##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended February 28, 2010

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to

Commission file number 0-50761





AngioDynamics, Inc.

(Exact name of registrant as
specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-3146460                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|14 Plaza Drive Latham, New York                                |  | 12110                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(518)
795-1400

Registrants telephone number, including area code





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted 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 such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  | x
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x

Indicate the number of shares outstanding of each of the Issuers classes of common stock, as of the latest practicable date.



|                             |  |                                
|---------------------------- |  | -------------------------------
|Class                        |  | Outstanding as of April 1,
2010
|Common Stock, par value $.01 |  | 24,727,050 shares              









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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

INDEX



|                              |  |                                                                                                                           |  |        
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | -------
|                              |  |                                                                                                                           |  | Page   
|Part I: Financial Information |  |                                                                                                                          
|                              |  |                                                                                                                          
|Item 1.                       |  | Financial Statements                                                                                                      |  |        
|                              |  |                                                                                                                          
|                              |  | Consolidated Statements of Income-three and nine months ended February 28, 2010 and February 28, 2009(unaudited)          |  | 3      
|                              |  |                                                                                                                          
|                              |  | Consolidated Balance Sheets  February 28, 2010 (unaudited) and May 31, 2009                                              |  | 4      
|                              |  |                                                                                                                          
|                              |  | Consolidated Statements of Cash Flows  nine months ended February 28, 2010 and February 28, 2009 (unaudited)             |  | 5      
|                              |  |                                                                                                                          
|                              |  | Consolidated Statement of Stockholders Equity and Comprehensive Income nine months ended February
 28, 2010 (unaudited) |  | 6      
|                              |  |                                                                                                                          
|                              |  | Notes to Consolidated Financial Statements (unaudited)                                                                    |  | 7  27 
|                              |  |                                                                                                                          
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                     |  | 28  37
|                              |  |                                                                                                                          
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                |  | 38     
|                              |  |                                                                                                                          
|Item 4.                       |  | Controls and Procedures                                                                                                   |  | 39     
|                              | 
|Part II: Other Information    |  |                                                                                                                          
|                              |  |                                                                                                                          
|Item 1.                       |  | Legal Proceedings                                                                                                         |  | 39  40
|                              |  |                                                                                                                          
|Item 1A.                      |  | Risk Factors                                                                                                              |  | 40  41
|                              |  |                                                                                                                          
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                               |  | 41     
|                              |  |                                                                                                                          
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                           |  | 41     
|                              |  |                                                                                                                          
|Item 4.                       |  | (Removed and Reserved)                                                                                                    |  | 41     
|                              |  |                                                                                                                          
|Item 5.                       |  | Other Information                                                                                                         |  | 41     
|                              |  |                                                                                                                          
|Item 6.                       |  | Exhibits                                                                                                                  |  | 42     



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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except per share data)



|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | ------------ |  | - | ------------ | - |  | - | ------- | -
|                                            |  | Three Months Ended |        |   | Nine Months Ended |  
|                                            |  | Feb 28, 2010       |        |   | Feb 28, 2009      |   |        | Feb 28, 2010 |  |   | Feb 28, 2009 |  
|                                            |  |                    |        |  
|Net sales                                   |  | $                  | 52,207 |   |                   | $ | 49,447 |              |  | $ | 155,758      |   |  | $ | 142,234 |  
|Cost of sales                               |  |                    | 21,934 |   |                   |   | 19,225 |              |  |   | 63,746       |   |  |   | 54,862  |  
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Gross profit                                |  |                    | 30,273 |   |                   |   | 30,222 |              |  |   | 92,012       |   |  |   | 87,372  |  
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Operating expenses                          |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Research and development                    |  |                    | 4,289  |   |                   |   | 4,692  |              |  |   | 13,901       |   |  |   | 13,079  |  
|Sales and marketing                         |  |                    | 14,032 |   |                   |   | 13,906 |              |  |   | 44,433       |   |  |   | 41,516  |  
|General and administrative                  |  |                    | 4,075  |   |                   |   | 6,671  |              |  |   | 12,183       |   |  |   | 14,619  |  
|Amortization of intangibles                 |  |                    | 2,284  |   |                   |   | 2,323  |              |  |   | 7,007        |   |  |   | 6,816   |  
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Total operating expenses                    |  |                    | 24,680 |   |                   |   | 27,592 |              |  |   | 77,524       |   |  |   | 76,030  |  
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Operating income                            |  |                    | 5,593  |   |                   |   | 2,630  |              |  |   | 14,488       |   |  |   | 11,342  |  
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Other income (expenses)                     |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Interest income                             |  |                    | 181    |   |                   |   | 415    |              |  |   | 531          |   |  |   | 1,291   |  
|Interest expense                            |  |                    | (137   | ) |                   |   | (193   | )            |  |   | (545         | ) |  |   | (552    | )
|Other income (expense)                      |  |                    | (277   | ) |                   |   | (129   | )            |  |   | (674         | ) |  |   | (1,397  | )
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Total other income (expenses)               |  |                    | (233   | ) |                   |   | 93     |              |  |   | (688         | ) |  |   | (658    | )
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Income before income tax provision          |  |                    | 5,360  |   |                   |   | 2,723  |              |  |   | 13,800       |   |  |   | 10,684  |  
|Income tax provision                        |  |                    | 2,027  |   |                   |   | 811    |              |  |   | 5,227        |   |  |   | 3,654   |  
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Net income                                  |  | $                  | 3,333  |   |                   | $ | 1,912  |              |  | $ | 8,573        |   |  | $ | 7,030   |  
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Earnings per common share                   |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Basic                                       |  | $                  | 0.14   |   |                   | $ | 0.08   |              |  | $ | 0.35         |   |  | $ | 0.29    |  
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|Diluted                                     |  | $                  | 0.13   |   |                   | $ | 0.08   |              |  | $ | 0.35         |   |  | $ | 0.29    |  
|                                            |  |                    |        |   |                   |   |        |              |  |   |              |   |  |   |         |  
|                                            |  |                    |        |  
|Basic weighted average shares outstanding   |  |                    | 24,622 |   |                   |   | 24,366 |              |  |   | 24,523       |   |  |   | 24,342  |  
|Diluted weighted average shares outstanding |  |                    | 24,867 |   |                   |   | 24,484 |              |  |   | 24,722       |   |  |   | 24,501  |  

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



3



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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ------------ | - | ------- | -
|                                                                                                                                                                                  |  | Feb 28, 2010 |         |   | May 31, 2009 |  
|                                                                                                                                                                                  |  | (unaudited)  |         |   |              |  
|ASSETS                                                                                                                                                                            |  |              |         |   |              |   |         |  
|CURRENT ASSETS                                                                                                                                                                    |  |              |         |   |              |   |         |  
|Cash and cash equivalents                                                                                                                                                         |  | $            | 37,513  |   |              | $ | 27,909  |  
|Marketable securities, at fair value                                                                                                                                              |  |              | 48,265  |   |              |   | 40,278  |  
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|Total cash, cash equivalents and marketable securities                                                                                                                            |  |              | 85,778  |   |              |   | 68,187  |  
|Accounts receivable, net of allowances of $534 and $602, respectively                                                                                                             |  |              | 26,536  |   |              |   | 27,181  |  
|Inventories                                                                                                                                                                       |  |              | 34,115  |   |              |   | 36,928  |  
|Deferred income taxes                                                                                                                                                             |  |              | 6,049   |   |              |   | 9,337   |  
|Prepaid expenses and other                                                                                                                                                        |  |              | 5,873   |   |              |   | 6,965   |  
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|Total current assets                                                                                                                                                              |  |              | 158,351 |   |              |   | 148,598 |  
|PROPERTY, PLANT AND EQUIPMENT-AT COST, less accumulated depreciation                                                                                                              |  |              | 23,293  |   |              |   | 22,183  |  
|OTHER ASSETS                                                                                                                                                                      |  |              | 2,274   |   |              |   | 908     |  
|INTANGIBLE ASSETS, less accumulated amortization                                                                                                                                  |  |              | 60,738  |   |              |   | 67,770  |  
|GOODWILL                                                                                                                                                                          |  |              | 161,974 |   |              |   | 161,974 |  
|DEFERRED INCOME TAXES, long term                                                                                                                                                  |  |              | 2,641   |   |              |   | 4,263   |  
|PREPAID ROYALTIES                                                                                                                                                                 |  |              | 3,024   |   |              |   | 3,007   |  
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|TOTAL ASSETS                                                                                                                                                                      |  | $            | 412,295 |   |              | $ | 408,703 |  
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|                                                                                                                                                                                  |  |             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                              |  |              |         |   |              |   |         |  
|CURRENT LIABILITIES                                                                                                                                                               |  |              |         |   |              |   |         |  
|Accounts payable                                                                                                                                                                  |  | $            | 8,640   |   |              | $ | 13,152  |  
|Accrued liabilities                                                                                                                                                               |  |              | 9,875   |   |              |   | 11,055  |  
|Current portion of long-term debt                                                                                                                                                 |  |              | 255     |   |              |   | 265     |  
|Other current liabilities, net of discount                                                                                                                                        |  |              |        |   |              |   | 5,227   |  
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|Total current liabilities                                                                                                                                                         |  |              | 18,770  |   |              |   | 29,699  |  
|LONG-TERM DEBT, net of current portion                                                                                                                                            |  |              | 6,615   |   |              |   | 6,810   |  
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|Total liabilities                                                                                                                                                                 |  |              | 25,385  |   |              |   | 36,509  |  
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                     |  |              |         |   |              |   |         |  
|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, 45,000,000 shares authorized; issued and outstanding 24,725,471 and 24,428,209 shares at
February 28, 2010 and May 31, 2009, respectively |  |              | 247     |   |              |   | 245     |  
|Additional paid-in capital                                                                                                                                                        |  |              | 364,473 |   |              |   | 358,014 |  
|Retained earnings                                                                                                                                                                 |  |              | 23,413  |   |              |   | 14,840  |  
|Accumulated other comprehensive loss                                                                                                                                              |  |              | (1,223  | ) |              |   | (905    | )
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|Total stockholders equity                                                                                                                                                        |  |              | 386,910 |   |              |   | 372,194 |  
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                        |  | $            | 412,295 |   |              | $ | 408,703 |  
|                                                                                                                                                                                  |  |              |         |   |              |   |         |  

