MESA LABORATORIES INC /CO/ 10-K

Item 8. Financial Statements and Supplementary Data   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM       Stockholders and Board of Directors Mesa Laboratories, Inc. Lakewood, Colorado   Opinions on the Financial Statements and Internal Control over Financial Reporting   We have audited the accompanying consolidated balance sheets of Mesa Laboratories, Inc. (the “Company”) as of March 31, 2021 and 2020, the related consolidated statements of income, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 2021, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company's internal control over financial reporting as of March 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”).   In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2021 based on criteria established in the COSO framework.   Basis for Opinions   The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.   Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.   Definition and Limitations of Internal Control over Financial Reporting   A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.             Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   Critical Audit Matter   The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.     Page 30 Table of Contents   Income Taxes — Refer to Notes 1 and 14 to the financial statements   Critical Audit Matter Description   The Company’s income tax expense includes U.S., state, local and international income taxes. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting basis and the tax basis of existing assets and liabilities. The tax rate used to determine the deferred tax assets and liabilities is based on the enacted tax rate for the year and the manner in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.   We identified management’s calculation of income tax expense and deferred tax assets and liabilities (net of valuation allowance) as a critical audit matter because of the significant judgments and estimates management makes to determine these amounts. Performing audit procedures to evaluate the reasonableness of management’s interpretation of tax law in various foreign jurisdictions, and its estimate of the associated provisions and tax charges required a high degree of auditor judgment and increased effort.   How the Critical Audit Matter was Addressed in the Audit   Our audit procedures performed to address this critical audit matter included the following, among others:       ● We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over income taxes balances and disclosures, including the provision for income taxes and deferred tax assets and liabilities (including valuation allowance).   ● We assessed the Company’s income tax expense and deferred tax assets and liabilities by:   ● Evaluating the Company’s income tax provision calculation, including testing the appropriateness of income tax rates applied and of income allocations among the taxing jurisdictions, and the mathematical accuracy of the calculation.   ● Evaluating the Company’s analyses supporting its conclusions as to the recognition and measurement of deferred tax assets and liabilities, including the calculation of the deferred tax asset resulting from the carryover of net operating losses.   ● Evaluating management’s assessment of the Company’s ability to utilize the deferred tax assets in future years.   ● Evaluating the Company’s disclosures related to the provision for income taxes and deferred tax assets and liabilities (including valuation allowance).   /s/ Plante & Moran, PLLC   We have served as the Company’s auditor since 1986. Denver, Colorado                                                           June 1, 2021   Page 31 Table of Contents     Mesa Laboratories, Inc. Consolidated Balance Sheets (In thousands, except share amounts)       March 31,     March 31,       2021     2020   ASSETS                 Current assets:                 Cash and cash equivalents   $ 263,865     $ 81,380   Accounts receivable, less allowances of $218 and $159 , respectively     23,787       21,132   Inventories     11,178       14,230   Prepaid expenses and other     4,082       4,136   Prepaid income taxes     837       1,914   Total current assets     303,749       122,792   Property, plant and equipment, net     21,998       22,066   Deferred tax asset     616       363   Other assets     2,530       2,480   Intangibles, net     111,741       119,871   Goodwill     160,841       141,536   Total assets   $ 601,475     $ 409,108                     LIABILITIES AND STOCKHOLDERS’ EQUITY                 Current liabilities:                 Accounts payable   $ 4,473     $ 3,408   Accrued payroll and benefits     9,388       8,940   Unearned revenues     8,777       6,814   Income taxes payable     1,648       241   Other accrued expenses     8,297       6,605   Total current liabilities     32,583       26,008   Deferred tax liability     16,275       21,451   Other long-term liabilities     715       1,358   Convertible senior notes, net of discounts and debt issuance costs     145,675       140,278   Total liabilities     195,248       189,095   Stockholders’ equity:                 Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 5,140,568 and 4,387,140 shares, respectively     317,652       158,023   Retained earnings     72,459       72,359   Accumulated other comprehensive income (loss)     16,116       ( 10,369 ) Total stockholders’ equity     406,227       220,013   Total liabilities and stockholders’ equity   $ 601,475     $ 409,108     See accompanying notes to consolidated financial statements.   