entitled to one vote for each share held. Subject to preferences applicable to any outstanding shares of preferred stock,the holders of common stock are entitled to receive ratably dividends, if any, as may be declared by the Board of Directors out of funds legally available fordividend payments. If the Company liquidates, dissolves, or winds up, the holders of common stock are entitled to share ratably in all assets remaining afterpayment of liabilities and liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no pre-emptive rights or rightsto convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock. The rights,preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series ofpreferred stock that the Company may designate in the future.85The board of directors has the authority to (i) issue the undesignated preferred stock in one or more series, (ii) determine the powers, preferences andrights and the qualifications, limitations or restrictions granted to or imposed upon any wholly un-issued series of undesignated preferred stock and (iii) fixthe number of shares constituting any series and the designation of the series, without any further vote or action by the Company's stockholders.Stock Options2004 Stock and Incentive Award PlanThe 2004 Stock and Incentive Award Plan (the “2004 Plan”) provides for the grant of incentive options to employees and for the grant of non-statutorystock options, restricted stock, stock appreciation rights, performance units, performance shares and other incentive awards to employees, directors and otherservice providers. A total of 7,000,000 shares of common stock have been reserved for issuance under the 2004 Plan, of which up to 800,000 shares may beissued upon the exercise of incentive stock options. The compensation committee of the Board of Directors administers the 2004 Plan. The committeedetermines vesting terms and the exercise price of options granted under the 2004 Plan, but for all incentive stock options the exercise price must at least beequal to the fair market value of common stock on the date of grant. The term of an incentive stock option may not exceed ten years.On October 25, 2016, the Company amended the 2004 Stock and Incentive Award Plan to increased the shares of common stock reserved for issuanceby 250,000 shares.As of May 31, 2018, there remained approximately 1.8 million shares available for granting under the 2004 Plan. The following table summarizes information about stock option activity for the fiscal year ended May 31, 2018: Shares Weighted-averageexerciseprice Weightedaverageremainingcontractuallife Aggregateintrinsicvalue (inthousands)Outstanding at beginning of year - June 1, 20171,667,443 $15.01 Granted518,498 $16.78 Exercised(271,344) $14.83 Forfeited(204,184) $16.24 Expired(14,000) $15.75 Outstanding at end of year - May 31, 20181,696,413 $15.42 5.58 $9,520Options exercisable at year-end652,543 $14.41 3.48 $4,321Options expected to vest in future periods1,043,870 $16.05 6.90 $5,199Stock options are granted at exercise prices equal to the quoted market price of common stock at the date of the grant. Options vest 25% per year overfour years for employees. Grants to directors vest 33.33% per year over three years. Stock options granted prior to May 1, 2007 and after June 1, 2017 expireon the tenth anniversary of the grant date. Stock options granted between May 1, 2007 through May 31, 2017 expire on the seventh anniversary of the grantdate.The Company measures the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model. The weighted averagegrant-date fair value of options granted during the years ended May 31, 2018, 2017 and 2016 was $4.95, $4.70, and $4.16, respectively. The followingassumptions were used in arriving at the fair value of options granted during 2018, 2017 and 2016, respectively: risk-free interest rates of 2.08%, 1.30% and1.48%; expected volatility of 30%, 31%, and 31%; and expected lives of 4.72 years, 4.80 years, and 4.81 years. The Company does not declare dividendstherefore a dividend yield of zero was used for the years ended May 31, 2018, 2017 and 2016. Risk-free interest rates reflect the yield on zero-coupon U.S.Treasury bonds whose maturity period equals the expected term of the option. Expected volatilities are based on the historical volatility of the Company'sstock. The expected option lives are based on historical experience of employee exercise behavior.86The total intrinsic value of options exercised during the years ended May 31, 2018, 2017 and 2016 was $0.7 million, $2.8 million, and $0.1 million,respectively. As of May 31, 2018, there was $3.9 million of total unrecognized compensation cost related to non-vested options, which is expected to berecognized over a weighted average period of 3 years.Cash received from option exercises during 2018, 2017 and 2016 was $2.0 million, $9.9 million and $1.3 million, respectively. The tax benefit realizedfrom stock options exercised during the year ended May 31, 2016 was $0.1 million. Due to the valuation allowance there was no tax benefit realized fromstock option exercises during the years ended May 31, 2018 and 2017.Performance Share and Restricted Stock Unit AwardsThe Company grants restricted stock units to certain employees under the 2004 Plan which give the recipients the right to receive shares of Companystock upon vesting. The restricted stock unit awards vest in four equal annual installments beginning on the first anniversary of the grant date. Restrictedstock unit awards granted to directors vest over one year. Unvested restricted stock unit awards will be forfeited if the recipient ceases to be employed by theCompany. The following table summarizes information about restricted stock unit activity for the year ended May 31, 2018: Restricted Stock Units Weighted AverageGrant-Date Fair ValueNon-vested at beginning of year, June 1, 2017439,297 $15.55Granted299,392 $16.60Vested(158,756) $16.83Canceled(105,431) $18.25Non-vested at end of year, May 31, 2018474,502 $16.23The fair value of each restricted stock unit is the market price of Company stock on the date of grant. The weighted average grant date fair value ofrestricted stock units granted during the years ended May 31, 2018, 2017 and 2016 was $16.60, $16.54 and $15.21, respectively. The total intrinsic value ofrestricted stock units (meaning the fair value of the units on the date of vest) vesting during the years ended May 31, 2018, 2017 and 2016 was $2.7 million,$2.9 million, and $2.5 million, respectively. As of May 31, 2018, there was $5.1 million of total unrecognized compensation cost related to non-vestedrestricted stock awards, which is expected to be recognized over a weighted average period of 3 years.The Company grants performance share awards to certain employees under the 2004 Plan which gives the recipients the right to receive shares ofCompany stock if certain criteria is met. The performance criteria is established by the compensation committee for vesting of the performance share awardsand is determined by the achievement of relative total shareholder return ("TSR"). Performance share awards are subject to additional conditions, includingthe recipient’s continued employment with the Company. The following table summarizes information about performance unit award activity for the year ended May 31, 2018: Performance Unit Awards Weighted AverageGrant-Date Fair ValueNon-vested at beginning of year, June 1, 2017361,164 $18.54Granted135,135 $23.83Vested— $—Canceled(44,443) $22.76Non-vested at end of year, May 31, 2018451,856 $19.75During fiscal years 2018, 2017 and 2016, we granted performance unit awards that include a three-year market condition. Vesting of the performanceunit awards is based on the Company's level of attainment of specified total shareholder return ("TSR") targets relative to the percentage appreciation of aspecified index of companies for the respective three-year periods. It is also subject to the continued employment of the grantees. In order to estimate the fairvalue of such awards, we used a87Monte Carlo Simulation valuation model on the date of the grant. For the years ended May 31, 2018, 2017 and 2016, the weighted average grant date fairmarket value for new grants was $23.83, $22.61 and $18.07, respectively. Compensation cost is recognized over the performance period which is typicallythree years. As of May 31, 2018, 0.5 million performance share units with a weighted average remaining contractual term of 2 years and $3.9 million ofunrecognized compensation cost were outstanding.Compensation ExpenseThe following tables represents the break out of share-based compensation included in the Company's consolidated statement of operations: Year ended May 31,(in thousands) 2018 2017 2016Cost of sales $119 $299 $172Research and development 554 314 349Sales and marketing 1,778 1,762 1,489General and administrative 5,461 4,026 2,291Acquisition, restructuring and other items, net — (218) (1,061) $7,912 $6,183 $3,240The income tax benefit on the compensation expense recognized for all share-based compensation arrangements was $1.8 million, $2.2 million and$1.0 million for the years ended May 31, 2018, 2017 and 2016, respectively. The income tax benefit for 2018, 2017 and 2016 are negated by the fullvaluation allowance established as of May 31, 2016.Employee Stock Purchase PlanThe Employee Stock Purchase Plan (the “Stock Purchase Plan”) provides a means by which employees (the “participants”) are given an opportunity topurchase the Company's common stock through payroll deductions. A total of 2,500,000 shares of common stock have been reserved for issuance under theStock Purchase Plan. Shares are offered through two purchase periods, each with duration of approximately 6 months, commencing on the first business dayof the first and third fiscal quarters. An employee is eligible to participate in an offering period if, on the first day of an offering period, he or she has beenemployed in a full-time capacity for at least six months, with a customary working schedule of 20 or more hours per week and more than five months in acalendar year. Employees who own stock possessing 5% or more of the total combined voting power or value of all classes of stock are not eligible toparticipate in the Stock Purchase Plan. The purchase price of the shares of common stock acquired on each purchase date will be the lower of (i) 85% of thefair market value of a share of common stock on the first day of the offering period or (ii) 85% of the fair market value of a share of common stock on the lastday of the purchase period, subject to adjustments made by the Board of Directors. The Stock Purchase Plan is intended to qualify as an “employee stockpurchase plan” within the meaning of Section 423 of the Internal Revenue Code. During the year ended May 31, 2015, an additional 800,000 shares of theCompany's common stock have been reserved for issuance under the Stock Purchase Plan. During the year ended May 31, 2017, an additional 500,000 sharesof the Company's common stock were reserved for issuance under the Stock Purchase Plan. The Company uses the Black-Scholes option-pricing model to calculate the purchase date fair value of the shares