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



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AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                  |  |                   |         |   |              |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------ | - | ------- | -
|                                                                                  |  | Nine Months Ended |        
|                                                                                  |  | Feb 28, 2010      |         |   | Feb 28, 2009 |  
|Cash flows from operating activities:                                             |  |                   |         |   |              |   |         |  
|Net income                                                                        |  | $                 | 8,573   |   |              | $ | 7,030   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                   |         |   |              |   |         |  
|Depreciation and amortization                                                     |  |                   | 9,256   |   |              |   | 8,814   |  
|Tax effect on exercise of stock options and issuance of performance shares        |  |                   | (145    | ) |              |   | (104    | )
|Deferred income taxes                                                             |  |                   | 4,943   |   |              |   | 2,438   |  
|Change in allowance for excess and obsolete inventory                             |  |                   | (640    | ) |              |   | 587     |  
|Stock based compensation                                                          |  |                   | 3,672   |   |              |   | 4,508   |  
|Imputed interest                                                                  |  |                   | 153     |   |              |   | 189     |  
|Change in AR allowances                                                           |  |                   | (68     | ) |              |   |        |  
|Other                                                                             |  |                   | (97     | ) |              |   | 136     |  
|Changes in operating assets and liabilities:                                      |  |                   |         |   |              |   |         |  
|Accounts receivable                                                               |  |                   | 713     |   |              |   | 1,198   |  
|Inventories                                                                       |  |                   | 3,170   |   |              |   | (6,444  | )
|Prepaid expenses and other                                                        |  |                   | (8      | ) |              |   | 674     |  
|Accounts payable and accrued liabilities                                          |  |                   | (5,708  | ) |              |   | 1,704   |  
|Litigation settlement                                                             |  |                   |        |   |              |   | (6,757  | )
|Income taxes payable                                                              |  |                   |        |   |              |   | (933    | )
|                                                                                  |  |                   |         |   |              |   |         |  
|Net cash provided by operating activities                                         |  |                   | 23,814  |   |              |   | 13,040  |  
|                                                                                  |  |                   |         |   |              |   |         |  
|Cash flows from investing activities:                                             |  |                   |         |   |              |   |         |  
|Additions to property, plant and equipment                                        |  |                   | (3,394  | ) |              |   | (3,472  | )
|Acquisition of intangible assets and business                                     |  |                   | (5,342  | ) |              |   | (17,078 | )
|Change in restricted cash                                                         |  |                   |        |   |              |   | 68      |  
|Purchases of marketable securities                                                |  |                   | (37,834 | ) |              |   | (24,295 | )
|Proceeds from sale or maturity of marketable securities                           |  |                   | 29,649  |   |              |   | 34,811  |  
|                                                                                  |  |                   |         |   |              |   |         |  
|Net cash used in investing activities                                             |  |                   | (16,921 | ) |              |   | (9,966  | )
|                                                                                  |  |                   |         |   |              |   |         |  
|Cash flows from financing activities:                                             |  |                   |         |   |              |   |         |  
|Repayment of long-term debt and convertible notes                                 |  |                   | (205    | ) |              |   | (9,955  | )
|Proceeds from exercise of stock options and ESPP                                  |  |                   | 2,934   |   |              |   | 1,765   |  
|                                                                                  |  |                   |         |   |              |   |         |  
|Net cash provided by (used in) financing activities                               |  |                   | 2,729   |   |              |   | (8,190  | )
|                                                                                  |  |                   |         |   |              |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                      |  |                   | (18     | ) |              |   | (148    | )
|                                                                                  |  |                   |         |   |              |   |         |  
|Increase (decrease) in cash and cash equivalents                                  |  |                   | 9,604   |   |              |   | (5,264  | )
|                                                                                  |  |                  
|Cash and cash equivalents at beginning of period                                  |  |                   | 27,909  |   |              |   | 32,040  |  
|                                                                                  |  |                   |         |   |              |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                 | 37,513  |   |              | $ | 26,776  |  
|                                                                                  |  |                   |         |   |              |   |         |  

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



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND

COMPREHENSIVE INCOME

Nine Months Ended February 28, 2010

(unaudited)

(in thousands, except share data)



|                                                            |        |              |        |                          |     |  |                  |         |                                   |  |   |        |  |   |                     |   |  |   |         |   |  |   |       |  
|----------------------------------------------------------- | ------ | ------------ | ------ | ------------------------ | --- |  | ---------------- | ------- | --------------------------------- |  | - | ------ |  | - | ------------------- | - |  | - | ------- | - |  | - | ----- | -
|                                                            |        | Common Stock |        | Additionalpaid incapital |     |  | Retainedearnings |         | Accumulatedothercomprehensiveloss |  |   | Total  |  |   | Comprehensiveincome |  
|                                                            | Shares |              | Amount |                          |     |  |                  |        
|Balance at May 31, 2009                                     |        | 24,428,209   |        | $                        | 245 |  | $                | 358,014 |                                   |  | $ | 14,840 |  | $ | (905                | ) |  | $ | 372,194 |   |  |   |       |  
|Net income                                                  |        |              |        |                          |     |  |                  |         |                                   |  |   | 8,573  |  |   |                     |   |  |   | 8,573   |   |  | $ | 8,573 |  
|Exercise of stock options                                   |        | 165,054      |        |                          | 1   |  |                  | 1,800   |                                   |  |   |        |  |   |                     |   |  |   | 1,801   |   |  |   |       |  
|                                                            |        |              |        |                          |     |  |                 
|Purchase of common stock under Employee Stock Purchase Plan |        | 114,479      |        |                          | 1   |  |                  | 1,152   |                                   |  |   |        |  |   |                     |   |  |   | 1,153   |   |  |   |       |  
|Stock-based compensation                                    |        |              |        |                          |     |  |                  | 3,672   |                                   |  |   |        |  |   |                     |   |  |   | 3,672   |   |  |   |       |  
|Issuance/Cancellation of performance shares                 |        | 17,729       |        |                          |     |  |                  | (55     | )                                 |  |   |        |  |   |                     |   |  |   | (55     | ) |  |   |       |  
|Tax effect of exercise of stock options                     |        |              |        |                          |     |  |                  | (110    | )                                 |  |   |        |  |   |                     |   |  |   | (110    | ) |  |   |       |  
|                                                            |        |              |        |                          |     |  |                 
|Unrealized loss on marketable securities, net of tax of $39 |        |              |        |                          |     |  |                  |         |                                   |  |   |        |  |   | (66                 | ) |  |   | (66     | ) |  |   | (66   | )
|Unrealized gain on interest rate swap, net of tax of $6     |        |              |        |                          |     |  |                  |         |                                   |  |   |        |  |   | 11                  |   |  |   | 11      |   |  |   | 11    |  
|Foreign currency translation                                |        |              |        |                          |     |  |                  |         |                                   |  |   |        |  |   | (263                | ) |  |   | (263    | ) |  |   | (263  | )
|                                                            |        |              |        |                          |     |  |                  |         |                                   |  |   |        |  |   |                     |   |  |   |         |   |  |   |       |  
|Comprehensive income                                        |        |              |        |                          |     |  |                  |         |                                   |  |   |        |  |   |                     |   |  |   |         |   |  | $ | 8,255 |  
|                                                            |        |              |        |                          |     |  |                  |         |                                   |  |   |        |  |   |                     |   |  |   |         |   |  |   |       |  
|Balance at February 28, 2010                                |        | 24,725,471   |        | $                        | 247 |  | $                | 364,473 |                                   |  | $ | 23,413 |  | $ | (1,223              | ) |  | $ | 386,910 |   |  |   |       |  
|                                                            |        |              |        |                          |     |  |                  |         |                                   |  |   |        |  |   |                     |   |  |   |         |   |  |   |       |  

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



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2010 and February 28, 2009

(unaudited)

NOTE A  CONSOLIDATED FINANCIAL STATEMENTS

The consolidated balance sheet as of February 28, 2010, the consolidated statement of stockholders equity and comprehensive income for the nine months ended February 28, 2010, the
consolidated statement of cash flows for the nine months ended February 28, 2010 and February 28, 2009 and the consolidated statements of income for the three and nine months ended February 28, 2010 and February 28, 2009 have
been prepared by the Company without audit. The consolidated balance sheet as of May 31, 2009 was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted
in the United States of America. In the opinion of management, all adjustments (which include only normally recurring adjustments) necessary to state fairly the financial position, changes in stockholders equity and comprehensive income,
results of operations and cash flows as of and for the period ended February 28, 2010 (and for all periods presented) have been made. Certain prior period amounts have been reclassified for comparative purposes to conform to current quarter and
year to date presentation. The reclassifications, made for the purpose of including strategic business unit management costs in marketing costs, resulted in an increase in marketing costs of $255,000 in the third quarter of the prior year and
$781,000 in the prior year to date with comparative decreases in general and administrative costs for the same periods.

Certain information and footnote disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted. It is suggested
that these unaudited interim consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended May 31, 2009, filed by the Company on
August 14, 2009. The results of operations in the fiscal periods ended February 28, 2010 and February 28, 2009 are not necessarily indicative of the operating results for the respective full fiscal years.

The unaudited interim consolidated financial statements for the three and nine months ended February 28, 2010 include the accounts of
AngioDynamics, Inc. and its wholly owned subsidiaries, RITA Medical Systems, LLC, and AngioDynamics UK Limited (collectively, the Company). All intercompany balances and transactions have been eliminated.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE A  CONSOLIDATED FINANCIAL STATEMENTS 
(contd)

The Company has organized its business into three reportable segments: Peripheral Vascular, Access and
Oncology/Surgery. The Peripheral Vascular segment is comprised of the venous, angiographic, PTA, drainage and thrombolytic product lines. The Access segment is comprised of the dialysis, ports and PICC product lines. The Oncology/Surgery segment is
comprised of the RFA, embolization, Habib and NanoKnife product lines. The Companys chief operating decision maker evaluates performance based on the reportable segments and utilizes net sales, gross profit and operating income as primary
profitability measures. The expenses related to certain shared and corporate activities are allocated to these segments on a percentage of total sales basis or operating expense basis, as deemed appropriate.

The Company has performed an evaluation of subsequent events through the date the financial statements were issued.

NOTE B  ACQUISITIONS

FlowMedica, Inc.

On January 12, 2009 the Company completed the acquisition of certain assets of
FlowMedica, Inc. for approximately $1.75 million in cash and a contingent payment based on fiscal 2011 sales of FlowMedica products. With this acquisition, the Company purchased the Benephit product line, a therapeutic approach to deliver drugs
directly to the kidneys in order to prevent and treat acute kidney injury, in the emerging field of Targeted Renal Therapy. Intangible assets acquired totaled approximately $1.3 million which have been identified as product technologies (10-year
weighted average useful life). Inventory acquired totaled approximately $400,000. The acquisition has been accounted for as a purchase and accordingly, the Company has included the results of operations in the financial statements effective
January 12, 2009. The pro-forma effects of the acquisition were not material to the Companys income statement and balance sheet. Ten employees of FlowMedica, Inc. became employees of the Company upon completion of the acquisition.

Diomed, Inc. and Diomed UK Limited

On June 17, 2008, the Company completed the acquisition of certain U.S. assets of Diomed, Inc. and UK assets of Diomed UK Limited, in
separate transactions, for an aggregate purchase price of approximately $11.1 million in cash including capitalized acquisition costs. With this acquisition, the Company substantially strengthened its position in the market for the treatment of
varicose veins. The combination of Diomed endovenous laser products with the Companys existing venous product line provides the Company with a comprehensive venous product offering. The total of the net tangible assets acquired was $5.5
million.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE B  ACQUISITIONS (contd)

Goodwill recorded as a result of these acquisitions was approximately $1.9 million. Intangible assets acquired, other than goodwill,
totaled approximately $3.7 million of which $3.6 million has been identified as customer relationships (8-year estimated weighted average useful life)and $100,000 has been identified as product technologies (10-year estimated
weighted average useful life).

The acquisition has been accounted for as a purchase and, accordingly, the Company has
included the results of operations in the financial statements effective June 17, 2008. The pro-forma effects of the Diomed acquisition on the Companys income statement and balance sheet were not material. Thirty
five employees of Diomed became employees of the Company upon completion of the acquisitions.

Oncobionic, Inc.

On May 9, 2008, the Company completed the acquisition of all the issued and
outstanding shares of capital stock of Oncobionic, Inc. pursuant to the terms of the Stock Purchase Agreement entered into on October 12, 2006. The closing of the acquisition came as a result of the successful use of irreversible
electroporation (IRE) technology in the first human clinical trial for the treatment of soft tissue in April 2008.

Under the
October 2006 Stock Purchase Agreement, the Company agreed to pay a total purchase price of $25.4 million, including $400,000 of assumed liabilities. The Company made payments of $5.0 million upon the execution of the stock purchase agreement in
October 2006, $10.0 million on May 9, 2008 upon closing the acquisition, $5.0 million in November 2008 and $5.0 million in November 2009.

The Stock Purchase Agreement also provides for future royalty payments due on net sales of any catheter-based products sold by the Company that incorporate irreversible electroporation technology
(IRE). The Company holds a license to such technology under a license agreement with the Regents of the University of California (the UC License).

The Company has accounted for the acquisition of Oncobionic as a purchase under accounting principles generally accepted in the United States of America. Under the purchase method of accounting, the
assets and liabilities of Oncobionic were recorded as of the acquisition date, at their respective fair values, and consolidated with those of AngioDynamics. $25.2 million of the purchase price was recorded as product technology and is being
amortized over a 15 year useful life. The Company has recorded goodwill and a deferred tax liability of $9.3 million. In future periods the deferred tax liability will be reduced to offset the tax impact of non-deductible amortization expense on the
intangible assets acquired.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE C  ASSET PURCHASE AGREEMENTS

Medron, Inc.

On May 1, 2006, the Company entered into an Asset Purchase Agreement with Medron, Inc. to acquire the rights, titles, and interests in, and to, Patent Pending Technology for purposes of manufacturing, marketing, and selling proprietary
Vascular Access Ports, following administrative approval. As of February 28, 2010, the Company has paid $5.5 million in accordance with this agreement. That amount, net of accumulated amortization, has been included on the balance sheet under
the caption Intangible assets and is being amortized on a straight line basis over the expected useful life of the assets. A potential future payment of $2.5 million is due upon issuance (within 10 years of the effective date of the
agreement) of a U.S. patent claiming priority to the Patent Application, or any issuance of a patent to the Company within 10 years of the effective date of the agreement in which the original owners are the inventors.

NOTE D  INVENTORIES

Inventories consist of the following:



|                  |  |                |        |   |              |   |        |  
|----------------- |  | -------------- | ------ | - | ------------ | - | ------ | -
|                  |  | Feb 28, 2010   |        |   | May 31, 2009 |  
|                  |  | (in thousands) |       
|Raw materials     |  | $              | 13,491 |   |              | $ | 13,790 |  
|Work in process   |  |                | 4,160  |   |              |   | 4,188  |  
|Finished goods    |  |                | 18,898 |   |              |   | 22,024 |  
|                  |  |                |        |   |              |   |        |  
|Gross Inventories |  |                | 36,549 |   |              |   | 40,002 |  
|Less: Reserves    |  |                | (2,434 | ) |              |   | (3,074 | )
|                  |  |                |        |   |              |   |        |  
|Inventories       |  | $              | 34,115 |   |              | $ | 36,928 |  
|                  |  |                |        |   |              |   |        |  

NOTE E  GOODWILL AND INTANGIBLE ASSETS

Goodwill is not amortized but rather is tested for impairment during the third quarter of each fiscal year or more frequently if triggering
events indicating potential impairment arise. Goodwill and intangible assets have been recorded at either incurred or allocated cost. Allocated costs were based on respective fair market values at the date of acquisition.

There were no changes in the carrying amount of goodwill for the nine months ended February 28, 2010.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE E  GOODWILL AND INTANGIBLE ASSETS 
(contd)

Goodwill represents the excess of the purchase price over the fair value of the net tangible and
identifiable intangible assets acquired in each business combination. Beginning in fiscal 2009 the Company began reporting three operating segments as opposed to a single segment in prior periods. The Companys reporting units are consistent
with the Companys operating segments, and include Peripheral Vascular, Access and Oncology/Surgery. As a result, the carrying value of goodwill was allocated to each of the Companys reporting units on a relative fair value basis. The
Company completed its annual evaluation of goodwill by reporting unit as of December 31, 2009. The Companys assessment of goodwill impairment indicated that the fair value of each of the Companys reporting units exceeded its
carrying value and therefore goodwill in each of the reporting units was not impaired. The fair value of Peripheral Vascular, Access and Oncology/Surgery exceeded its carrying value by 26%, 6% and 16%, respectively. The sum of the fair values of the
reporting units was reconciled to the Companys current market capitalization (based upon the Companys stock price) plus an estimated control premium of approximately 8% as of December 31, 2009.

To determine fair value, the Company utilized two market-based approaches and an income approach. Under the market-based approaches, the
Company utilized information regarding the Company as well as publicly available industry information to determine earnings multiples and sales multiples. Under the income approach, the Company determined fair value based on estimated future cash
flows of each reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn. The Company determined
the discounted cash flow as the best indicator to determine fair value.

Determining the fair value of a reporting unit is
judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others. Solely for purposes of establishing inputs for the fair
value calculations, the Company assumed that the current economic conditions would continue through fiscal year 2011, followed by a recovery thereafter. In addition, the Company applied gross margin assumptions consistent with the Companys
historical trends at various revenue levels and used an EBITDA exit multiple of 6.0, 6.0 and 7.0 to calculate the terminal value of the Peripheral Vascular, Access and Oncology/Surgery reporting units, respectively, compared to an EBITDA exit
multiple of 6.5, 7.0 and 8.0, respectively, used in the prior year. In addition, the Company used a discount rate of 21%, 15% and 18% to calculate the fair value of its Peripheral Vascular, Access and Oncology/Surgery reporting units, respectively.
These discount rates vary from the rates of 19%, 16% and 19%, respectively, used in the prior year primarily due to the fact that additional risk premiums were added to take into account the economic downturn and specific inherent risks associated
with each reporting unit.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE E  GOODWILL AND INTANGIBLE ASSETS 
(contd)

Even though the Company determined that there was no goodwill impairment as of December 31, 2009, the
future occurrence of a potential indicator of impairment, such as a significant adverse change in legal factors or business climate, an adverse action or assessment by a regulator, unanticipated competition, a material negative change in
relationships with significant customers, strategic decisions made in response to economic or competitive conditions, loss of key personnel or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will
be sold or disposed of, would require an interim assessment for some or all of the reporting units prior to the next required annual assessment as of December 31, 2010. It is not possible at this time to determine if any such future impairment
charge would result or, if it does, whether such charge would be material.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE E  GOODWILL AND INTANGIBLE ASSETS 
(contd)

Intangible assets are amortized over their estimated useful lives. The balances of intangible assets are as
follows:



|                          |  |                     |        |                         |   |         |                   |  |                        |        |  |     
|------------------------- |  | ------------------- | ------ | ----------------------- | - | ------- | ----------------- |  | ---------------------- | ------ |  | ----
|                          |  | February 28, 2010  
|                          |  | Gross carryingvalue |        | Accumulatedamortization |   |         | Net carryingvalue |  | Weightedavg usefullife
|                          |  | (in thousands)      |        | (years)                
|Product technologies      |  | $                   | 48,654 |                         | $ | (11,330 | )                 |  | $                      | 37,324 |  | 13.5
|Customer relationships    |  |                     | 31,125 |                         |   | (12,179 | )                 |  |                        | 18,946 |  | 7.5 
|Licenses                  |  |                     | 6,040  |                         |   | (1,987  | )                 |  |                        | 4,053  |  | 9.2 
|Distributor relationships |  |                     | 900    |                         |   | (900    | )                 |  |                        |       |  | 3.0 
|Trademarks                |  |                     | 600    |                         |   | (185    | )                 |  |                        | 415    |  | 10.0
|                          |  |                     |        |                         |   |         |                   |  |                        |        |  |     
|                          |  | $                   | 87,319 |                         | $ | (26,581 | )                 |  | $                      | 60,738 |  |     
|                          |  |                     |        |                         |   |         |                   |  |                        |        |  |     
|                          | 
|                          |  | May 31, 2009       
|                          |  | Gross carryingvalue |        | Accumulatedamortization |   |         | Net carryingvalue |  | Weightedavg usefullife
|                          |  | (in thousands)      |        | (years)                
|Product technologies      |  | $                   | 48,659 |                         | $ | (8,294  | )                 |  | $                      | 40,365 |  | 13.5
|Customer relationships    |  |                     | 31,126 |                         |   | (9,070  | )                 |  |                        | 22,056 |  | 7.5 
|Licenses                  |  |                     | 6,040  |                         |   | (1,351  | )                 |  |                        | 4,689  |  | 9.2 
|Distributor relationships |  |                     | 900    |                         |   | (700    | )                 |  |                        | 200    |  | 3.0 
|Trademarks                |  |                     | 600    |                         |   | (140    | )                 |  |                        | 460    |  | 10.0
|                          |  |                     |        |                         |   |         |                   |  |                        |        |  |     
|                          |  | $                   | 87,325 |                         | $ | (19,555 | )                 |  | $                      | 67,770 |  |     
|                          |  |                     |        |                         |   |         |                   |  |                        |        |  |     



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE F  ACCRUED LIABILITIES

Accrued liabilities consist of the following:



|                                 |  |                |       |             |   |       
|-------------------------------- |  | -------------- | ----- | ----------- | - | ------
|                                 |  | Feb 28,2010    |       | May 31,2009
|                                 |  | (in thousands)
|Payroll and related expenses     |  | $              | 4,750 |             | $ | 5,944 
|Royalties                        |  |                | 1,427 |             |   | 1,143 
|Sales and franchise taxes        |  |                | 966   |             |   | 1,125 
|Fair value of interest rate swap |  |                | 909   |             |   | 917   
|Other                            |  |                | 1,823 |             |   | 1,926 
|                                 |  |                |       |             |   |       
|Total                            |  | $              | 9,875 |             | $ | 11,055
|                                 |  |                |       |             |   |       

NOTE G  INCOME TAXES

The Companys effective income tax rate for the three month periods ending February 28, 2010 and February 28, 2009 was 38% and
30%, respectively. The Companys effective income tax rate for the nine month periods ending February 28, 2010 and February 28, 2009 was 38% and 34%, respectively. The prior year quarter and year to date benefited from utilization of
R&D tax credits. The R&D tax credit expired from the tax law on December 31, 2007. On October 3, 2008, the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 became law. The law retroactively extended the
R&D tax credits from January 1, 2008 to December 31, 2009. The retroactive one-time impact is reflected in the Companys prior year third quarter and year to date effective tax rates.

In September 2009, the Company received $1.7 million in cash as a tax refund related to completion of an examination of the Companys
federal income tax returns for fiscal years 2006 and 2007 by the Internal Revenue Service. This refund was primarily related to the tax deduction of costs incurred related to the acquisition of RITA Medical Systems, Inc. and was recorded as a
reduction in goodwill during the third quarter of fiscal 2009 when notification from the Internal Revenue Service was received.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE H  EARNINGS PER COMMON SHARE

Basic earnings per share are based on the weighted average number of common shares outstanding without consideration of potential common
stock. Diluted earnings per share further includes the dilutive effect of potential common stock consisting of stock options, warrants, and restricted stock units, provided that the inclusion of such securities is not antidilutive.

The following table sets forth the reconciliation of the weighted-average number of common shares:



|                              |  |                    |  |                   |  |             |  |            
|----------------------------- |  | ------------------ |  | ----------------- |  | ----------- |  | -----------
|                              |  | Three Months Ended |  | Nine Months Ended
|                              |  | Feb 28,2010        |  | Feb 28,2009       |  | Feb 28,2010 |  | Feb 28,2009
|Basic                         |  | 24,621,506         |  | 24,365,757        |  | 24,523,481  |  | 24,341,792 
|Effect of dilutive securities |  | 245,449            |  | 118,384           |  | 198,127     |  | 159,106    
|                              |  |                    |  |                   |  |             |  |            
|Diluted                       |  | 24,866,955         |  | 24,484,141        |  | 24,721,608  |  | 24,500,898 
|                              |  |                    |  |                   |  |             |  |            

Excluded from the calculation of diluted earnings per
common share are options and warrants issued to employees and non-employees to purchase 1,997,760 and 2,367,495 shares of common stock for the three and nine months ended February 28, 2010 and 1,501,025 and 1,384,362 for the three and nine
months ended February 28, 2009, as their inclusion would be antidilutive. The exercise prices of these options were between $11.16 and $53.92 at February 28, 2010.



15



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE I  SEGMENT AND GEOGRAPHIC INFORMATION

The Company has organized its business into three reportable segments: Peripheral Vascular, Access and Oncology/Surgery.
The Peripheral Vascular segment is comprised of the venous, angiographic, PTA, drainage and thrombolytic product lines. The Access segment is comprised of the dialysis, ports and PICC product lines. The Oncology/Surgery segment is comprised of the
RFA, embolization, Habib and NanoKnife product lines.