issued under the Stock Purchase Planand recognize expense related to shares purchased ratably over the offering period. During the years ended May 31, 2018, 2017 and 2016, 89,943, 129,185and 137,957 shares, respectively, were issued at an average price of $14.03, $11.00 and $10.67, respectively, under the Stock Purchase Plan. As of May 31,2018, 1.2 million shares remained available for future purchases under the Stock Purchase Plan.88Share RepurchasesOn November 6, 2016, the Board of Directors approved the Repurchase Program under which they authorized the Company the option to repurchase upto $25.0 million of its outstanding common stock during the twenty-four month period ending November 6, 2018. During the second quarter of fiscal year2017, the Company repurchased 500,000 shares of common stock in the open market at an aggregate cost of $7.8 million under the Repurchase Program.During the fourth quarter of fiscal year 2017, the Company repurchased 370,000 shares of common stock in the open market at an aggregate cost of $5.7million under the Repurchase Program. As of May 31, 2018, $11.4 million remained available for repurchase under the Repurchase Program.In February 2017, the Company retired 642,305 shares of treasury stock. These retired shares are now included in the Company’s pool of authorized butunissued shares. The retired stock had a carrying value of approximately $9.9 million and $0.01 was the par value that was deducted from common stock andthe remaining $9.9 million was deducted from additional paid-in capital.14. EARNINGS PER SHAREBasic earnings per share are based on the weighted average number of common shares outstanding. In addition, diluted earnings per share include thedilutive effect of potential common stock consisting of stock options, restricted stock units and performance stock units, provided that the inclusion of suchsecurities is not anti-dilutive. In periods with a net loss, stock options and restricted stock units are not included in the computation of basic loss per share asthe impact would be anti-dilutive.The following table reconciles basic to diluted weighted average shares outstanding for the years ended May 31, 2018, 2017 and 2016: Year ended May 31, 2018 2017 2016Basic37,074,797 36,616,859 36,161,383Effect of dilutive securities464,603 342,391 —Diluted37,539,400 36,959,250 36,161,383 Securities excluded as their inclusion would be anti-dilutive1,077,256 1,058,790 3,277,03715. COMMITMENTS AND CONTINGENCIESLeasesThe Company is committed under non-cancelable operating leases for facilities and equipment. During fiscal 2018, 2017 and 2016, aggregate rentalcosts under all operating leases were approximately $2.8 million, $2.5 million and $2.5 million, respectively. Future annual payments under non-cancelableoperating leases in the aggregate, of which one includes an escalation clause, with initial remaining terms of more than one year at May 31, 2018, aresummarized as follows (in thousands): 89(in thousands) 2019$2,23420201,829202199320228842023 and thereafter1,668 $7,608Other Commitments and ContingenciesThe following table summarizes the Company's other future commitments and contingencies as of May 31, 2018(in thousands)Total 2019 2020 2021 2022 2023 andthereafterPurchase obligations (1)$56,201 $11,751 $14,243 $15,485 $9,189 $5,533Royalties45,000 3,000 3,500 3,500 3,500 31,500Other667 167 167 167 166 — $101,868 $14,918 $17,910 $19,152 $12,855 $37,033(1)The non-cancelable inventory purchase obligations are not reflected on our consolidated balance sheets under accounting principles generallyaccepted in the United States of America. Legal ProceedingsThe Company is involved in various legal proceedings, including commercial, intellectual property, product liability, and regulatory matters of anature 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 anamount can be reasonably estimated. The Company discloses such matters when there is at least a reasonable possibility that a material loss may have beenincurred. However, the Company cannot predict the outcome of any litigation or the potential for future litigation. C.R. Bard, Inc. v. AngioDynamics, Inc.On January 11, 2012, C.R. Bard, Inc. (“Bard”) filed a suit in the United States District Court of Utah claiming certain of our implantable port productsinfringe on three U.S. patents held by Bard (the “Utah Action”). Bard’s Complaint sought unspecified damages and other relief. We filed petitions forreexamination in the U.S. Patent and Trademark Office (“USPTO”) seeking to invalidate all three patents asserted by Bard in the litigation. Our petitions weregranted and 40 of Bard's 41 patent patent claims were rejected and, following further proceedings, the Patent Office issued a Final Rejection of all 40 claimssubject to reexamination. Thereafter, Bard filed appeals to the USPTO Board of Appeals and Interferences for all three reexaminations. The Patent Officeissued decisions in all three appeals. In one (issued on March 11, 2016 for U.S. Patent No. 7,785,302), the rejections of six of the ten claims underreexamination were affirmed, but were reversed on four of the ten claims. In the second (issued on March 24, 2016 for U.S. Patent No. 7,959,615), therejections of eight of the ten claims under reexamination were affirmed but the rejections of the other two of the ten claims were reversed. In the third (issuedon March 29 for U.S. Patent No. 7,947.022) the rejections of all twenty claims under reexamination were affirmed. Thereafter, Bard filed Requests forRehearing in all three reexamination appeals and the Company filed Requests for Rehearing in two of the reexamination appeals (the ‘302 and ‘615 patentreexaminations). The PTO denied all three Rehearing Requests - - on February 1, 2017 for the ‘302 reexam; on February 17, 2017 for the ‘022 reexam; and onFebruary 21, 2017 for the ‘615 reexam, but modified its characterization of one prior art reference for the ‘302 and ‘022 decisions. Bard filed a Notice ofAppeal to the Federal Circuit Court of Appeals in all three reexams and the Company filed Cross-Appeals for the ‘302 and the ‘615 reexams. The parties havecompleted the process of filing the various appellate briefs. MedComp also filed an Amicus Brief in support of the Company on November 22, 2017. A datefor the oral hearing has not yet been set. The Utah Action has been stayed pending final resolution of the USPTO process. We believe these claims are withoutmerit and intend to defend them vigorously. We have not recorded an expense related to the outcome of this litigation because it is not yet possible todetermine if a potential loss is probable nor reasonably estimable.90On March 10, 2015, C.R. Bard, Inc. (“Bard”) and Bard Peripheral Vascular, Inc. (“BPV”) filed suit in the United States District Court for the District ofDelaware claiming certain of our implantable port products infringe on three U.S. patents held by Bard (the “Delaware Action”). Bard's complaint seeksunspecified damages and other relief. The patents asserted in the Delaware Action are different than those asserted in the Utah Action. On June 1, 2015, theCompany filed two motions in response to Bard’s Complaint - one sought transfer to the District of Utah where the Utah Action is currently pending, and theother sought dismissal of the entire complaint on grounds that none of the claims in the asserted patents is directed to patent eligible subject matter underSection 101 of the Patent Statute and in light of recent authority from the U. S. Supreme Court. On January 12, 2016, the Court issued a decision denyingboth motions. A Markman hearing was held on March 10, 2017 and the Court issued its Claim Construction Order on May 19, 2017. On May 19, 2017, Bardserved its Final Infringement Contentions and on June 2, 2017, the Company served its Final Invalidity Contentions.On October 20, 2017, the scheduling order for the case was amended to, among other things, set a trial date commencing July 23, 2018. The partiescompleted Expert Discovery in January 2018. The parties completed briefing on their respective case dispositive motions on April 27, 2018. On June 26,2018, the Court denied all case dispositive motions, ruling that issues of material fact remained in dispute. On July 9, 2018, the Court continued the trial to alater date to be determined by the Court and the parties. We believe these claims are without merit and intend to defend them vigorously. We have notrecorded an expense related to the outcome of this litigation because it is not yet possible to determine if a potential loss is probable nor reasonablyestimable.AngioDynamics, Inc. v. C.R. Bard, Inc.On May 30, 2017, we commenced an action in the United States District Court for the Northern District of New York entitled AngioDynamics, Inc. v.C.R. Bard, Inc. and Bard Access Systems, Inc. (“Bard”). In this action, we allege that Bard has illegally tied the sales of its tip location systems to the sales ofits PICCs. We allege that this practice violates the federal antitrust laws and has had, and continues to have, an anti-competitive effect in the market forPICCs. We seek both monetary damages and injunctive relief. Bard moved to dismiss on September 8, 2017 and the motion has been submitted to the court. The court has adjourned the initial conference in the case pending its resolution of the motion to dismiss.Governmental InvestigationsIn June 2014 we received a subpoena from the U.S. Department of Justice (the “DOJ”) requesting documents in relation to a criminal and civilinvestigation the DOJ is conducting regarding BTG International, Inc.’s LC Bead® product beginning in 2003. RITA Medical Systems and AngioDynamics,Inc., after its acquisition of RITA, was the exclusive distributor of LC Beads in the United States from 2006 through December 31, 2011. We are cooperatingfully with this investigation.In April 2015 we received a subpoena from the DOJ requesting documents in relation to a criminal and civil investigation the DOJ is conductingregarding purported promotion of certain of AngioDynamics’ VenaCure EVLT products for un-cleared indications. We are cooperating fully with thisinvestigation.As of May 31, 2017 the Company accrued $12.5 million for these matters and in August 2017, the Company agreed in principle with the government toresolve these matters for approximately $12.5 million. This amount was still accrued for at May 31, 2018 and was paid in the first quarter of fiscal year 2019.16. SEGMENTS AND GEOGRAPHIC INFORMATIONSegment informationThe Company considers its business to be a single segment entity related to the development, manufacture and sale on a global basis of medicaldevices for vascular access, surgery, peripheral vascular disease and oncology. The Company's chief operating decision maker (CEO) evaluates the variousglobal product portfolios on a net sales basis. Executives reporting in to the CEO include those responsible for operations and supply chain management,research and development, sales, franchise marketing and certain corporate functions. The CEO evaluates profitability, investment and cash flow metrics on aconsolidated worldwide basis due to shared infrastructure and resources.91Total sales by product category are summarized below (in thousands): Year ended May 31,(in thousands)2018 2017 2016Net sales by Product Category Peripheral Vascular$202,334 $208,602 $205,620Vascular Access92,760 96,481 99,375Oncology/Surgery49,191 44,560 48,895Total$344,285 $349,643 $353,890Geographic informationTotal sales for geographic areas are summarized below (in thousands): Year ended May 31,(in thousands)2018 2017 2016Net sales by Geography United States$273,327 $282,168 $285,824International70,958 67,475 68,066Total$344,285 $349,643 $353,890For fiscal years 2018, 2017 and 2016, International sales as a percentage of total net sales were 21%, 19% and 19%, respectively. Sales to any onecountry 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. Inaddition, no one customer represents more than 10% of consolidated net sales. 