Selected information by reportable segment is presented in the
following tables (in thousands):



|                       |  |                    |        |             |                                              |        |             |  |      |             |  |       |   
|---------------------- |  | ------------------ | ------ | ----------- | -------------------------------------------- | ------ | ----------- |  | ---- | ----------- |  | ----- | --
|                       |  | Three Months Ended |        |             | As a Percentageof Net SalesThree MonthsEnded |       
|                       |  | Feb 28,2010        |        | Feb 28,2009 |                                              |        | Feb 28,2010 |  |      | Feb 28,2009 | 
|Net sales              |  |                    |        |             |                                              |        |             |  |      |             |  |       |   
|Peripheral Vascular    |  | $                  | 22,412 |             | $                                            | 20,743 |             |  |      |             |  |       |   
|Access                 |  |                    | 16,087 |             |                                              | 17,176 |             |  |      |             |  |       |   
|Oncology/Surgery       |  |                    | 13,708 |             |                                              | 11,528 |             |  |      |             |  |       |   
|                       |  |                    |        |             |                                              |        |             |  |      |             |  |       |   
|Total                  |  | $                  | 52,207 |             | $                                            | 49,447 |             |  |      |             |  |       |   
|                       |  |                    |        |             |                                              |        |             |  |      |             |  |       |   
|Gross profit           |  |                    |        |             |                                              |        |             |  |      |             |  |       |   
|Peripheral Vascular    |  | $                  | 12,048 |             | $                                            | 12,322 |             |  | 53.8 | %           |  | 59.4  | % 
|Access                 |  |                    | 9,254  |             |                                              | 10,186 |             |  | 57.5 | %           |  | 59.3  | % 
|Oncology/Surgery       |  |                    | 8,971  |             |                                              | 7,714  |             |  | 65.4 | %           |  | 66.9  | % 
|                       |  |                    |        |             |                                              |        |             |  |      |             |  |       |   
|Total                  |  | $                  | 30,273 |             | $                                            | 30,222 |             |  | 58.0 | %           |  | 61.1  | % 
|                       |  |                    |        |             |                                              |        |             |  |      |             |  |       |   
|Operating income(loss) |  |                    |        |             |                                              |        |             |  |      |             |  |       |   
|Peripheral Vascular    |  | $                  | 2,830  |             | $                                            | 2,226  |             |  | 12.6 | %           |  | 10.7  | % 
|Access                 |  |                    | 2,197  |             |                                              | 2,134  |             |  | 13.7 | %           |  | 12.4  | % 
|Oncology/Surgery       |  |                    | 566    |             |                                              | (1,730 | )           |  | 4.1  | %           |  | (15.0 | )%
|                       |  |                    |        |             |                                              |        |             |  |      |             |  |       |   
|Total                  |  | $                  | 5,593  |             | $                                            | 2,630  |             |  | 10.7 | %           |  | 5.3   | % 
|                       |  |                    |        |             |                                              |        |             |  |      |             |  |       |   



16



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE I  SEGMENT AND GEOGRAPHIC INFORMATION 
(contd)



|                       |  |                   |         |             |                                             |         |             |  |      |             |  |       |   
|---------------------- |  | ----------------- | ------- | ----------- | ------------------------------------------- | ------- | ----------- |  | ---- | ----------- |  | ----- | --
|                       |  | Nine Months Ended |         |             | As a Percentageof Net SalesNine MonthsEnded |        
|                       |  | Feb 28,2010       |         | Feb 28,2009 |                                             |         | Feb 28,2010 |  |      | Feb 28,2009 | 
|Net sales              |  |                   |         |             |                                             |         |             |  |      |             |  |       |   
|Peripheral Vascular    |  | $                 | 66,639  |             | $                                           | 60,947  |             |  |      |             |  |       |   
|Access                 |  |                   | 48,994  |             |                                             | 48,931  |             |  |      |             |  |       |   
|Oncology/Surgery       |  |                   | 40,125  |             |                                             | 32,356  |             |  |      |             |  |       |   
|                       |  |                   |         |             |                                             |         |             |  |      |             |  |       |   
|Total                  |  | $                 | 155,758 |             | $                                           | 142,234 |             |  |      |             |  |       |   
|                       |  |                   |         |             |                                             |         |             |  |      |             |  |       |   
|Gross profit           |  |                   |         |             |                                             |         |             |  |      |             |  |       |   
|Peripheral Vascular    |  | $                 | 37,911  |             | $                                           | 35,181  |             |  | 56.9 | %           |  | 57.7  | % 
|Access                 |  |                   | 28,202  |             |                                             | 29,609  |             |  | 57.6 | %           |  | 60.5  | % 
|Oncology/Surgery       |  |                   | 25,899  |             |                                             | 22,582  |             |  | 64.5 | %           |  | 69.8  | % 
|                       |  |                   |         |             |                                             |         |             |  |      |             |  |       |   
|Total                  |  | $                 | 92,012  |             | $                                           | 87,372  |             |  | 59.1 | %           |  | 61.4  | % 
|                       |  |                   |         |             |                                             |         |             |  |      |             |  |       |   
|Operating income(loss) |  |                   |         |             |                                             |         |             |  |      |             |  |       |   
|Peripheral Vascular    |  | $                 | 8,333   |             | $                                           | 8,171   |             |  | 12.5 | %           |  | 13.4  | % 
|Access                 |  |                   | 5,971   |             |                                             | 6,981   |             |  | 12.2 | %           |  | 14.3  | % 
|Oncology/Surgery       |  |                   | 184     |             |                                             | (3,810  | )           |  | 0.5  | %           |  | (11.8 | )%
|                       |  |                   |         |             |                                             |         |             |  |      |             |  |       |   
|Total                  |  | $                 | 14,488  |             | $                                           | 11,342  |             |  | 9.3  | %           |  | 8.0   | % 
|                       |  |                   |         |             |                                             |         |             |  |      |             |  |       |   

In accordance with accounting policies on disclosure of segment reporting, the internal
organization that is used by management for making operating decisions and assessing performance is used as the source of the Companys reportable segments. The accounting policies of the segments are the same as those described in Accounting
Policies, Note 1, of the Companys Annual Report on Form 10-K for the fiscal year ended May 31, 2009, filed by the Company on August 14, 2009. The Companys chief operating decision maker evaluates performance based on the
reportable segments and utilizes net sales, gross profit and operating income as primary profitability measures. The expenses related to certain shared and corporate activities are allocated to these segments on a percentage of total sales basis or
a percentage of operating expense basis, as deemed appropriate.

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



|                       |  |                    |        |                   |   |             |  |             |         |  |   |        
|---------------------- |  | ------------------ | ------ | ----------------- | - | ----------- |  | ----------- | ------- |  | - | -------
|                       |  | Three Months Ended |        | Nine Months Ended
|                       |  | Feb 28,2010        |        | Feb 28,2009       |   | Feb 28,2010 |  | Feb 28,2009
|Net Sales by Geography |  |                    |        |                   |   |             |  |             |         |  |   |        
|United States          |  | $                  | 46,380 |                   | $ | 44,074      |  | $           | 138,781 |  | $ | 126,262
|International          |  |                    | 5,827  |                   |   | 5,373       |  |             | 16,977  |  |   | 15,972 
|                       |  |                    |        |                   |   |             |  |             |         |  |   |        
|Total                  |  | $                  | 52,207 |                   | $ | 49,447      |  | $           | 155,758 |  | $ | 142,234
|                       |  |                    |        |                   |   |             |  |             |         |  |   |        



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE J  FAIR VALUE

Effective June 1, 2008, the Company adopted an accounting policy regarding fair value. Under this policy, fair value is defined as the
exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
This policy establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The policy describes three levels of inputs that may be used to
measure fair value which are provided in the table below. The adoption of this policy had no impact on the Companys financial statements other than the disclosures presented herein.



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1 |  | Quoted prices in active markets for identical assets or liabilities. Level 1 assets include bank time deposits, mutual funds and U.S. Treasury securities that are traded in an
active exchange market. Includes money market funds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 
|Level 2 |  | Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Includes US government securities and corporate bonds. When quoted market prices are unobservable, the Company obtains pricing
information from an independent pricing vendor. The pricing vendor uses various pricing models for each asset class that are consistent with what other market participants would use. The inputs and assumptions to the model of the pricing vendor are
derived from market observable sources including: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and other market-related data. Since many fixed income securities do not trade on a daily
basis, the methodology of the pricing vendor uses available information as applicable such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. The pricing vendor considers all available market observable
inputs in determining the evaluation for a security. Thus, certain securities may not be priced using quoted prices, but rather determined from market observable information. These investments are included in Level 2 and primarily comprise the
Companys portfolio of corporate and government fixed income securities. Additionally included in Level 2 are interest rate swap agreements which are valued using a mid-market valuation model.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE J  FAIR VALUE  (contd)



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 3 |  | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities
include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or
estimation. This category currently only includes auction rate securities where independent pricing information was not able to be obtained. The Companys investments in auction-rate securities were classified as Level 3 as quoted prices were
unavailable since these auction rate securities issued by New York state and local government authorities failed auction. Due to limited market information, the Company utilized a discounted cash flow (DCF) model to derive an estimate of
fair value. The assumptions used in preparing the DCF model included estimates with respect to the amount and timing of future interest and principal payments, forward projections of the interest rate benchmarks, the probability of full repayment of
the principal considering the credit quality and guarantees in place, and the rate of return required by investors to own such securities given the current liquidity risk associated with auction-rate securities.

There were no changes in the level 3 fair value instruments for the nine months ended February 28, 2010.

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis (in
thousands):



|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|----------------------------- |  | -------------------------------------------------- | ------ | ------------------------- | - | ------- |  | - | ----- |  | - | ------
|                              |  | Fair Value Measurements usinginputs considered as: |        | Fair Value atFeb 28, 2010
|                              |  | Level 1                                            |        | Level 2                   |   | Level 3 | 
|Financial Assets              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Cash equivalents              |  | $                                                  | 12,695 |                           | $ | 11,196  |  | $ |      |  | $ | 23,891
|Marketable securities         |  |                                                    |       |                           |   | 46,415  |  |   | 1,850 |  |   | 48,265
|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Total Financial Assets        |  | $                                                  | 12,695 |                           | $ | 57,611  |  | $ | 1,850 |  | $ | 72,156
|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Financial Liabilities         |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Interest rate swap agreements |  | $                                                  |       |                           | $ | 909     |  | $ |      |  | $ | 909   
|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Total Financial Liabilities   |  | $                                                  |       |                           | $ | 909     |  | $ |      |  | $ | 909   
|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE J  FAIR VALUE  (contd)



|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|----------------------------- |  | -------------------------------------------------- | ------ | ------------------------- | - | ------- |  | - | ----- |  | - | ------
|                              |  | Fair Value Measurements usinginputs considered as: |        | Fair Value atMay 31, 2009
|                              |  | Level 1                                            |        | Level 2                   |   | Level 3 | 
|Financial Assets              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Cash equivalents              |  | $                                                  | 14,538 |                           | $ | 999     |  | $ |      |  | $ | 15,537
|Marketable securities         |  |                                                    |       |                           |   | 38,428  |  |   | 1,850 |  |   | 40,278
|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Total Financial Assets        |  | $                                                  | 14,538 |                           | $ | 39,427  |  | $ | 1,850 |  | $ | 55,815
|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Financial Liabilities         |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Interest rate swap agreements |  | $                                                  |       |                           | $ | 917     |  | $ |      |  | $ | 917   
|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       
|Total Financial Liabilities   |  | $                                                  |       |                           | $ | 917     |  | $ |      |  | $ | 917   
|                              |  |                                                    |        |                           |   |         |  |   |       |  |   |       

In March 2008, FASB issued authoritative guidance
which is intended to improve financial reporting about derivative instruments and hedging activities by requiring companies to enhance disclosure about how these instruments and activities affect their financial position, performance and cash flows.
This guidance also improves the transparency about the location and amounts of derivative instruments in a companys financial statements and how they are accounted for. The guidance is effective for both interim and annual reporting periods
beginning after November 15, 2008. The Company has provided the required disclosures in the February 28, 2010 consolidated financial statements.

In January 2010, the FASB updated the disclosure requirements for fair value measurements. The updated guidance requires companies to disclose separately the investments that transfer in and out of Levels
1 and 2 and the reasons for those transfers. Additionally, in the reconciliation for fair value measurements using significant unobservable inputs (Level 3), companies should present separately information about purchases, sales, issuances and
settlements. The updated guidance is effective for the reporting periods beginning after December 15, 2009 (the Companys 2010 fiscal fourth quarter), except for the disclosures about purchases, sales, issuances and settlements in the
Level 3 reconciliation, which are effective for fiscal years beginning after December 15, 2010 (the Companys 2012 fiscal year). The Company will provide the additional disclosures necessary beginning in the Companys fiscal year 2010
Annual Report on Form 10-K.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)

NOTE J  FAIR VALUE  (contd)



The Company is exposed to market risk due to changes in interest rates. To reduce that risk, the Company
periodically enters into certain derivative financial instruments to hedge its underlying economic exposure. The Company uses derivative instruments as part of its interest rate risk management strategy. The derivative instruments used are
fixed-to-floating rate interest rate swaps, which are subject to fair-value hedge accounting treatment. The Company recognized interest income of $94,000 and interest expense of $9,000 for the three and nine months ended February 28, 2010,
respectively, and interest expense of $18,000 and $502,000 for the three and nine months ended February 28, 2009 on the fair value hedge.

NOTE K  MARKETABLE SECURITIES

Marketable securities, which are principally government agency bonds,
auction rate investments and corporate commercial paper, are classified as available-for-sale securities in accordance with authoritative guidance issued by FASB and reported at fair value, with unrealized gains and losses excluded from
operations and reported as a component of accumulated other comprehensive income (loss), net of the related tax effects, in stockholders equity. Cost is determined using the specific identification method. The Company holds investments in
auction rate securities in order to generate higher than typical money market rate investment returns. Auction rate securities typically are high credit quality, generally achieved with municipal bond insurance. Credit risks are eased by the
historical track record of bond insurers, which back a majority of this market. Sell orders for any security traded through an auction process could exceed bids and, in such cases, the auction fails and the Company may be unable to liquidate its
position in the securities in the near term. At February 28, 2010 and May 31, 2009, the Company had $1.85 million in investments in two auction rate securities issued by New York state and local government authorities that had failed
auctions. The authorities are current in their interest payments on the securities.

Marketable securities as of
February 28, 2010 consisted of the following:



|                                   |  |                |        |                      |   |                       |  |   |            |   |  |   |       
|---------------------------------- |  | -------------- | ------ | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | ------
|                                   |  | Amortizedcost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|                                   |  | (in thousands)
|Available-for-sales securities     |  |                |        |                      |   |                       |  |   |            |   |  |   |       
|U.S. government agency obligations |  | $              | 24,588 |                      | $ | 48                    |  | $ | (22        | ) |  | $ | 24,614
|Corporate bond securities          |  |                | 23,601 |                      |   | 73                    |  |   | (23        | ) |  |   | 23,651
|                                   |  |                |        |                      |   |                       |  |   |            |   |  |   |       
|                                   |  | $              | 48,189 |                      | $ | 121                   |  | $ | (45        | ) |  | $ | 48,265
|                                   |  |                |        |                      |   |                       |  |   |            |   |  |   |       



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE K  MARKETABLE SECURITIES  (contd)

Marketable securities as of May 31, 2009 consisted of the following:



|                                   |  |                |        |                      |   |                       |  |   |            |   |  |   |       
|---------------------------------- |  | -------------- | ------ | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | ------
|                                   |  | Amortizedcost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|                                   |  | (in thousands)
|Available-for-sales securities     |  |                |        |                      |   |                       |  |   |            |   |  |   |       
|U.S. government agency obligations |  | $              | 29,592 |                      | $ | 113                   |  | $ | (27        | ) |  | $ | 29,678
|Corporate bond securites           |  |                | 10,546 |                      |   | 60                    |  |   | (6         | ) |  |   | 10,600
|                                   |  |                |        |                      |   |                       |  |   |            |   |  |   |       
|                                   |  | $              | 40,138 |                      | $ | 173                   |  | $ | (33        | ) |  | $ | 40,278
|                                   |  |                |        |                      |   |                       |  |   |            |   |  |   |       



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE L  LITIGATION

AngioDynamics v. Vascular Solutions

On July 29, 2009, the Company commenced an action in the United States District Court for the District of Delaware against Vascular Solutions, Inc. In this action, the Company alleges that
Vascular Solutions Vari-Lase Bright-Tip fiber product line infringes on claims of two of the Companys patents, US 7,273,478 and US 7,559,329 (the 478 and 329 patents). These patents relate to methods of
treating varicose veins using endovenous laser treatments. Vascular Solutions has filed with the U.S. Patent & Trademark Offices (PTO) requests for inter partes reexamination of the 478 and 329
patents. The PTO has initiated reexamination of the 478 and 329 patents, and the Company has filed responsive papers vigorously opposing the reexamination and supporting the patents. Vascular Solutions has filed a motion
to transfer the case to the federal court in Minnesota, and the Company has opposed the motion, which is now fully briefed and awaiting decision by the Court. The Company also has initiated pretrial discovery in the Delaware federal
court case. Vascular Solutions has filed a motion to stay the Delaware case pending the reexamination proceedings in the PTO; the Company has opposed the motion, which is now fully briefed and is awaiting decision by the Court.

AngioDynamics v. biolitec AG and Wolfgang Neuberger

On January 2, 2008, the Company commenced an action in the United States District Court for the Northern District of New York against
biolitec, Inc. In this action, the Company is seeking judgment against biolitec for defense and indemnification in two lawsuits which have been settled by the Company. The Companys claims arise out of a Supply and Distribution Agreement
(SDA) entered into between the Company and biolitec on April 1, 2002. Biolitec has filed counter-claims against the Company in this action, seeking reimbursement of approximately $1.6 million in alleged past defense costs paid
by biolitec in one of the settled cases. In October 2009, the Company commenced an action in the United States District Court for the District of Massachusetts against biolitec AG and Wolfgang Neuberger. The Complaint in this action was amended
in March 2010. This action seeks to recover against biolitec, Inc.s parent entities and CEO for tortiously interfering with biolitec, Inc.s contractual obligation to defend and indemnify the Company, and also seeks to pierce the
corporate veil of biolitec, Inc. and to invalidate certain alleged fraudulent transfers in order to hold biolitec, Inc.s parent entities jointly and severally liable for the alleged breach of the SDA.

The Company is party to legal actions that arise in the ordinary course of business. The Company believes that any liability resulting from
any currently pending litigation will not, individually or in the aggregate, have a material adverse effect on the Companys business, financial condition, results of operations, or cash flows.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE M  RECENTLY ADOPTED ACCOUNTING POLICIES

In November 2007, the FASB issued authoritative guidance which establishes disclosure requirements for arrangements entered
into by companies to collaboratively develop, manufacture, or market products and which also establishes income statement classification of collaboration transactions between the parties. The Company has adopted this guidance effective June 1,
2009 and the adoption had no impact on the Companys consolidated financial statements.

In December 2007, the FASB
revised the authoritative guidance for business combinations, which establishes principles and requirements for how the acquirer in a business combination recognizes and measures the assets acquired, liabilities assumed and any noncontrolling
interest in the acquiree; recognizes and measures the goodwill acquired or gain from a bargain purchase; and determines what information to disclose to enable readers of the financial statements to evaluate the nature and financial effects of the
business combination. This guidance is effective for business combinations for which the acquisition date is on or after fiscal years beginning after December 15, 2008 (the Companys 2010 fiscal year) and will be applied prospectively,
with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. Adjustments made to valuation allowances on deferred taxes and acquired tax contingencies associated with acquisitions that closed prior
to the effective date of this policy would also apply the provisions of this policy. The Company has adopted this guidance effective June 1, 2009 and the adoption had no impact on the Companys consolidated financial statements.

In December 2007, the FASB issued authoritative guidance which establishes reporting standards that require companies to more
clearly identify in the financial statements and disclose the impact of noncontrolling interest in a consolidated subsidiary on the consolidated financial statements. The Company has adopted this guidance effective June 1, 2009 and the adoption
had no impact on the Companys consolidated financial statements.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)

NOTE M  RECENTLY ADOPTED ACCOUNTING POLICIES  (contd)



The FASB issued authoritative guidance for fair value
measurements in September 2006, which defines fair value, establishes a framework for measuring fair value and expands disclosures about assets and liabilities measured at fair value in the financial statements. In February 2008, the FASB issued
authoritative guidance which deferred the effective date of this guidance for fair value measurements for one year for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements
on a recurring basis. The Company has adopted this guidance for non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis effective June 1, 2009. The adoption of this
guidance had no impact on the Companys consolidated financial statements.

In June 2008, the FASB issued authoritative
guidance to determine whether instruments granted in share-based payment transactions are participating securities. This guidance addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting
and therefore need to be included in the earnings allocation in calculating earnings per share under the two class method. This guidance requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividend or
dividend equivalents as a separate class of securities in calculating earnings per share. The Company has adopted this guidance effective June 1, 2009 and the adoption had no impact on the Companys consolidated financial statements.

In June 2008, the FASB issued authoritative guidance which establishes a two-step process for evaluating whether an
equity-linked financial instrument or embedded feature is indexed to the entitys own stock. This guidance determines that warrants which a company issues that contain a strike price adjustment feature results in the instruments no longer being
considered indexed to the companys own stock. Accordingly, adoption of this guidance will change the current classification (from equity to liability) and the related accounting for such warrants outstanding at that date. The Company has
adopted this guidance effective June 1, 2009 and the adoption had no impact on the Companys consolidated financial statements.

In April 2009, the FASB issued authoritative guidance which provides instruction for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased
when compared with normal market activity for the asset or liability and for identifying circumstances that indicate a transaction is not orderly. Additionally, the guidance requires disclosure in interim and annual periods of the inputs and
valuation techniques used to measure fair value. The guidance is effective for interim and annual periods ending after June 15, 2009 (the Companys 2010 fiscal year) and will be applied prospectively. The Company has adopted this guidance
effective June 1, 2009 and the adoption had no impact on the Companys consolidated financial statements.

In April
2009, the FASB issued authoritative guidance which amends and clarifies the initial recognition and measurement, subsequent measurement and accounting and disclosure of assets and liabilities arising from contingencies in a business combination.
This guidance was adopted by the Company effective June 1, 2009 and will be applied prospectively.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)



NOTE M  RECENTLY ADOPTED ACCOUNTING POLICIES 
(contd)

In April 2009, the FASB issued authoritative guidance which amends the other-than-temporary guidance for
debt securities and requires additional interim and annual disclosures of other-than-temporary impairments on debt and equity securities. An other-than-temporary impairment of a debt security shall be considered to have occurred if an entity
(1) intends to sell the debt security, (2) more likely than not will be required to sell the security before recovery of its amortized cost basis or (3) does not expect to recover the entire amortized cost basis of the security even
if it does not intend to sell the security. Once it is determined than an other-than-temporary impairment has occurred, the policy provides guidance on when to recognize the other-than-temporary impairment in earnings or in other comprehensive
income. Depending on which of the above factor(s) caused the impairment to be considered other-than-temporary, (1) the entire shortfall of the securitys fair value versus its amortized cost basis or (2) only the credit loss portion
would be recognized in earnings while the remaining shortfall (if any) would be recorded in other comprehensive income. This guidance is effective for interim and annual periods ending after June 15, 2009 (the Companys 2010 fiscal year)
and is required to be applied retrospectively to existing investments with a cumulative adjustment to retained earnings and prospectively to new investments purchased after the effective date. The Company has adopted this guidance effective
June 1, 2009 and the adoption had no impact on the Companys consolidated financial statements.

In May 2009, the
FASB issued authoritative guidance which requires an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. For
nonrecognized subsequent events that must be disclosed to keep the financial statements from being misleading, an entity will be required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an
estimate cannot be made. This guidance is effective for interim and annual periods ending after June 15, 2009 (the Companys 2010 fiscal year) and is required to be applied prospectively. The Company has provided the additional disclosures
necessary to the consolidated financial statements in this report on the Companys third quarter of fiscal year 2010.

In
June 2009, the FASB issued the FASB Accounting Standards Codification (Codification). The Codification will become the single source for all authoritative GAAP recognized by the FASB to be applied for financial statements issued for periods ending
after September 15, 2009. As the Codification was not intended to change existing GAAP, it will not have any impact on the Companys consolidated financial statements.



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##### Table of Contents

AngioDynamics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

February 28, 2010 and February 28, 2009

(unaudited)

NOTE M  RECENTLY ADOPTED ACCOUNTING POLICIES  (contd)



In October 2009, the FASB updated the revenue recognition
accounting guidance relating to the accounting treatment for revenue arrangements that involve more than one deliverable or unit of accounting. The updated guidance allows companies to allocate arrangement considerations in multiple deliverable
arrangements in a manner that better reflects the economics of the transaction by revising certain thresholds for separation, and providing criteria for allocation of revenue among deliverables. The updated guidance is effective for arrangements
entered into in fiscal years beginning on or after June 15, 2010 (the Companys 2012 fiscal year), but may be adopted early. The Company has chosen early adoption effective with the current quarter. The adoption had no material effect on
the Companys consolidated financial statements.