99% of long-lived assets are located within the United States.17. ACQUISITION, RESTRUCTURING AND OTHER ITEMS, NETFor the years ended May 31, 2018, 2017 and 2016 acquisition, restructuring and other items, net consisted of: Year ended May 31,(in thousands)2018 2017 2016Legal$10,067 $19,480 $7,487Intangible and other asset impairment— 5,604 352Restructuring4,674 1,348 1,462Other691 1,078 3,290Total$15,432 $27,510 $12,591Of the $19.5 million in legal for fiscal year 2017, $12.5 million relates to a reserve for DOJ litigation settlement (see Note 15) and the remaining legalexpenses relates to DOJ matters. The remaining legal expenses relate to litigation that is outside of the normal course of business.RestructuringThe Company evaluates its performance and looks for opportunities to improve the overall operations of the Company on an ongoing basis. As a resultof this evaluation, certain restructuring initiatives are taken to enhance the Company’s overall operations.92Operational ConsolidationOn February 1, 2017, the Company announced to employees an operational consolidation plan (the “plan”) to consolidate manufacturing facilities inManchester, GA and Denmead, UK into the Glens Falls and Queensbury, NY facilities. This plan will streamline and optimize the manufacturing functionsinto one centralized location increasing the utilization of the Glens Falls and Queensbury facilities, optimizing inventory and reducing cost of goods soldthrough savings in overhead expenses and direct labor. The restructuring activities associated with the plan were completed in the fourth quarter of fiscal year2018 with immaterial validation costs to be incurred in the first quarter of fiscal year 2019.The Company recorded restructuring charges related to the plan during the year ended May 31, 2018 and 2017 of $4.7 million and $1.3 million,respectively. Total restructuring charges recorded as part of the plan were $6.0 million. Termination benefits are only earned if an employee stays until theirtermination date; therefore, the expenses related to termination benefits are being recorded ratably over the service period.The following table presents a rollforward of the restructuring reserve for the years ended May 31, 2018 and 2017: Contract Termination Plant Regulatory Cancellation Other Benefits Consolidation Filings Costs Costs Total(in thousands) Balance at May 31, 2016 $— $— $— $— $— $—Charges 851 494 — — 3 1,348Non-cash adjustments — (108) — — — (108)Cash payments — (275) — — (3) (278)Balance at May 31, 2017 $851 $111 $— $— $— $962Charges 1,440 2,892 68 200 74 4,674Non-cash adjustments — (276) — — — (276)Cash payments (1,453) (2,706) (56) — (74) (4,289)Balance at May 31, 2018 $838 $21 $12 $200 $— $1,071The Company’s restructuring liability of $1.1 million is mainly comprised of accruals for termination benefits which are expected to be paid in the nexttwelve months and are included in accrued expenses on the consolidated balance sheet.9318. ACCUMULATED OTHER COMPREHESIVE INCOME (LOSS)Changes in each component of accumulated other comprehensive income (loss), net of tax, are as follows for fiscal 2018 and 2017:(in thousands) Foreign currencytranslation gain(loss) Unrealized gain (loss)on marketablesecurities TotalBalance at May 31, 2016 $(760) $(31) $(791)Other comprehensive income (loss) before reclassifications, net of tax (545) 12 (533)Amounts reclassified from accumulated other comprehensive income — — —Net other comprehensive income (loss) $(545) $12 $(533)Balance at May 31, 2017 $(1,305) $(19) $(1,324)Other comprehensive income before reclassifications, net of tax 270 102 372Amounts reclassified from accumulated other comprehensive income — — —Net other comprehensive income $270 $102 $372Balance at May 31, 2018 $(1,035) $83 $(952) 19. QUARTERLY INFORMATION (unaudited)Quarterly results of operations during the fiscal years ended May 31, 2018 and 2017 are as follows: 2018 Firstquarter Secondquarter Thirdquarter Fourthquarter(in thousands, except per share data) Net sales$85,411 $86,706 $83,851 $88,317Gross profit41,229 42,731 45,448 47,467Net income (loss) (1)(35) 249 14,019 2,102Earnings (loss) per common share Basic0.00 0.01 0.38 0.06Diluted0.00 0.01 0.37 0.06 2017 Firstquarter Secondquarter Thirdquarter Fourthquarter(in thousands, except per share data) Net sales$88,098 $89,029 $85,602 $86,914Gross profit45,032 45,010 43,792 42,335Net income (loss) (2)1,300 13,734 2,887 (12,913)Earnings (loss) per common share Basic0.04 0.37 0.08 (0.35)Diluted0.04 0.37 0.08 (0.35)(1) Included within net income during the third quarter of fiscal 2018 is a $9.3 million discrete tax benefit as a result of the Tax Reform Act and therevaluation of the Company's deferred tax assets, liabilities and valuation allowance to reflect the lower U.S. federal statutory rate (see Note 9).94(2) Included within net income (loss) during the fourth quarter of fiscal 2017 is the $12.5 million charge for a litigation reserve (see Note 15) and $4.5million impact relating to the Acculis recall (see Note 10).The data in the schedules above has been intentionally rounded to the nearest thousand and therefore the quarterly amounts may not sum to the fullyear amounts.AngioDynamics, Inc. and Subsidiaries SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS (in thousands)Column AColumn B Column C Column D Column EDescriptionBalance atBeginningof Year Additions -Charged tocosts andexpenses Deductions Balance atEnd of PeriodYear Ended May 31, 2016 Allowance for deferred tax asset$1,791 $40,685 $(267) $42,209Allowance for sales returns and doubtful accounts$3,043 $3,748 $(2,419) $4,372Year Ended May 31, 2017 Allowance for deferred tax asset$42,209 $6,139 $— $48,348Allowance for sales returns and doubtful accounts$4,372 $(291) $(1,136) $2,945Year Ended May 31, 2018 Allowance for deferred tax asset$48,348 $— $(21,741) $26,607Allowance for sales returns and doubtful accounts$2,945 $608 $(1,087) $2,466 95EXHIBITS Incorporated by ReferenceExhibitNumberDescription of ExhibitsFormExhibitFiling Date2.1Stockholders Agreement, dated as of May 22, 2012, among AngioDynamics, Inc.and the stockholders set forth on the signature pages thereto.8-K2.2May 25, 20122.2Stock Purchase Agreement, dated as of October 8, 2012, by and amongAngioDynamics, Inc., Vortex Medical, Inc. (“Vortex”), the stockholders of Vortexset forth on the signature pages thereto, the option holders of Vortex set forth onthe signature pages thereto and CHTP Management Services, Inc., as sellers’representative.8-K2.1October 12, 20123.1.1Amended and Restated Certificate of Incorporation.10-Q3.1October 7, 20053.1.2Certificate of Amendment to the Amended and Restated Certificate ofIncorporation of AngioDynamics, Inc.10-K3.1.2August 10, 20153.2Second Amended and Restated By-Laws, effective October 16, 2015.8-K10.1October 21, 201510.1Credit Agreement, dated as of November 7, 2016, by and among AngioDynamics,Inc., the lenders party thereto, JPMorgan Chase Bank, N.A., as administrativeagent, Bank of America, N.A. and Keybank National Association as co-syndicationagents, and JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & SmithIncorporated and Keybank National Association as joint bookrunners and jointlead arrangers.8-K10.1November 10,201610.1.1Amendment One to the Credit Agreement dated May 24, 2018. 10.1.2AngioDynamics, Inc. 1997 Stock Option Plan, as amended by the Board andShareholders on February 27, 2004.S-110.2March 5, 200410.1.3AngioDynamics, Inc. 2004 Stock and Incentive Award Plan (as amended).DEF14A September 15,201610.1.4AngioDynamics 2014 Total Shareholder Return Performance Unit AgreementProgram.10-K/A10.1.4January 12, 201510.1.5AngioDynamics 2015 Total Shareholder Return Performance Unit AgreementProgram.10-K10.1.5August 10, 201510.1.6AngioDynamics 2016 Total Shareholder Return Performance Unit AgreementProgram.10-K10.1.6August 1, 201610.1.7AngioDynamics 2017 Total Shareholder Return Performance Unit AgreementProgram. 10.2AngioDynamics, Inc. Employee Stock Purchase Plan (as amended).DEF14A September 15,201610.3Form of Non-Statutory Stock Option Agreement pursuant to the AngioDynamics,Inc. Stock and Incentive Award Plan.10-Q10.1October 12, 200410.3.1Form of Non-Statutory Stock Option Agreement pursuant to the AngioDynamics,Inc. Stock and Incentive Award Plan. 10.4.2Form of 2014 Performance Share Award Agreement pursuant to theAngioDynamics, Inc. 2004 Stock and Incentive Award Plan.10-K/A10.4.2January 12, 201510.4.3Form of 2015 Performance Share Award Agreement pursuant to theAngioDyanmics, Inc. 2004 Stock and Incentive Award Plan.10-K10.4.3August 10, 201510.4.4Form of 2016 Performance Share Award Agreement pursuant to theAngioDyanmics, Inc. 2004 Stock and Incentive Award Plan.10-K10.4.3August 1, 201610.4.5Form of 2017 Performance Share Award Agreement pursuant to theAngioDyanmics, Inc. 2004 Stock and Incentive Award Plan. 96 Incorporated by ReferenceExhibitNumberDescription of ExhibitsFormExhibitFiling Date10.5Form of Restricted Stock Award Agreement pursuant to the AngioDynamics, Inc.2004 Stock and Incentive Award Plan.8-K10.3May 12, 200510.6Rita Medical Systems, Inc. 1994 Incentive Stock Plan.S-110.2May 3, 200010.7Horizon Medical Products, Inc. 1998 Stock Incentive Plan.S-110.11February 3, 199810.8Rita Medical Systems, Inc. 2000 Stock Plan.S-1/A10.3June 14, 200010.9Rita Medical Systems, Inc. 2000 Directors’ Stock Plan, as amended on June 8,2005.S-899.2July 8, 200510.10Rita Medical Systems, Inc. 2005 Stock and Incentive Plan.S-899.1July 8, 200510.11Form of Indemnification Agreement of AngioDynamics, Inc.8-K10.1May 12, 200610.11.1Employment Agreement, dated April 1, 2016, between AngioDynamics, Inc. andJames C. Clemmer.8-K10.1April 6, 201610.11.2Employment letter, dated August 18, 2016, between AngioDynamics, Inc. andMichael C. Greiner.8-K10.1July 25, 201610.12Change in Control Agreement, dated April 1, 2016, between AngioDynamics, Inc.and James C. Clemmer.8-K10.2April 6, 201610.12.1Form of Severance Agreement of AngioDynamics, Inc.8-K10.1October 31, 200710.13Form of Change in Control Agreement.10-K/A10.13January 12, 201510.13.1Change in Control Agreement, dated August 18, 2016, between AngioDynamics,Inc. and Michael C. Greiner.10-Q10.3October 5, 201610.14Performance Share Award Agreement, with a grant date of April 4, 2016, betweenAngioDynamics, Inc. and James C. Clemmer.8-K10.3April 6, 201610.15AngioDynamics, Inc. Total Shareholder