In October 2009, the FASB updated the accounting guidance relating to
certain revenue arrangements that include software elements. The updated guidance clarifies the accounting for products that include both tangible product and software elements. This amendment is effective for fiscal years beginning after
June 15, 2010 (the Companys 2012 fiscal year), but companies are required to adopt these amendments in the same period as the amendments relating to revenue arrangements that involve more than one deliverable or unit of
accounting. The Company has therefore adopted the amendment effective with the current quarter. The adoption had no material effect on the Companys consolidated financial statements.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

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

Forward-Looking Statements

This quarterly report on Form 10-Q, including the sections entitled Managements Discussion and Analysis of Financial Condition
and Results of Operations, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regarding AngioDynamics expected future financial position, results of operations,
cash flows, business strategy, budgets, projected costs, capital expenditures, products, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include the words such as
expects, reaffirms intends, anticipates, plans, believes, seeks, estimates, or variations of such words and similar expressions, are forward-looking
statements. These forward looking statements are not guarantees of future performance and are subject to risks and uncertainties. Investors are cautioned that actual events or results may differ from our expectations. Factors that may affect our
actual results achieved include, without limitation, our ability to develop existing and new products, future actions by the FDA or other regulatory agencies, results of pending or future clinical trials, the results of ongoing litigation, overall
economic conditions, general market conditions, market acceptance, foreign currency exchange rate fluctuations, the effects on pricing from group purchasing organizations and competition, as well as our ability to integrate purchased businesses.
Other risks and uncertainties include, but are not limited to, the factors described from time to time in our reports filed with the SEC, including our Form 10-K for the fiscal year ended May 31, 2009.

Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions
could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this quarterly report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Any forward-looking statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. AngioDynamics disclaims any obligation to update the forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date stated, or if no date is stated, as of the date of this document.

Overview

AngioDynamics is a provider of innovative medical devices used in minimally invasive, image-guided procedures to treat
peripheral vascular disease, or PVD, and local oncology therapy options for treating cancer, including radiofrequency ablation (RF or RFA) systems, and embolization products for treating benign and malignant tumors. In
addition, we provide our irreversible electroporation, or IRE, system for the ablation of soft tissue. We design, develop, manufacture and market a broad line of therapeutic and diagnostic devices that enable interventional physicians
(interventional radiologists, vascular surgeons, interventional and surgical oncologists and others) to treat PVD, tumors, and other non-coronary diseases. For the past five fiscal years, over 95% of our net sales were from single-use, disposable
products.



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##### Table of Contents

Our business is organized in three reportable segments: Peripheral Vascular, Access and
Oncology/Surgery. The Peripheral Vascular segment is comprised of the venous, angiographic, PTA, drainage and thrombolytic product lines. The Access segment is comprised of the dialysis, ports and PICC product lines. The Oncology/Surgery segment is
comprised of the RFA, embolization, Habib and NanoKnife product lines.

We sell our broad line of quality devices in the
United States through a direct sales force and outside the U.S. through a combination of direct sales and distributor relationships. As of February 28, 2010, our sales organization numbered 137 in the U.S. and 19 outside the U.S. For both the
three and nine months ended February 28, 2010 and February 28, 2009, approximately 11% of our net sales were from markets outside the United States.

Our growth depends in large part on the continuous introduction of new and innovative products, together with ongoing enhancements to our existing products, through internal product development,
technology licensing and strategic alliances. We recognize the importance of, and intend to continue to make investments in, research and development. For the three and nine months ended February 28, 2010, our research and development
(R&D) expenditures were $4.3 million and $13.9 million, which represented 8.2% and 8.9%, respectively of net sales. This is compared to $4.7 million and $13.1 million in the prior year periods which constituted 9.5%, and 9.2%,
respectively, of net sales. R&D activities include research, product development, clinical studies, intellectual property affairs and regulatory affairs. We expect that our R&D expenditures will be between 8% and 10% of net sales in fiscal
2010 and 2011 primarily due to investment in IRE technology. However, downturns in our business could cause us to reduce our R&D spending.

We are also seeking to grow through selective acquisitions of complementary businesses and technologies. In January 2007, we acquired RITA Medical Systems, Inc. This acquisition created a diversified
medical technology company with a broad line of access, diagnostic and therapeutic products that enable interventional physicians and surgeons to treat peripheral vascular disease and cancerous tumors. In addition, in May 2008 we acquired
irreversible electroporation (IRE) technology which will be complementary to RITAs diverse offering of local oncology therapies, including its market-leading RFA systems, Habib SealerTMresection devices and LC BeadsTMfor tumor embolization. We are in the process of commercializing the IRE technology and recently introduced the
NanoKnife generator. In June 2008, we completed the acquisition of certain U.S. and U.K. assets of Diomed, Inc. With this acquisition, we substantially strengthened our position in the market for the treatment of varicose veins. The combination of
Diomed endovenous laser products with our existing venous product line provides us with a comprehensive venous product offering. In January 2009, we completed the acquisition of certain assets of FlowMedica, Inc. providing us with the Benephit
product line, a therapeutic approach to deliver drugs directly to the kidneys in order to prevent and treat acute kidney injury, in the emerging field of Targeted Renal Therapy.

Except to the extent we can further use our cash and short term investments or our equity securities as acquisition capital, we will require
additional equity or debt financing to fund any future significant acquisitions.



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In recent years, we expanded our manufacturing and warehousing facilities in Queensbury, New
York, to provide us with significantly greater manufacturing and warehousing capacity and to accommodate additional research, development and administrative requirements. We are not currently operating our manufacturing facilities at full capacity.
In July 2009, we entered into an agreement to lease, for a ten year period plus 2 five year renewal options, a 52,500 square foot office building in Latham, New York. We completed the move into this facility of our corporate headquarters and certain
business operations during March 2010.

Our ability to further increase our profitability will depend in part on improving
gross profit margins. Factors such as changes in our product mix, new technologies and unforeseen price pressures may cause our margins to grow at a slower rate than we have anticipated, or to decline.

Recent Developments

Distribution Agreement Amendment

We sell the embolization product, LC
Bead, pursuant to a Supply and Distribution Agreement with Biocompatibles UK Limited that grants us exclusive distribution rights to the product in the United States. The Agreement was amended in March 2010 to extend distribution rights until
December 31, 2011.

CEO Transition

On January 20, 2009, we entered into an Employment Agreement and Non-Statutory Stock Option Agreement with our then chief executive officer that provided, among other things, for a transition to a
new chief executive officer. The transition to the new chief executive was completed in the third quarter of fiscal 2009. The former chief executive officer did not have an operating role after February 28, 2009. Accordingly, we
recorded a provision in fiscal 2009 of approximately $3.0 million in general and administrative expenses for all current and future costs associated with the aforementioned Employment Agreement and Non-Statutory Stock Option Agreement and certain
costs associated with the recruitment of the new chief executive officer. The new CEO commenced employment with us on March 1, 2009.

Acquisition of certain assets of FlowMedica, Inc.

On January 12,
2009, we completed the acquisition of certain assets of FlowMedica, Inc. for approximately $1.75 million in cash and a contingent payment based on fiscal 2011 sales of FlowMedica products. With this acquisition, we purchased the Benephit product
line, a therapeutic approach to deliver drugs directly to the kidneys in order to prevent and treat acute kidney injury, in the emerging field of Targeted Renal Therapy. Intangible assets acquired totaled approximately $1.3 million which have been
identified as product technologies (10-year weighted average useful life). Inventory acquired totaled approximately $400,000. The acquisition has been accounted for as a purchase and accordingly, we have included the results of operations in the
financial statements effective January 12, 2009. The pro-forma effects of the acquisition were not material to our income statement and balance sheet. Ten employees of FlowMedica, Inc. became employees upon completion of the acquisition.

Acquisition of certain assets of Diomed

On June 17, 2008, we completed the acquisition of certain U.S. assets of Diomed, Inc. and UK assets of Diomed UK Limited., in separate transactions, for an aggregate purchase price of approximately
$11.1 million in cash including capitalized acquisition costs. With this acquisition, we substantially strengthened our position in the market for the treatment of varicose veins. The combination of Diomed endovenous laser products with our existing
venous product line provides us with a comprehensive venous product offering. The total of the net tangible assets acquired was $5.5 million.



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Goodwill recorded as a result of these acquisitions was approximately $1.9 million.
Intangibles assets acquired, other than goodwill, totaled approximately $3.7 million of which $3.6 million has been identified as customer relationships (8-year estimated weighted average useful life)and $100,000 has been
identified as product technologies (10-year estimated weighted average useful life).

The acquisition has been accounted for
as a purchase and, accordingly, we have included the results of operations in the financial statements effective June 17, 2008. The pro-forma effects of the Diomed acquisition on our income statement and balance sheet were not
material. Thirty five employees of Diomed became employees of ours upon completion of the acquisition.

Acquisition of Oncobionic,Inc.

On May 9, 2008, we completed the acquisition of all the issued and
outstanding shares of capital stock of Oncobionic, Inc. pursuant to the terms of the Stock Purchase Agreement entered into on October 12, 2006. The closing of the acquisition came as a result of the successful use of irreversible
electroporation (IRE) technology in the first human clinical trial for the treatment of soft tissue in April 2008.

Under the
October 2006 Stock Purchase Agreement, we agreed to pay a total purchase price of $25.4 million, including $400,000 of assumed liabilities. We made payments of $5.0 million upon the execution of the stock purchase agreement in October 2006, $10.0
million on May 9, 2008 upon closing the acquisition, $5.0 million in November 2008 and $5.0 million in November 2009.

The Stock Purchase Agreement also provides for future royalty payments due on net sales of any catheter-based products sold by us that incorporate irreversible electroporation technology (IRE). We hold a license to such
technology under a license agreement with the Regents of the University of California (the UC License).

We have
accounted for the acquisition of Oncobionic as a purchase under accounting principles generally accepted in the United States of America. Under the purchase method of accounting, the assets and liabilities of Oncobionic were recorded as of the
acquisition date, at their respective fair values, and consolidated with those of AngioDynamics. Substantially all of the purchase price was recorded as product technology and is being amortized over a 15 year useful life. We have recorded goodwill
and a deferred tax liability of $9.3 million. In future periods the deferred tax liability will be reduced to offset the tax impact of non-deductible amortization expense on the intangible assets acquired.



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Results of Operations

Three Months ended February 28, 2010 and February 28, 2009

For the third quarter of fiscal 2010, we reported net income of $3.3 million, or $0.13 per diluted common share, on net sales of $52.2
million, compared with net income of $1.9 million, or $0.08 per diluted common share, on net sales of $49.4 million in the third quarter of the prior year. Gross profit was 58.0% in the third quarter of fiscal 2010 compared with 61.1% in the third
quarter of the prior year.

The following table sets forth certain operating data as a percentage of net sales:



|                                    |  |                    |    |  |              |  
|----------------------------------- |  | ------------------ | -- |  | ------------ | -
|                                    |  | Three Months Ended |   
|                                    |  | Feb 28, 2010       |    |  | Feb 28, 2009 |  
|Net sales                           |  | 100.0              | %  |  | 100.0        | %
|Gross profit                        |  | 58.0               | %  |  | 61.1         | %
|Research and development expenses   |  | 8.2                | %  |  | 9.5          | %
|Sales and marketing expenses        |  | 26.9               | %  |  | 28.1         | %
|General and administrative expenses |  | 7.8                | %  |  | 13.5         | %
|Amortization of intangibles         |  | 4.4                | %  |  | 4.7          | %
|Operating income                    |  | 10.7               | %  |  | 5.3          | %
|Other income(expenses)              |  | (0.4               | )% |  | 0.2          | %
|Net income                          |  | 6.4                | %  |  | 3.9          | %

Net
sales. Net sales are derived from the sale of our products and related freight charges, less discounts and returns. Net sales for the fiscal third quarter of 2010 increased by 6%, or $2.8 million, to $52.2 million from $49.4 million in the
fiscal third quarter of 2009. The growth in net sales was primarily attributable to increased unit sales of VenaCure EVLT procedure kits, LC Beads, RF electrodes, Nanoknife IRE generators and probes and Benephit renal infusion products, offset by a
decrease in PICCs and vascular access ports.