Return Performance Share Award Program- Performance Period Ending July 2019.8-K10.4April 6, 201610.16Stock Option Award Agreement, with a grant date of April 4, 2016, betweenAngioDynamics, Inc. and James C. Clemmer.8-K10.5April 6, 201610.17Restricted Stock Unit Award Agreement, with a grant date of April 4, 2016,between AngioDynamics, Inc. and James C. Clemmer.8-K10.6April 6, 201610.18Separation Agreement and General Release, dated April 22, 2016, betweenAngioDynamics, Inc. and Joseph M. DeVivo.8-K10.1April 27, 201614Code of Ethics.8-K14May 21, 200621Subsidiaries23Consent of Deloitte & Touche LLP, an independent registered public accounting firm.23.1Consent of PricewaterhouseCoopers LLP, an independent registered public accounting firm.31.1Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.32.2Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.101.INSXBRL Instance Document101.SCHXBRL Schema Document101.CALXBRL Calculation Linkbase Documents101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Labels Linkbase Documents97101.PREXBRL Presentation Linkbase DocumentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. ANGIODYNAMICS, INC.Date: July 23, 2018By: /S/ HOWARD W. DONNELLY Howard W. Donnelly,Chairman of the Board, DirectorPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Date: July 23, 2018/S/ HOWARD W. DONNELLY Howard W. Donnelly, Chairman of the Board, Director Date: July 23, 2018/S/ JAMES C. CLEMMER James C. Clemmer, President, Chief Executive Officer(Principal Executive Officer) Date: July 23, 2018/S/ MICHAEL C. GREINER Michael C. Greiner Executive Vice President, Chief Financial Officer, (Principal Financial and AccountingOfficer) Date: July 23, 2018/S/ WESLEY E. JOHNSON, JR. Wesley E. Johnson, Jr., Director Date: July 23, 2018/S/ JEFFREY G. GOLD Jeffrey G. Gold, Director Date: July 23, 2018/S/ DENNIS S. METENY Dennis S. Meteny, Director Date: July 23, 2018/S/ STEVEN R. LAPORTE Steven R. LaPorte, Director Date: July 23, 2018/S/ KEVIN J. GOULD Kevin J. Gould, Director Date: July 23, 2018/S/ JAN REED Jan Reed, Director Date: July 23, 2018/S/ EILEEN AUEN Eileen Auen, Director98EXECUTION COPY AMENDMENT NO. 1 Dated as of May 24, 2018 to CREDIT AGREEMENT Dated as of November 7, 2016 THIS AMENDMENT NO. 1 (this “Amendment”) is made as of May 24, 2018 by and among AngioDynamics, Inc., a Delaware corporation (the “Borrower”), the financial institutions listed on the signature pages hereof and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent’), under that certain Credit Agreement dated as of November 7, 2016 by and among the Borrower, the Lenders and the Administrative Agent (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrower has requested that the requisite Lenders and the Administrative Agent agree to make certain amendments to the Credit Agreement; WHEREAS, the Borrower, the Lenders party hereto and the Administrative Agent have so agreed on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders party heretoand the Administrative Agent hereby agree to enter into this Amendment. 1. Amendments to the Credit Agreement. Effective as of the Amendment No. 1 Effective Date (as defined below), the parties hereto agree that the Credit Agreement shall be amended as follows: (a) Clause (a) of Section 6.12 of the Credit Agreement is hereby amended to replace the reference of “$10,000,000” appearing therein with “$20,000,000”. 2. Conditions of Effectiveness. The effectiveness of this Amendment (the “Amendment No. 1 Effective Date”) is subject to the satisfaction of the following conditions precedent: (a) The Administrative Agent (or its counsel) shall have received counterparts of (i) this Amendment duly executed by the Borrower, the Required Lenders and the Administrative Agent and (ii) the Consent and Reaffirmation attached hereto duly executed by the Subsidiary Guarantors. (b) The Administrative Agent shall have received, for the account of each applicable Lender party hereto that delivers its executed signature page to this Amendment by no later than the date and time specified by the Administrative Agent, an amendment fee in an amount equal to the amount previously disclosed to the Lenders. (c) The Administrative Agent shall have received payment of the Administrative US-DOCS\101225498.3 Agent’s and its affiliates’ fees and reasonable and documented out-of-pocket expenses (including reasonable fees and expenses of counsel for the Administrative Agent) in connection with this Amendment and the other Loan Documents to the extent earned, due and owing and otherwise reimbursable pursuant to the terms of the Credit Agreement or this Amendment. 3. Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as modified hereby constitute legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. (b) As of the date hereof and after giving effect to the terms of this Amendment, (i) no Default or Event of Default has occurred and is continuing and (ii) the representations and warranties of the Borrower set forth in the Credit Agreement are true and correct in all material respects (except to the extent such representation or warranty is qualified by materiality or Material Adverse Effect, in which case such representation and warranty is true and correct in all respects). 4. Reference toand Effect on the Credit Agreement. (a) Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby. (b) The Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. (d) This Amendment is a Loan Document. 5. Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of New York. 6. Headings. Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment. 2 7. Counterparts. This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by telecopy, e-mailed .pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Amendment. [Signature Pages Follow] 3     SUNTRUST BANK, as a Lender By:_______________________________________ Name: Philip VanFossan Title: Vice President Signature Page to Amendment No. 1 to Credit Agreement dated as of November 7, 2016 AngioDynamics, Inc.  CONSENT AND REAFFIRMATION Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 1 to the Credit Agreement dated as of November 7, 2016 (as amended, restated, supplemented or otherwise modified, the “Credit Agreement”) by and among AngioDynamics, Inc., a Delaware corporation, the financial institutions from time to time party thereto (the “Lenders”) and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”), which Amendment No. 1 is dated as of May 24, 2018 (the “Amendment”). Capitalized terms used in this Consent and Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement. Without in any way establishing a course of dealing by the Administrative Agent or any Lender, each of the undersigned consents to the Amendment and reaffirms the terms and conditions of the Credit Agreement and any other Loan Document executed by it and acknowledges and agrees that such Credit Agreement and each and every such Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above-referenced documents shall be a reference to the CreditAgreement as so modified by the Amendment. Dated: May 24, 2018 [Signature Page Follows]  Total Shareholder Return Performance Unit Award Program (the “Program”)Performance Period July 12, 2018 – July, 2021I.Purpose of the ProgramThe purpose of the Program is to align AngioDynamics’ executive compensation program with the interests of shareholders and toreinforce the concept of pay for performance by comparing the relative Total Shareholder Return (“TSR”) of shares ofAngioDynamics’ Common Stock (the “Common Stock”) to the TSR of a pre-defined peer group (the “Peer Group”) of companiesover a three-year period beginning on July 12, 2018.The Program entails the grant of Performance Unit Awards, and the program shall be administered under the AngioDynamics 2004Stock and Incentive Award Plan, as amended (the “Plan”). Terms not defined in this Program document but defined in the Plan shallhave the meaning ascribed to such term in the Plan. The Program is established under section 5.II of the Plan and is intended to qualifyfor the performance-based compensation exception under Section 162(m) of the Internal Revenue Code (“Code”).II. Eligible ParticipantsThe Program covers members of the Executive Management Team (“EMT”) on the date that awards are granted under the Program asdetermined and in the amounts established by the Board of Directors (the “Board”).The Board may review Program eligibility criteria for Participants in the Program from time to time and may revise such criteria at anytime, even within a Program year, with or without notice and within its sole discretion.III.Performance Share UnitsPursuant to the Plan and this Program, the Board may, in its sole discretion, grant Performance Unit Awards to members of the EMT(the “Grant Date”). Each Performance Unit Award shall specify a target number of shares of Common Stock underlying thePerformance Unit Award (the “Target Amount”). Shares of Common Stock underlying the Performance Unit Award granted underthe Program (the “Performance Unit Awards”) shall be issued only upon satisfaction of both the performance vesting criteria describedin this Section III and the payment eligibility criteria described in Section VII. The applicable performance criteria are based on theTSR of AngioDynamics’ Common Stock relative to the TSR of the common stock of the companies in the Peer Group.The TSR for AngioDynamics and all other companies in the Peer Group will be measured over a three-year period in accordance withArticle IV below (the “Performance Period”).The number of shares of Common Stock that vest under the Performance Unit Award will be in a range of 0% to 200% of the TargetAmount of shares of Common Stock pursuant to the Performance Unit Award granted to the Participant based upon AngioDynamics’TSR percentile ranking relative to the Peer Group as follows:TSR PerformancePercentile RankPerformance Share Unitsas a Percent of Target75th Percentile or above200%50th Percentile100%25th Percentile50%Below 25th Percentile0%If the minimum level of performance set forth above is achieved for the Performance Period, the number of shares of Common Stockvesting under the Performance Unit Award will be calculated linearly between each set of data points.Following the end of the Performance Period, the Board shall determine the number of shares of Common Stock, based upon the totalnumber of shares of Common Stock underlying the Target amount of the Performance Unit Award, that shall become vested pursuantto AngioDynamics’ relative TRS percentile rank during the Performance Period pursuant to the table set forth above.The Board shall issue a number of shares of Common Stock underlying the Performance Unit Award to the Participant in accordancewith this Program and the applicable grant agreement equal to the number of shares of Common Stock, if any, that vested in thePerformance Period.The Board’s determination regarding the Company’s performance to the performance criteria with respect to the Performance Periodshall be final and binding.Shares of Common Stock will be delivered or otherwise made available to the Participant as soon as practicable (and in all eventswithin sixty (60) days) after the end of the Performance Period. Any shares of Common Stock underlying a Performance Unit Awardas to which the performance criteria of this Section III have not been satisfied as of the end of the Performance Period will be forfeitedin their entirety.IV. Calculation of Total Shareholder Return and DefinitionsThe TSR for AngioDynamics and each other company in the Peer Group shall include any cash dividends paid during thePerformance Period and shall be determined as follows:Total Shareholder Return for each Performance Cycle =(Change in Stock Price + Dividends Paid) / Beginning Stock Price“Beginning Stock Price” with respect to AngioDynamics and each company in the Peer Group means the daily average closing priceas quoted on the New York Stock Exchange or the NASDAQ Global Select Market, as applicable, of one (1) share of common stockfor the period beginning on July 2, 2018 and ending on July 23, 2021.“Change in Stock Price” means the difference between the Beginning Stock Price and the Ending Stock Price.“Dividends Paid” means the total of all cash dividends paid on one (1) share of stock during the Performance Period.“Ending Stock Price” with respect to AngioDynamics and each company in the Peer Group means the daily average closing price asquoted on the New York Stock Exchange or the NASDAQ Global Select Market, as applicable, of one (1) share of common stock forthe period beginning nine (9) calendar days prior to the date AngioDynamics announces its financial results for the fiscal year endedMay 31, 2020 and ending 10 calendar days after the date AngioDynamics announces its financial results for the fiscal year ended May31, 2020. If either date falls on a day on which the financial markets are closed, the next day on which the financial markets are openshall be used.Example: If the Beginning Stock Price for a company was $25.00 per share, and the company paid $2.50 in dividends over thePerformance Period, and the Ending Stock Price was $30.00 per share (thereby making the Change in Stock Price $5.00 ($30.00minus $25.00)), then the TSR for that company would be thirty percent (30%). The calculation is as follows: 0.30 = ($5.00 + $2.50) /$25.00V.Calculation of Percentile PerformanceFollowing the calculation of the TSR for the Performance Period for AngioDynamics and each other company in the Peer Group,AngioDynamics and the other companies in the Peer Group will be ranked, in order of maximum to minimum, according to theirrespective TSR for the Performance Period.After this ranking, the percentile performance of AngioDynamics as compared to the other companies in the Peer Group shall bedetermined by the following formula:“P” represents the percentile performance which will be rounded, if necessary, to the nearest whole percentile by application ofstandard scientific rounding conventions.“N” represents the number of companies in the Peer Group, including AngioDynamics.“R” represents AngioDynamics’ ranking versus the other companies in the Peer Group.Example: If AngioDynamics ranked 10th out of 56 companies, the performance (“P”) therefore will be in the 84th percentile.This calculation is as follows: 0.837 = 1 - (10 - 1) / (56 - 1) VI.Peer GroupThe companies in the Peer Group can be found in Appendix A attached hereto.If, during the Performance Period, two companies in the Peer Group merge, the surviving company shall remain in the Peer Group.If, during the Performance Period, a company in the Peer Group merges with, or is acquired by, a company that is not in the PeerGroup, and the company in the Peer Group is the surviving company, then the surviving company shall not be included in the PeerGroup.If, during the Performance Period, a company in the Peer Group merges with, or is acquired by, a company that is not in the PeerGroup, and the company in the Peer Group is not the surviving company or the surviving company is no longer publicly traded, thenthe surviving company shall not be included in the Peer Group.If, during the Performance Period, a company in the Peer Group sells all or substantially all of its assets, such company shall not beincluded in the Peer Group.If, during the Performance Period, a company in the Peer Group splits-off or spins-off or consummates any other extraordinaryreorganization transaction, and such spin-off, split-off or reorganization comprises more than 20% of the assets of the company prior tosuch spin-off, split-off or reorganization, such company shall not be included in the Peer Group.If, during the Performance Period, a company in the Peer Group files for bankruptcy or otherwise ceases to be traded or quoted on anynational exchange, such Company shall remain in the Peer Group. If no public stock price information is available for such companyafter it files for bankruptcy or otherwise ceases to be traded or quoted on a national securities exchange, the TSR for such companyshall equal a total loss of equity (or -100%) during the Performance Period for which no stock price information is available.The triggering event for determining whether a company shall be excluded from the Peer Group pursuant to this Section VI shall bethe first official announcement of an SEC reportable event. VII.Payment Eligibility CriteriaExcept as set forth below with respect to a Change in Control or termination of employment due to Retirement, death, or Disability, (i)no shares of Common Stock underlying the Performance Unit Award shall issue prior to the end of the Performance Period and (ii) aparticipant must be employed by the Company (as defined below) through the end of the Performance Period to be eligible to receiveshares of Common Stock that have vested under the Performance Unit Award pursuant to Section III of this Program.Death. If the Participant’s employment with AngioDynamics or its subsidiaries or affiliates is terminated due to death on or after theGrant Date, but prior to the end of the Performance Period, the Performance Unit Award shall remain eligible to vest following the enddate of the Performance Period according to the vesting provisions set forth in Section III of this Program and the Participant shallreceive a pro-rated portion of the Common Stock underlying the Performance Unit Award that would otherwise vest based upon theprovisions set forth in Section III of this Program on the end date of the Performance Period, with the pro-rata portion based on theParticipant’s whole months of service with the Company during the Performance Period prior to the date of such termination; providedthat a partial month of employment will be considered a whole “month of service” for purposes of this Program only if the Participantwas employed by AngioDynamics for at least fifteen (15) days during such month. Any portion of the Performance Unit Award thatremains unvested on the end date of the Performance Period (after giving effect to such pro-ration) shall be considered to haveterminated on such date. The Participant may, from time to time, name any beneficiary or beneficiaries (who may be namedcontingently or successively) to whom any benefit granted to the Participant under this Program is to be paid in case of his or her deathbefore he or she receives any or all such benefit. Each such designation shall revoke all prior designations by the Participant, shall be ina form prescribed by AngioDynamics, and will be effective only when filed by the Participant in writing with the Secretary of theCompany during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s deathshall be paid to the Participant’s estate.Retirement or Disability. If the Participant’s employment with AngioDynamics or its subsidiaries or affiliates is terminated due toRetirement or Disability on or after the Grant Date, but prior to the end of the Performance Period, the Performance Unit Award shallremain eligible to vest pursuant to Section III of this Program on the end date of the Performance Period and the Participant shallreceive a pro-rated portion of the Common Stock underlying the Performance Unit Award that would otherwise vest pursuant toSection III of this Program based on performance during the Performance Period, with the pro-rata portion based on the Participant’swhole months of service with AngioDynamics during the Performance Period prior to the date of such termination; provided that apartial month of employment will be considered a whole “month of service” for purposes of this Agreement only if the Participant wasemployed by AngioDynamics for at least fifteen (15) days during such month. Any portion of the Performance Unit Award thatremains unvested on the end date of the Performance Period (after giving effect to such pro-ration) shall be considered to haveterminated on such date.Other Termination of Employment -- Eligibility Conditions. If the Participant’s employment with AngioDynamics or any and of itssubsidiaries or affiliates is terminated or the Participant separates from AngioDynamics or its affiliates or subsidiaries for any reasonother than death, Retirement or Disability, the Performance Unit Award shall terminate and no shares of Common Stock shall beissued.Change in Control of the Company. Notwithstanding anything to the contrary in this Agreement, in the event of a Change in Control(as defined in this Program) of AngioDynamics on or after the Grant Date, but prior to the end of the Performance Period and prior tothe Participant’s termination of employment for any reason, the Participant shall immediately vest in 100% of the Target Amount ofshares of Common Stock subject to the Performance Unit Award. Notwithstanding anything to the contrary in this Agreement, in theevent the Participant’s employment with AngioDynamics or any of its subsidiaries or affiliates terminates due to one of the reasonsexpressly covered above (except as described in “Other Termination of Employment” set forth above) and a Change in Control ofAngioDynamics occurs subsequent to such a termination of employment (but during the Performance Period), the pro-rata vestingprovided for in such sections shall be based on the Target Amount of shares of Common Stock subject to the Performance UnitAward. Any shares of Common Stock subject to the Performance Unit Award that become vested pursuant to this section of theProgram shall be issued to the Participant upon or as soon as practicable (and in all events within thirty (30) days) after the effectivedate of the Change in Control of AngioDynamics (or, if so provided by the Board, immediately prior to the Change in Control). In theevent a Change in Control of AngioDynamics occurs following the last day of the Performance Period, prior to the Participant’stermination of employment for any reason, and prior to the date all vested shares of Common Stock underlying the Performance UnitAward are issued pursuant to this Program, any shares of Common Stock subject to the Performance Unit Award that became vestedpursuant to this paragraph of the Program shall be issued to the Participant upon or as soon as practicable (and in all events withinthirty (30) days) after the effective date of the Change in Control of AngioDynamics (or, if so provided by the Board, immediatelyprior to the Change in Control).For the purposes of this