From a business unit perspective, Peripheral Vascular sales increased 8% to
$22.4 million from $20.7 million. This increase was driven primarily by increased sales of VenaCure EVLT procedure kits and Benephit renal infusion products. Access sales were $16.1 million, a decrease of 6%, primarily attributable to decreased
sales of PICC products and vascular access ports, including the effect of a 6% decline in average selling prices of Access products. Oncology/Surgery sales were $13.7 million, an increase of 19% over the prior year primarily as a result of increased
unit sales of our LC Beads, RF electrodes and Nanoknife IRE generators and probes. Nanoknife IRE sales totaled $724,000 in the third quarter of fiscal 2010.

From a geographical perspective, US sales increased $2.3 million or 5% in the third quarter of fiscal 2010 to $46.4 million from $44.1 million a year ago. This increase is primarily attributable to
increased unit sales of Venacure EVLT procedure kits, LC Beads, Nanoknife IRE generators and probes, RF electrodes and Benephit renal infusion products, partially offset by a decrease in sales of PICCs and vascular access ports. International sales
were $5.8 million in the fiscal third quarter of 2010, up 8% from $5.4 million in the same period of fiscal 2009 and a 5% increase on a constant currency basis. Increased unit sales of RF electrodes, RF generators and other RF devices comprised the
majority of this increase.



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Gross profit. Gross profit consists of net sales less the cost of goods sold, which
includes the costs of materials, products purchased from third parties and sold by us, manufacturing personnel, royalties, freight, business insurance, depreciation of property and equipment and other manufacturing overhead. Our gross profit as a
percentage of sales decreased to 58.0% for the third quarter of 2010 from 61.1% for the same period in the prior year. The decrease in gross profit percentage was primarily due to lower average selling prices for Access products and VenaCure EVLT
procedure kits due to the competitive pricing environment, higher material costs for certain Access products and increased royalties in the Peripheral Vascular segment.

Research and development expenses. Research and development (R&D) expenses include costs to develop new products, enhance existing products, validate new and enhanced products,
manage clinical affairs and register and maintain our intellectual property. R&D expenses decreased by $403,000, or 9%, to $4.3 million in the third quarter of 2010. The decrease is primarily due to lower spending on IRE development activities.
$1.7 million was spent on IRE R&D activities in the third quarter of 2010. As a percentage of net sales, R&D expenses were 8.2% for the fiscal third quarter of 2010, compared with 9.5% for the same prior year period. At February 28,
2010, we employed 82 people in R&D activities compared with 75 people in the prior year quarter.

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 samples. S&M expenses increased
$126,000 or 1% to $14.0 million in the third quarter of fiscal 2010. This increase is primarily due to IRE marketing activities and increased marketing headcount to support our growth, partially offset by lower spending on marketing programs and
trade show activities. As a percentage of net sales, S&M expenses were 26.9% for the fiscal third quarter of 2010, compared with 28.1% for the prior year period. $450,000 was spent on IRE sales and marketing activities in the third quarter of
fiscal 2010. At February 28, 2010, we employed 199 people in sales and marketing activities compared with 187 people a year ago.

General and administrative expenses. General and administrative (G&A) expenses include executive management, finance, accounting, legal, human resources and information technology and the administrative and
professional costs associated with those activities. G&A expenses decreased $2.6 million, or 39%, to $4.1 million in the third quarter of fiscal 2010 due to inclusion in the prior year period of $2.8 million of CEO transition costs. Exclusive of
these costs, G&A increased $245,000 or 6% due to increased personnel and other infrastructure costs to support our growth. Exclusive of the CEO transition costs in the prior year third fiscal quarter, G&A expenses remained constant at 7.8%
of net sales. As of February 28, 2010, we employed 55 people in general and administrative activities compared with 51 people a year ago.

Amortization of intangibles. Amortization of intangibles remained constant at $2.3 million in the third quarter of fiscal 2010 as compared with the third quarter of fiscal 2009. Amortization of IRE
intangibles was $432,000 in the third quarter of fiscal 2010.

Operating income. Operating income was $5.6 million and
$2.6 million for the third quarter of fiscal 2010 and 2009, respectively. As a percentage of sales, operating income for the third quarter of 2010 was 10.7% compared with 5.3% in the prior year same period or 11.0%, exclusive of the CEO transition
costs.



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Other income (expenses). Other income and expenses for the third quarter of fiscal
2010 decreased to expense of $233,000 compared with income of $93,000 in the same period a year ago. This decrease is primarily attributable to reduced interest income and foreign exchange losses as compared to the prior year period.

Income taxes. Our effective tax rate was 38% for the fiscal third quarter of 2010 compared with 30% for the same prior year period.
The prior years quarter benefited from the retroactive renewal of the research credit that expired on December 31, 2007. The retroactive one-time impact was reflected in our third quarter 2009 tax rate.

Net income. For the third quarter of 2010, we reported net income of $3.3 million, an increase of $1.4 million from net income of
$1.9 million for the prior year quarter.

Nine Months ended February 28, 2010 and February 28, 2009

For the first nine months of fiscal 2010, we reported net income of $8.6 million, or $0.35 per diluted common share, on
net sales of $155.8 million, compared with net income of $7.0 million, or $0.29 per diluted common share, on net sales of $142.2 million in the first nine months of the prior year. Gross profit was 59.1% in the first nine months of fiscal 2010
compared with 61.4% in the first nine months of the prior year.

The following table sets forth certain operating data as a
percentage of net sales:



|                                    |  |                   |    |  |              |   
|----------------------------------- |  | ----------------- | -- |  | ------------ | --
|                                    |  | Nine Months Ended |   
|                                    |  | Feb 28, 2010      |    |  | Feb 28, 2009 |   
|Net sales                           |  | 100.0             | %  |  | 100.0        | % 
|Gross profit                        |  | 59.1              | %  |  | 61.4         | % 
|Research and development expenses   |  | 8.9               | %  |  | 9.2          | % 
|Sales and marketing expenses        |  | 28.5              | %  |  | 29.2         | % 
|General and administrative expenses |  | 7.8               | %  |  | 10.3         | % 
|Amortization of intangibles         |  | 4.5               | %  |  | 4.8          | % 
|Operating income                    |  | 9.3               | %  |  | 8.0          | % 
|Other income(expenses)              |  | (0.4              | )% |  | (0.5         | )%
|Net income                          |  | 5.5               | %  |  | 4.9          | % 

Net
sales. Net sales for the first nine months of fiscal 2010 increased by 10%, or $13.6 million, to $155.8 million from $142.2 million in the comparable 2009 period. The growth in net sales was primarily attributable to increased unit sales of LC
Beads, Venacure EVLT procedure kits, Benephit renal infusion products, RF electrodes, and Nanoknife IRE generators and probes.

From a business unit perspective, Peripheral Vascular sales increased 9% to $66.6 million from $60.9 million. This increase was driven primarily by increased sales of our VenaCure EVLT procedure kits and Benephit renal infusion products.
Access sales were $49.0 million year to date and $48.9 million in the prior year period, with increased unit sales of dialysis products offsetting the effect of a 5% decline in average selling prices of Access products. Oncology/Surgery sales were
$40.1 million, an increase of 24% over the prior year primarily as a result of increased unit sales of LC Beads, RF electrodes and Nanoknife IRE generators and probes. Nanoknife IRE sales totaled $1.5 million in the year to date period.



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From a geographical perspective, US sales of $138.8 million increased 10% in the year to
date period from $126.3 million a year ago. This increase is primarily attributable to increased unit sales of LC Beads, VenaCure EVLT procedure kits, Benephit renal infusion products and Nanokife IRE generators and probes, partially offset by the
effect of lower average selling prices on Access and VenaCure EVLT procedure kits. International sales were $17.0 million in the year to date period, a 6% increase from $16.0 million in the same period of fiscal 2009.

Gross profit. Our gross profit as a percentage of sales decreased to 59.1% for the first nine months of 2010 from 61.4% for the same
period in the prior year. The decrease in gross profit percentage was primarily attributable to lower average selling prices for Access products and VenaCure EVLT disposable kits due to the competitive pricing environment and higher material costs
for certain Access products.

Research and development expenses. R&D expenses increased by $822,000, or 6%, to
$13.9 million in the first nine months of 2010. The increase is primarily due to the establishment of a technology process and engineering group. For the first nine months of fiscal 2010, $5.3 million was spent on IRE R&D activities compared
with $5.2 million in the comparable prior year period. As a percentage of net sales, R&D expenses were 8.9% for the first nine months of fiscal 2010, compared with 9.2% for the same prior year period.

Sales and marketing expenses. S&M expenses increased $2.9 million or 7% to $44.4 million in the first nine months of fiscal 2010.
This increase is primarily due to increased IRE marketing activities, increased headcount to support the business unit structure, increased headcount for customer service functions to support increasing business demands and the start of an internal
training function, partially offset by lower spending on marketing programs and trade show activities. As a percentage of net sales, S&M expenses improved to 28.5% for the fiscal first nine months of 2010, compared with 29.2% for the prior year
period.

General and administrative expenses. G&A expenses decreased $2.4 million, or 16%, to $12.2 million in the
first nine months of 2010 due to inclusion in the prior year period of $3.0 million of CEO transition costs. Exclusive of these costs, G&A expenses increased $605,000 year to date due to increased personnel and other infrastructure costs to
support our growth. As a percentage of net sales, G&A expenses were 7.8% of net sales compared with 8.1% in the prior year period, exclusive of the CEO transition costs.

Amortization of intangibles. Amortization of intangibles increased $191,000 for the first nine months of fiscal 2010 as compared to
the prior year period primarily due to amortization related to acquisition of the FlowMedica assets. Amortization of IRE intangibles was $1.3 million in the first nine months of fiscal 2010.

Operating income. Operating income was $14.5 million and $11.3 million for the first nine months of fiscal 2010 and 2009,
respectively. As a percentage of sales, operating income for the first nine months of 2010 was 9.3% compared with 8.0% in the prior year period.

Other income (expenses). Other income and expenses for the first nine months of fiscal 2010 decreased $30,000 to expense of $688,000 compared with expense of $658,000 in the same period of the
prior year. This decrease is primarily due to lower interest income in fiscal 2010 partially offset by improved performance on an interest rate swap in the first nine months of fiscal 2010 compared with a year ago, and foreign exchange gains in the
current period compared with losses a year ago.



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Income taxes. Our effective tax rate was 38% for the first nine months of 2010
compared with 34% for the first nine months of fiscal 2009. The prior year period benefited from the retroactive renewal of the research credit which expired on December 31, 2007. The retroactive one-time impact was reflected in our 2009 year
to date tax rate.

Net income. For the first nine months of 2010, we reported net income of $8.6 million, an increase
of $1.6 million from net income of $7.0 million for the prior year period.

Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities totaled $85.8 million at February 28, 2010, compared with $68.2
million at May 31, 2009. Marketable securities are comprised of U.S. government issued or guaranteed securities, corporate bonds and auction rate securities. At February 28, 2010, total debt was $6.9 million comprised of short and
long-term bank debt that financed our facility expansions in Queensbury, New York. This compared with $7.1 million at May 31, 2009.

Summary of cash flows (in thousands):



|                                                             |  |                   |         |   |             |   |        |  
|------------------------------------------------------------ |  | ----------------- | ------- | - | ----------- | - | ------ | -
|                                                             |  | Nine Months ended |        
|                                                             |  | Feb 28,2010       |         |   | Feb 28,2009 |  
|Cash provided by (used in):                                  |  |                   |         |   |             |   |        |  
|Operating activities                                         |  | $                 | 23,814  |   |             | $ | 13,040 |  
|Investing activities                                         |  |                   | (16,921 | ) |             |   | (9,966 | )
|Financing activities                                         |  |                   | 2,729   |   |             |   | (8,190 | )
|Effect of exchange rate changes on cash and cash equivalents |  |                   | (18     | ) |             |   | (148   | )
|                                                             |  |                   |         |   |             |   |        |  
|Net change in cash and cash equivalents                      |  | $                 | 9,604   |   |             | $ | (5,264 | )
|                                                             |  |                   |         |   |             |   |        |  

Net cash provided by operating activities for the nine months ended February 28, 2010 was $23.8 million
compared with $13.0 million in the same prior year period. Cash generated from operating activities during the first nine months of fiscal year 2010 was primarily the result of net income and the effect on net income of non cash items, such as
depreciation and amortization, the provision for deferred income taxes and stock-based compensation, as well as a decreases in inventories and accounts receivable, offset by decreases in accounts payable and accrued liabilities. The prior year
included payment of $6.8 million to settle litigation.