Program, Change in Control shall mean shall mean that any of the following events has occurred:(i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing morethan 50% of the combined voting power of the Company's then outstanding securities, excluding any Person who becomessuch a Beneficial Owner in connection with a transaction described in clause (A) of paragraph (iii) below; or(ii) the following individuals cease for any reason to constitute a majority of the number of directors serving on the Board:individuals who, at the beginning of any period of two consecutive years or less (not including any period prior to the date ofthis Agreement), constitute the Board and any new director (other than a director whose initial assumption of office is inconnection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to theelection of directors of the Company) whose appointment or election by the Board or nomination for election by theCompany's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in officewho either were directors at the beginning of such period or whose appointment, election or nomination for election waspreviously so approved or recommended; or(iii) there is consummated a merger or consolidation of the Company or any Subsidiary with any other corporation, otherthan (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior tosuch merger or consolidation continuing to represent (either by remaining outstanding or by being converted into votingsecurities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciaryholding securities under an employee benefit plan of the Company or any Subsidiary, at least 60% of the combined votingpower of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after suchmerger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similartransaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Companyrepresenting more than 50% of the combined voting power of the Company's then outstanding securities; or(iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there isconsummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, otherthan a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 60% of thecombined voting power of the voting securities of which are owned by shareholders of the Company in substantially the sameproportions as their ownership of the Company immediately prior to such sale. VIII.Termination, Suspension or Modification and Interpretation of the ProgramThe Board has sole authority over administration and interpretation of the Program and retains the right to exercise discretion as it seesfit, except that, the Board shall have no discretion to increase the number of shares of Common Stock in which a Participant may vestabove the amount described in Section III. The Board may terminate, suspend or modify and if suspended, may reinstate with orwithout modification all or part of the Program at any time, with or without notice to the Participant. The Board reserves the exclusiveright to determine eligibility to participate in this Program and to interpret all applicable terms and conditions, including eligibilitycriteria.IX. OtherThis document sets forth the terms of the Program and is not intended to be a contract or employment agreement between theParticipant and AngioDynamics, its subsidiaries or affiliates. As applicable, it is understood that both the Participant andAngioDynamics have the right to terminate the Participant’s employment with the company at any time, with or without cause andwith or without notice, in acknowledgement of the fact that their employment relationship is “at will.”To the extent section 409A of the Code (“Section 409A”) applies to any Performance Unit Award under this Program, thePerformance Unit Award shall be interpreted in a manner consistent with Section 409A. Where Section 409A applies, in the case ofany payment made on termination of employment, a termination of employment shall not be deemed to have occurred unless suchtermination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision, referencesto a “termination,” “termination of employment,” or like terms shall mean “separation from service.” Where Section 409A applies, inthe case of a payment made upon a Change in Control, a Change in Control shall not be deemed to have occurred unless there is achange in the ownership or effective control of AngioDynamics, or in the ownership of a substantial portion of the assets ofAngioDynamics, as defined in Section 409A. Where required by Section 409A in the case of a specified employee (as determinedunder Section 409A), payments on termination shall be made on the first business day of the seventh month following termination.APPENDIX AAbaxis Inc.Integra Lifesciences Holdings CorporationAbiomed Inc.Intricon CorporationAccuray Inc.Intuitive Surgical, Inc.AlphaTec Holdings Inc.Invacare CorporationArticure, Inc.Lakeland Industries Inc.Atrion CorporationLemaitre Vascular, Inc.Becton, Dickinson & CompanyMasimo CorporationBoston Scientific CorporationMerit Medical Systems, Inc.Cantel Medical Corp.Mine Safety Appliances CompanyConmed CorporationNatus Medical IncorporatedCryoLife, Inc.NuVasive, Inc.Cutera, Inc.NxStage Medical, Inc.Dexcom, Inc.Resmed Inc.Digirad CorpRTI Surgical, Inc.Edwards Lifesciences CorporationSteris CorporationEndologix, Inc.Stryker CorporationHaemonetics CorporationTeleflex IncorporatedICU Medical, Inc.Varian Medical Systems, Inc.Insulet CorporationWright Medical1NON‑STATUTORY STOCK OPTION AGREEMENTTHIS AGREEMENT is made as of ________ between AngioDynamics, Inc., ("Company") and __________ ("Optionee").Terms used herein have the same meaning as in the Company's 2004 Stock and Incentive Award Plan ("Plan").1.The Company hereby grants to Optionee a Non‑Statutory Stock Option to purchase ______ shares (the “Shares”) ofCommon Stock pursuant and subject to the terms of the Plan, a copy of which has been delivered to Optionee andwhich is incorporated herein by reference.2. The option price per Share shall be $_____.3.The Option shall expire ten years from the grant date unless earlier terminated.4.In the event Optionee becomes employed by, associated in any way with, or the beneficial owner of more than 1% ofthe equity of any business which competes, directly or indirectly, with the Company's business in any geographical areawhere the Company then does business, the Option shall immediately expire and Optionee shall have no rightshereunder.5.Except as provided hereinafter and in the Plan, the Option shall become exercisable as to the Shares covered hereby, ata cumulative rate of 25% on each of the first four anniversaries of ________ provided that the Optionee has remainedin the continuous employ of the Company from the date of this Agreement. Upon approval by the CompensationCommittee of the Board of Directors of the Company, for purposes of this Agreement, service as a consultant ordirector of the Company shall be deemed to be employment by the Company.Notwithstanding the foregoing, the Option shall be exercisable as to all Shares covered hereby upon a Change ofControl” (if the Option has not expired under Section 3 or 4).The Option may be exercised in accordance with the Plan prior to the expiration date (or earlier termination orcancellation date under Section 3 or 4) at any time, and may be exercised in whole or in part as to the Shares thenavailable for purchase. This Option may be exercised only to acquire whole shares. No fractional shares shall be issued,and an exercise that would otherwise result in the issuance of fractional shares shall be disregarded to the extent of thefraction.6.The Option shall not be transferable otherwise than by will or by the laws of descent and distribution and during thelifetime of Optionee shall be exercisable only by Optionee.7.In the event Optionee ceases to be employed by the Company for any reason other than death or disability, the Optionmay be exercised (if it has not expired under Sections 3 or 4 and is exercisable under Section 5), to the extent theOptionee is entitled to do so on the date of termination, only during the period ending three months from the date ofsuch cessation.Notwithstanding the foregoing, in the event the Optionee’s employment is terminated by the Company for cause, theOption shall terminate at the time of such termination.8.In the event Optionee ceases to be employed by the Company by reason of death or disability, the Option may be fullyexercised as to all Shares covered hereby (if it has not expired under Sections 3 or 4 but regardless of whether it isexercisable under Section 5) only during the period ending one year from the date of such cessation.9.Nothing herein or in the Plan shall confer upon any employee of the Company any right to continue in the employmentof the Company.10.The Option and the Plan are subject to adjustments, modifications and amendments as provided in the Plan.11.Subject to the Plan, this Agreement shall bind and inure to the benefit of the Company, Optionee and their respectivesuccessors, permitted assigns and personal representatives.12.This Agreement will be governed by and construed under the laws of Delaware.13.Any disputes, claims or interpretive issues arising hereunder shall be resolved by the Committee in its sole and absolutediscretion, and the Committee's determinations shall be final and incontestable.IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective from the date first above written.ANGIODYNAMICS, INC.By: ____________________________Michael GreinerEVP & Chief Financial OfficerBY: ___________________________[Employee] PERFORMANCE UNIT AWARD AGREEMENTThis Performance Unit Award Agreement (this “Agreement”), dated as of the 18th day of July, 2018 (the “Grant Date”), isbetween AngioDynamics, Inc., a Delaware corporation (the “Company”), and the (“Participant”), an employee of the Company or anyof its affiliates or subsidiaries and whose name appears on the signature page hereto. All capitalized terms not otherwise defined hereinshall have the meaning ascribed thereto in either the AngioDynamics 2004 Stock and Incentive Award Plan, as amended (the “Plan”)or in the Total Shareholder Return Performance Unit Award Program (the “Program”) for the performance period calculated pursuantto the Program (the “Performance Period”).1. Grant and Acceptance of Award. Effective as of the Grant Date, the Company hereby grants to the Participant aPerformance Unit Award (the “Performance Unit Award”), subject to the terms and conditions set forth in this Agreement, theProgram and the Plan, with respect to [TARGET AMOUNT] (the “Target Amount”) shares of the Company’s common stock, parvalue $0.01 per share (the “Common Stock”). The grant of this Performance Unit Award shall not confer any right to the Participant(or any other participant) to be granted any Performance Unit Awards in the future under the Program.2. Eligibility Conditions upon Performance Unit Award. The Participant hereby acknowledges the vesting of any shares ofCommon Stock underlying the Performance Unit Award is subject to certain eligibility, performance and other conditions set forthherein. All shares of Common Stock vested pursuant to the terms of this Agreement, the Program and the Plan shall be issued to theParticipant as soon as practicable (and in all events within sixty (60) days) after the end of the Performance Period.3. Satisfaction of Performance-Based Conditions. Subject to the eligibility conditions described in Section 7 of this Agreement,except as otherwise provided in Sections 5, 6 and 8 of this Agreement, and the satisfaction of the performance conditions set forth onAppendix A to this Agreement during the Performance Period, shares of Common Stock subject to the Performance Unit Award willvest pursuant to the terms and in accordance with the conditions set forth in the Program. Except as set forth in Sections 5, 6 and 8 ofthis Agreement, no shares of Common Stock in settlement of vested shares of Common Stock underlying the Performance Unit Awardshall be issued to the Participant prior to the end of the Performance Period.4. Participant’s Rights in Common Stock. The shares of Common Stock, if and when issued hereunder, shall be registered inthe name of the Participant and evidenced in the manner as the Company may determine. During the period prior to the issuance ofStock (including any Vesting Date according to the Vesting Schedule), the Participant will have no rights of a stockholder of theCompany with respect to the Common Stock underlying the Performance Unit Award, including no right to receive dividends or votethe shares of Common Stock underlying each Performance Unit Award.5. Death. In the event that the Participant’s employment with the Company or its subsidiaries or affiliates is terminated due todeath on or after the Grant Date, but prior to the end of the Performance Period, the Performance Unit Award shall remain eligible tovest following the end date of the Performance Period (subject to satisfaction of the performance conditions set forth on Appendix A tothis Agreement) and the Participant shall receive a pro-rated portion of the Common Stock underlying the Performance Unit Awardthat would otherwise vest based on performance on the Vesting Date, with the pro-rata portion based on the Participant’s wholemonths of service with the Company during the Performance Period prior to the date of such termination; provided that a partial monthof employment will be considered a whole “month of service” for purposes of this Agreement only if the Participant was employed bythe Company for at least fifteen (15) days during such month. Any portion of the Performance Unit Award that remains unvested onthe Vesting Date (after giving effect to such pro-ration) shall be considered to have terminated on the Vesting Date. The Participantmay, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefitunder this Agreement is to be paid in case of his or her death before he or she receives any or all such benefit. Each such designationshall revoke all prior designations by the Participant, shall be in a form prescribed by the Company, and will be effective only whenfiled by the Participant in writing with the Secretary of the Company during the Participant’s lifetime. In the absence of any suchdesignation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.6. Retirement or Disability. In the event that the Participant’s employment with the Company or its subsidiaries or affiliates isterminated due to Retirement or Disability on or after the Grant Date, but prior to the end of the Performance Period, the PerformanceUnit Award shall remain eligible to vest following the end date of the Performance Period (subject to satisfaction of the performanceconditions set forth on Appendix A to this Agreement) and the Participant shall receive a pro-rated portion of the Common Stockunderlying the Performance Unit Award that would otherwise vest based on performance on the Vesting Date, with the pro-rataportion based on the Participant’s whole months of service with the Company during the Performance Period prior to the date of suchtermination; provided that a partial month of employment will be considered a whole “month of service” for purposes of thisAgreement only if the Participant was employed by the Company for at least fifteen (15) days during such month. Any portion of thePerformance Unit Award that remains unvested on the Vesting Date (after giving effect to such pro-ration) shall be considered to haveterminated on the Vesting Date.7. Other Termination of Employment -- Eligibility Conditions. If the Participant’s employment with the Company and itsaffiliates or subsidiaries is terminated or the Participant separates from the Company and its affiliates or subsidiaries for any reasonother than death, Retirement or Disability, the Performance Unit Award shall terminate and no shares of Common Stock shall beissued. Except as set forth in Sections 5, 6 and 8, eligibility to be issued shares of Common Stock underlying the Performance UnitAward is conditioned on the Participant’s continuous employment with the Company through the last day of the Performance Period.8. Change in Control of the Company. Notwithstanding anything to the contrary in this Agreement, in the event of a Change inControl (as defined in the Program) of the Company on or after the Grant Date, but prior to the end of the Performance Period andprior to the Participant’s termination of employment for any reason, the Participant shall immediately vest in 100% of the TargetAmount of shares of Common Stock subject to the Performance Unit Award. Notwithstanding anything to the contrary in thisAgreement, in the event the Participant’s employment with the Company or any Subsidiary terminates due to one of the reasonsexpressly covered by Section 5 or Section 6 of this Agreement and a Change in Control of the Company occurs subsequent to such atermination of employment (but during the Performance Period), the pro-rata vesting provided for in such sections shall be based on theTarget Amount of shares of Common Stock subject to the Performance Unit Award. Any shares of Common Stock subject to thePerformance Unit Award that become vested pursuant to this Section 8 shall be issued to the Participant upon or as soon as practicable(and in all events within thirty (30) days) after the effective date of the Change in Control of the Company (or, if so provided by theBoard of Directors, immediately prior to the Change in Control). In the event a Change in Control of the Company occurs followingthe last day of the Performance Period, prior to the Participant’s termination of employment for any reason, and prior to the date allvested shares of Common Stock underlying the Performance Unit Award are issued pursuant to Section 2 above, any shares ofCommon Stock subject to the Performance Unit Award that became vested pursuant to the terms of this Agreement and the Programshall be issued to the Participant upon or as soon as practicable (and in all events within thirty (30) days) after the effective date of theChange in Control of the Company (or, if so provided by the Company’s Board of Directors, immediately prior to the Change inControl).9. Consideration for Stock. The shares of Common Stock underlying the Performance Unit Award that are issued pursuant tothis Agreement and the Program will be issued for no cash consideration.10. Issuance of Stock. The Company shall not be obligated to issue any shares of Common Stock underlying the PerformanceUnit Award that become vested pursuant to the terms of this Agreement and the Program until (i) all federal and state laws andregulations as the Company may deem applicable have been complied with; (ii) the shares have been listed or authorized for listingupon official notice to the Nasdaq Global Select Market or have otherwise been accorded trading privileges; and (iii) all other legalmatters in connection with the issuance and delivery of the shares have been approved by the Company’s legal department.11. Tax Withholding. The Participant acknowledges that he or she shall be responsible for the payment of any taxes of anykind required by any national, state or local law to be paid with respect to the Performance Unit Award or the shares of CommonStock to be awarded hereunder, including, without limitation, the payment of any applicable withholding, income, social and similartaxes or obligations. The Participant further acknowledges that the Company (1) makes no representations or undertakings regardingthe treatment of any tax-related matters in connection with any aspect of this Agreement, including the grant of this Performance UnitAward, the vesting of any shares of Common Stock underlying this Performance Unit Award, the issuance of shares of CommonStock hereunder, the subsequent sale of any shares of Common Stock acquired hereunder and the receipt of any dividends; and (2)does not commit and is under no obligation to structure the terms of the grant or any aspect of the Performance Unit Award to reduceor eliminate the Participant’s liability for tax-related matters or achieve any particular tax result. Further, if the Participant becomessubject to tax and/or social security contributions in more than one jurisdiction between the Date of Grant and the date of any relevanttaxable, tax and/or social security contribution withholding event, as applicable, the Participant acknowledges that the Company maybe required to withhold or account for tax-related matters in more than one jurisdiction. Prior to any relevant taxable, tax and/or socialsecurity contribution withholding event, the Participant shall pay or make adequate arrangements satisfactory to the Company to satisfyall tax-related matters. In this regard, the Participant authorizes the Company, at its sole discretion, to satisfy the obligations withrespect to tax-related matters by one or a combination of the following: (i) withholding from the Participant’s wages or other cashcompensation paid to him or her by the Company; or (ii) withholding from the proceeds of the sale of shares of Common Stockacquired hereunder, either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalfpursuant to this authorization); or (iii) withholding in shares of Common Stock to be issued hereunder. To avoid negative accountingtreatment, the Company will withhold or account for tax-related matters by considering applicable minimum statutory withholdingamounts or other applicable withholding rates. If the obligation for tax-related matters is satisfied by withholding in shares of CommonStock, for tax purposes, the Participant will be deemed to have been issued the full number of shares of Common Stock subject to thevested portion of this Performance Unit Award, notwithstanding that a number of the shares of Common Stock is held back solely forthe purpose of paying the tax-related matters due as a result of any aspect of the Participant’s participation in the Program. Finally, theParticipant shall pay to the Company any amount of tax-related matters that the Company may be required to withhold or account foras a result of Participant’s participation in the Program that cannot be satisfied by the means described in this Section 11. The Companymay refuse to issue or deliver shares of Common Stock or the proceeds of the sale of shares of Common Stock to the Participant if theParticipant fails to comply with Participant’s