Net cash used in investing activities was $16.9 million for the nine
months ended February 28, 2010 compared with $10.0 million for the same prior year period. The net cash used in the first nine months of 2010 consisted primarily of the final purchase price payment of $5.0 million to Oncobionic and net
purchases from the sale, maturity and purchase of available-for-sale short term investments. The prior year consisted of net proceeds from the sale, maturity and purchase of available-for-sale short term investments, as well as the $10.1 million
purchase cost of Diomed assets and a $5.0 million purchase price payment to Oncobionic.



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Net cash provided by financing activities was $2.7 million for the nine months ended
February 28, 2010 compared with cash used in financing activities of $8.2 million for the comparable prior year period. Cash provided by financing activities for the nine months ended February 28, 2010 primarily consisted of proceeds from
purchases under the employee stock purchase plan (ESPP). The prior year periods use of cash for financing activities primarily consisted of repayment of long term debt and convertible note obligations of $10.0 million, offset by
proceeds from the exercise of stock options and purchases under the ESPP of $1.8 million.

Our contractual obligations and
their effect on liquidity and cash flows have not changed substantially from that disclosed in our Annual Report on Form 10-K for our fiscal year ended May 31, 2009.

During the nine months ended February 28, 2009, the Convertible Notes assumed in the acquisition of RITA on January 29, 2007 with an aggregate principal amount of $9.7 million matured and were
paid in cash.

On May 9, 2008, we completed the acquisition of all the issued and outstanding shares of capital stock of
Oncobionic, Inc. pursuant to the terms of a stock purchase agreement entered into on October 12, 2006. The closing of the acquisition came as a result of the successful use of Oncobionics irreversible electroporation (IRE) technology in
the first human clinical trial for the treatment of soft tissue in April 2008. Under this stock purchase agreement, we agreed to pay a total purchase price of $25.4 million, including $400,000 of assumed liabilities. We made a payment of $5.0
million upon the execution of the stock purchase agreement in October 2006. We paid $10.0 million on May 9, 2008 upon the closing of the acquisition, $5.0 million in November 2008 and $5.0 million in November 2009.

In July 2009, we entered into an agreement to lease, for a ten year period plus 2 five year renewal options, a 52,500 square foot office
building in Latham, New York that will house our corporate headquarters and certain business operations. We completed the move into this facility of our corporate headquarters and certain business operations during March 2010. The agreement terms
are for an annual rent of $857,321 for the first five years and $943,054 for the next five years, plus the payment of customary building operating expenses. The lease commencement date was March 1, 2010.

We believe that our current cash and investment balances, together with cash generated from operations, will provide sufficient liquidity to
meet our anticipated needs for capital for at least the next 12 months. If we seek to make significant additional acquisitions of other businesses or technologies for cash, we may require external financing. We cannot assure you that such financing
will be available on commercially reasonable terms, if at all.



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|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We are exposed to market risk from changes in interest rates on investments and financing that could impact our results of operations and financial position. Although we have entered into interest rate
swaps with a bank to limit our exposure to interest rate change on our variable interest rate financings, we do not currently engage in any other hedging or market risk management tools.

At February 28, 2010, we maintained variable interest rate financing of $6.9 million in connection with our facility expansions. We
have limited our exposure to interest rate risk by entering into interest rate swap agreements with a bank under which we agreed to pay the bank fixed annual interest rate of 4.45% and 5.06% and the bank assumed our variable interest payment
obligations under the financing.

Nearly all of our sales have historically been denominated in United States dollars. In
fiscal 2007 we began to make sales in other currencies, particularly the Euro, GB pound and Canadian dollar. Approximately 4% of our sales in the first nine months of fiscal 2010 were denominated in currencies other than the US dollar, primarily the
Euro and GB pound. We currently have no significant direct foreign currency exchange risk.

Our excess cash is invested in
highly liquid, short-term, investment grade securities with maturities primarily of less than two years. These investments are not held for speculative or trading purposes. Changes in interest rates may affect the investment income we earn on cash,
cash equivalents and marketable securities and therefore affect our cash flows and results of operations. We hold investments in auction rate securities (ARS) in order to generate higher than typical money market investments. ARS
typically are high credit quality, generally achieved with municipal bond insurance. Credit risks are eased by the historical track record of bond insurers, which back a majority of this market. Sell orders for any security traded through an auction
process could exceed bids. Such instances are usually the result of a drastic deterioration of issuer credit quality. Should there be a failed auction, we may be unable to liquidate our position in the securities in the near term. We have $1.85
million in investments in two auction rate securities issued by New York state and local government authorities that have failed auctions. The authorities are current in their interest payments on the securities.

We are party to legal actions that arise in the ordinary course of business as described in Note L.



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##### Table of Contents

|Item 4. | Controls and Procedures.
|------- | ------------------------

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report,
our management, under the supervision and with the participation of our Chief Executive Officer and 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. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning
effectively to provide reasonable assurance that the information required to be disclosed by us (including our consolidated subsidiaries) in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commissions rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting in the fiscal quarter ended February 28,
2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

AngioDynamics, Inc. and Subsidiaries

Part II: Other Information



|Item 1. | Legal Proceedings.
|------- | ------------------

AngioDynamics v. Vascular Solutions

On July 29, 2009, we commenced an action in the United States
District Court for the District of Delaware against Vascular Solutions, Inc. In this action, we allege that Vascular Solutions Vari-Lase Bright-Tip fiber product line infringes on claims of two of our patents, US 7,273,478 and US
7,559,329 (the 478 and 329 patents). These patents relate to methods of treating varicose veins using endovenous laser treatments. Vascular Solutions has filed with the U.S. Patent & Trademark Offices
(PTO) requests for inter partes reexamination of the 478 and 329 patents. The PTO has initiated reexamination of the 478 and 329 patents, and we have filed responsive papers vigorously opposing the
reexamination and supporting the patents. Vascular Solutions has filed a motion to transfer the case to the federal court in Minnesota, and we have opposed the motion, which is now fully briefed and awaiting decision by the
Court. We also have initiated pretrial discovery in the Delaware federal court case. Vascular Solutions has filed a motion to stay the Delaware case pending the reexamination proceedings in the PTO; we have opposed the motion, which
is now fully briefed and is awaiting decision by the Court.



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AngioDynamics v. biolitec AG and Wolfgang Neuberger

On January 2, 2008, we commenced an action in the United States District Court for the Northern District of New York against biolitec,
Inc. In this action, we are seeking judgment against biolitec for defense and indemnification in two lawsuits which have been settled by us. Our claims arise out of a Supply and Distribution Agreement (SDA) entered into between
us and biolitec on April 1, 2002. Biolitec has filed counter-claims against us in this action, seeking reimbursement of approximately $1.6 million in alleged past defense costs paid by biolitec in one of the settled cases. In October
2009, we commenced an action in the United States District Court for the District of Massachusetts against biolitec AG and Wolfgang Neuberger. The Complaint in this action was amended in March 2010. This action seeks to recover against biolitec,
Inc.s parent entities and CEO for tortiously interfering with biolitec, Inc.s contractual obligation to defend and indemnify us, and also seeks to pierce the corporate veil of biolitec, Inc. and to invalidate certain alleged fraudulent
transfers in order to hold biolitec, Inc.s parent entities jointly and severally liable for the alleged breach of the SDA.

We are party to other legal actions that arise in the ordinary course of business. We believe that any liability resulting from any currently pending litigation will not, individually or in the aggregate, have a material adverse effect on
our business, financial condition, results of operations, or cash flows. The liability resulting from any currently pending litigation, could individually, or in the aggregate, have a material adverse effect on our results of operations or cash
flows in the period settled.



|Item 1A. | Risk Factors.
|-------- | -------------

In
addition to the risk factors set forth below and the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors of our annual report on Form 10-K for our fiscal
year ended May 31, 2009 which sets forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results. You should review and consider such Risk Factors
in making any investment decision with respect to our securities. An investment in our securities continues to involve a high degree of risk.

Supply and Distribution Agreement with Biocompatibles UK Limited

We
sell the embolization product, LC Bead, pursuant to a Supply and Distribution Agreement with Biocompatibles UK Limited that grants us exclusive distribution rights to the product in the United States. The Agreement was entered into in April
2006 and was amended in October 2007, June 2008, March 2009 and March 2010. Under the Agreement, we are required to purchase certain minimum levels of product from Biocompatibles. The March 2010 Amendment specifies distribution
rights until December 31, 2011. During our fiscal 2009, sales of LC Bead accounted for approximately 7% of our net sales, and during the first three quarters of our fiscal 2010, sales of LC Bead accounted for approximately 9% of our net
sales. Failure to extend our distribution rights to LC Bead after December 31, 2011 could have an adverse effect on our results of operations.



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Legislation and policy changes reforming the U.S. healthcare system may have a
material adverse effect on us.

On March 23, 2010, the Patient Protection and Affordable Care Act was signed into
law and on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 was signed into law. Together, the two measures make the most sweeping and fundamental changes to the U.S. health care system since the creation of Medicare and
Medicaid. The Health Care Reform laws include a large number of health-related provisions to take effect over the next four years, including expanding Medicaid eligibility, requiring most individuals to have health insurance, establishing new
regulations on health plans, establishing health insurance exchanges, requiring manufacturers to report payments or other transfers of value made to physicians and teaching hospitals, and modifying certain payment systems to encourage more
cost-effective care and a reduction of inefficiencies and waste, including through new tools to address fraud and abuse. Effective in 2013, there will be a 2.3% excise tax on the sale of certain medical devices.

In addition, various healthcare reform proposals have also emerged at the state level. We cannot predict the exact effect newly enacted laws
or any future legislation or regulation will have on us. However, the implementation of new legislation and regulation may lower reimbursements for our products, reduce medical procedure volumes and adversely affect our business, possibly
materially. In addition, the enacted excise tax may materially and adversely affect our operating expenses and results of operations.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

None.



|Item 4. | (Removed and Reserved)
|------- | ----------------------





|Item 5. | Other Information.
|------- | ------------------

None.



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|Item 6. | Exhibits.
|------- | ---------



|     |  |                                                                                                                                                                      
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.  |  | Description                                                                                                                                                          
|     | 
|31.1 |  | Certification pursuant to Rule 13a-14(a) or 15d-14 under the Securities Exchange Act of 1934.                                                                        
|     | 
|31.2 |  | Certification pursuant to Rule 13a-14(a) or 15d-14 under the Securities Exchange Act of 1934.                                                                        
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



|                    |  |                                                   
|------------------- |  | --------------------------------------------------
|                    |  | ANGIODYNAMICS, INC.                               
|                    |  | (Registrant)                                      
|                    | 
|Date: April 9, 2010 |  | /s/    JOHANNES C.
KELTJENS                       
|                    |  | Johannes C. Keltjens, President,                  
|                    |  | Chief Executive Officer                           
|                    |  | (Principal Executive Officer)                     
|                    | 
|Date: April 9, 2010 |  | /s/    D. JOSEPH
GERSUK                           
|                    |  | D. Joseph Gersuk, Executive Vice President,       
|                    |  | Chief Financial Officer                           
|                    |  | (Principal Financial and Chief Accounting Officer)



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EXHIBIT INDEX



|     |  |                                                                                                                                                                      
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.  |  | Description                                                                                                                                                          
|     | 
|31.1 |  | Certification pursuant to Rule 13a-14(a) or 15d-14 under the Securities Exchange Act of 1934.                                                                        
|     | 
|31.2 |  | Certification pursuant to Rule 13a-14(a) or 15d-14 under the Securities Exchange Act of 1934.                                                                        
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002



44