obligation in connection with any tax-related matters.12. Compliance with Section 409A. This Agreement is intended to comply with the requirements of Section 409A.Accordingly, all provisions herein shall be construed and interpreted to comply with Section 409A. This Agreement may be amendedat any time, without the consent of any party, to avoid the application of Section 409A in a particular circumstance or that is necessaryor desirable to satisfy any of the requirements under Section 409A, but the Company shall not be under any obligation to make anysuch amendment. Nothing in the Agreement shall provide a basis for any person to take action against the Company or any of itssubsidiaries or affiliate based on matters covered by Section 409A, including the tax treatment of any amount paid or Performance UnitAward granted under this Agreement, and neither the Company nor any of its subsidiaries or affiliates shall under any circumstanceshave any liability to any participant or his or her estate or any other party for any taxes, penalties or interest due on amounts paid orpayable under the this Agreement, including taxes, penalties or interest imposed under Section 409A. Notwithstanding any provisionto the contrary in this Agreement, if shares of Common Stock or other amounts become issuable or distributable under this Agreementby reason of the Participant’s Separation from Service and the Participant is a “specified employee,” within the meaning of Section409A, at the time of such Separation from Service, the shares of Common Stock shall not be issued or distributed to the Participantprior to the earlier of (i) the first day of the seventh (7th) month following the date of the Participant’s Separation from Service or (ii)the date of the Participant’s death, if such delayed commencement is otherwise required in order to avoid a prohibited distributionunder Section 409A(a)(2). Upon the expiration of the applicable Section 409A(a)(2) deferral period, all shares of Common Stockunderlying the Performance Unit Award issued pursuant to this Agreement or other amounts deferred pursuant to this Section 12 shallbe issued or distributed in a lump sum to the Participant. For purposes of this Agreement, “Separation from Service” means theParticipant’s separation from service as determined in accordance with Section 409A and the applicable standards of the TreasuryRegulations issued thereunder.13. Recapitalization. In the event there is any change in the Company’s Common Stock through the declaration of stockdividends or through recapitalization resulting in stock split-ups or through merger, consolidation, exchange of shares of CommonStock, or otherwise, the number and class of shares of Common Stock subject to this Performance Unit Award shall be equitablyadjusted by the Company, in the manner determined in its sole discretion, to prevent dilution or enlargement of rights.14. Investment Intent. The Participant acknowledges that the acquisition of shares of Common Stock to be issued hereunder isfor investment purposes without a view to distribution thereof.15. Limits on Transferability; Restrictions on Shares; Legend on Certificate. Until the eligibility conditions of this PerformanceUnit Award have been satisfied and shares of Common Stock have been issued in accordance with the terms of this Agreement or byaction of the Company’s Board of Directors, this Performance Unit Award is not transferable and shall not be sold, transferred,assigned, pledged, gifted, hypothecated or otherwise disposed of or encumbered by the Participant. Transfers of shares of CommonStock by the Participant are subject to the Company’s Insider Trading Policy and applicable securities laws. Shares of Common Stockissued to the Participant in certificate form or to the Participant’s book entry account upon satisfaction of the vesting and otherconditions of this Performance Unit Award may be restricted from transfer or sale by the Company and evidenced by stop-transferinstructions upon the Participant’s book entry account or restricted legend(s) affixed to certificates in the form as the Company or itscounsel may require with respect to any applicable restrictions on sale or transfer.16. Award Subject to the Plan and the Program. The Performance Unit Award made pursuant to this Agreement is madesubject to the Plan and the Program. The terms and provisions of the Plan and the Program, as each may be amended from time to timeare hereby incorporated herein by reference. In the event of a conflict between any term or provision contained in this Agreement and aterm or provision of the Plan or the Program, the applicable terms and conditions of the Plan or Program will govern and prevail.However, no amendment of the Plan or the Program after the date hereof may adversely alter or impair the issuance of the CommonStock underlying the Performance Unit Award to be made pursuant to this Agreement.17. No Rights to Continued Employment. This Agreement shall not confer upon the Participant any right to continuation ofemployment with the Company, its subsidiaries or affiliates, nor shall this Agreement interfere in any way with the Company’s right toterminate the Participant’s employment at any time with or without cause.18. Legal Notices. Any legal notice necessary under this Agreement shall be addressed to the Company in care of its GeneralCounsel at the principal executive offices of the Company and to the Participant at the address appearing in the personnel records ofthe Company for such Participant or to either party at such other address as either party may designate in writing to the other. Any suchnotice shall be deemed effective upon receipt thereof by the addressee.19. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of theState of New York (without regard to the conflict of laws principles thereof) and applicable federal laws. For purposes of litigating anydispute that arises directly or indirectly from the relationship of the parties evidenced by this Agreement, the parties hereby submit andconsent to the exclusive jurisdiction of the State of New York and agree that such litigation shall be conducted only in the State ofNew York, or the federal courts for the United States for the Northern District of New York, and no other courts, where thisPerformance Unit Award is made and/or to be performed.20. Headings. The headings contained in this Agreement are for convenience only and shall not affect the meaning orinterpretation of this Agreement.21. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be anoriginal and all of which together shall be deemed to be one and the same instrument.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]This Agreement is being signed as of the Grant Date.AngioDynamics, Inc.By: ______________________________Name: ______________________________Title: ______________________________ParticipantBy: ______________________________Name: ______________________________APPENDIX AI.Company Performance LevelsThe Performance Share Units will pay out in shares of Common Stock in a range of 0% to 200% of the number of Performance ShareUnits as follows:TSR PerformancePercentile RankPerformance Share Unitsas a Percent of Target75th Percentile or above200%50th Percentile100%25th Percentile50%Below 25th Percentile0%II.The Peer Group (as defined in the Program) with respect to this Agreement is set forth below.Abaxis Inc.Integra Lifesciences Holdings CorporationAbiomed Inc.Intricon CorporationAccuray Inc.Intuitive Surgical, Inc.AlphaTec Holdings Inc.Invacare CorporationArticure, Inc.Lakeland Industries Inc.Atrion CorporationLemaitre Vascular, Inc.Becton, Dickinson & CompanyMasimo CorporationBoston Scientific CorporationMerit Medical Systems, Inc.Cantel Medical Corp.Mine Safety Appliances CompanyConmed CorporationNatus Medical IncorporatedCryoLife, Inc.NuVasive, Inc.Cutera, Inc.NxStage Medical, Inc.Dexcom, Inc.Resmed Inc.Digirad CorpRTI Surgical, Inc.Edwards Lifesciences CorporationSteris CorporationEndologix, Inc.Stryker CorporationHaemonetics CorporationTeleflex IncorporatedICU Medical, Inc.Varian Medical Systems, Inc.Insulet CorporationWright MedicalB-1Exhibit 21Subsidiaries of AngioDynamics, Inc. Subsidiary State of Incorporation or OrganizationVortex Medical DelawareNM Holding Company, Inc. DelawareNavilyst Medical Holdings, Inc. DelawareNavilyst Medical, Inc. DelawareAngioDynamics UK Limited United KingdomAngioDynamics Netherlands B. V. NetherlandsRITA Medical Systems, LLC DelawareAngioDynamics France, SARL FranceAngioDynamics Canada Inc. British ColumbiaExhibit 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement Nos. 333-120057, 333-138456, 333-140627, 333-161355, 333-162844, 333-170619,333-190640 and 333-203441 on Form S-8 and No. 333-190642 on Form S-3 of our reports dated July 23, 2018 relating to the financial statements andfinancial statement schedule of AngioDynamics, Inc., and the effectiveness of AngioDynamics Inc.'s internal control over financial reporting, appearing inthis Annual Report on Form 10-K of AngioDynamics, Inc. for the year ended May 31, 2018./s/ Deloitte & Touche LLPBoston, MassachusettsJuly 23, 2018Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S‑3 (No. 333-190642) of AngioDynamics, Inc. of our report datedAugust 1, 2016 relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10‑K. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts July 23, 2018Exhibit 31.1CERTIFICATIONI, James C. Clemmer, certify that:1.I have reviewed this annual report on Form 10-K of AngioDynamics, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: July 23, 2018/ S / JAMES C. CLEMMERJames C. Clemmer, President,Chief Executive OfficerExhibit 31.2CERTIFICATIONI, Michael C. Greiner, certify that:1.I have reviewed this annual report on Form 10-K of AngioDynamics, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: July 23, 2018/ S / MICHAEL C. GREINERMichael C. Greiner, Executive Vice President,Chief Financial OfficerExhibit 32.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO TITLE 18,UNITED STATES CODE, SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, James C. Clemmer, President, Chief Executive Officer and Director of ANGIODYNAMICS, Inc. (the “Company”), certify, pursuant to Section 906 of theSarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:1.the annual report on Form 10-K of the Company for the fiscal year ended May 31, 2018 (the “Report”) fully complies with the requirements ofSection 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: July 23, 2018/s/ James C. ClemmerJames C. Clemmer, President,Chief Executive OfficerExhibit 32.2CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO TITLE 18,UNITED STATES CODE, SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Michael C. Greiner, Chief Financial Officer of ANGIODYNAMICS, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:1.the annual report on Form 10-K of the Company for the fiscal year ended May 31, 2018 (the “Report”) fully complies with the requirements ofSection 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: July 23, 2018/s/ Michael C. GreinerMichael C. Greiner, Executive Vice President,Chief Financial Officer

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