Page 32 Table of Contents     Mesa Laboratories, Inc. Consolidated Statements of Income (In thousands, except per share data)       Year Ended March 31,       2021     2020     2019                             Revenues:                         Product   $ 107,028     $ 93,401     $ 81,798   Service     26,909       24,286       21,337   Total revenues     133,937       117,687       103,135   Cost of revenues:                         Cost of products     33,120       40,445       30,250   Cost of services     13,803       11,880       11,969   Total cost of revenues     46,923       52,325       42,219   Gross profit     87,014       65,362       60,916   Operating expenses:                         Selling     18,480       12,910       8,260   General and administrative     45,697       37,826       31,295   Research and development     10,388       6,355       3,506   Impairment of goodwill and long-lived assets     -       298       4,774   Legal settlement     91       50       3,300   Total operating expenses     74,656       57,439       51,135   Operating income     12,358       7,923       9,781   Nonoperating expenses:                         Interest expense and amortization of debt discount     8,024       5,504       1,749   Interest (income)     ( 107 )     ( 960 )     ( 29 ) Other expense (income), net     2,138       ( 483 )     ( 562 ) Total nonoperating expense     10,055       4,061       1,158   Earnings before income taxes     2,303       3,862       8,623   Income tax (benefit) expense     ( 971 )     2,084       1,139   Net income   $ 3,274     $ 1,778     $ 7,484                             Earnings per share:                         Basic   $ 0.66     $ 0.42     $ 1.95   Diluted   $ 0.64     $ 0.41     $ 1.86                             Weighted-average common shares outstanding:                         Basic     4,975       4,200       3,839   Diluted     5,124       4,371       4,033       See accompanying notes to consolidated financial statements.   Page 33 Table of Contents     Mesa Laboratories, Inc. Consolidated Statements of Comprehensive Income (Loss) (In thousands except per share data)       Year Ended March 31,       2021     2020     2019                             Net income   $ 3,274     $ 1,778     $ 7,484   Other comprehensive income (loss):                         Foreign currency translation adjustments     26,485       ( 8,367 )     ( 2,379 ) Comprehensive income (loss)   $ 29,759     $ ( 6,589 )   $ 5,105     See accompanying notes to consolidated financial statements.   Page 34 Table of Contents     Mesa Laboratories, Inc. Consolidated Statements of Stockholders’ Equity (In thousands, except share amounts)       Common Stock                               Number of Shares     Amount     Retained Earnings     AOCI*     Total   March 31, 2018     3,801,439       30,516       68,281       564       99,361   Exercise of stock options and vesting of restricted stock units     88,699       5,095       -       -       5,095   Dividends paid, $0.64 per share     -       -       ( 2,462 )     -       ( 2,462 ) Stock-based compensation expense     -       4,212       -       -       4,212   Foreign currency translation     -       -       -       ( 2,379 )     ( 2,379 ) Net income     -       -       7,484       -       7,484   March 31, 2019     3,890,138       39,823       73,303       ( 1,815 )     111,311   Exercise of stock options and vesting of restricted stock units     65,752       4,945       -       -       4,945   Proceeds from issuance of common stock, net of issuance costs of $ 5,568     431,250       84,995       -       -       84,995   Proceeds from conversion feature of convertible senior notes, due 2025, net of allocated costs and deferred taxes of $8,338     -       22,735       -       -       22,735   Dividends paid, $0.64 per share     -       -       ( 2,722 )     -       ( 2,722 ) Stock-based compensation expense     -       5,525       -       -       5,525   Currency translation recognized in earnings from the exit of Cold Chain Packaging Division     -       -       -       ( 187 )     ( 187 ) Foreign currency translation     -       -       -       ( 8,367 )     ( 8,367 ) Net income     -       -       1,778               1,778   March 31, 2020     4,387,140       158,023       72,359       ( 10,369 )     220,013   Proceeds from the issuance of common stock, net of issuance costs of $9,315     690,000       145,935       -       -       145,935   Exercise of stock options and vesting of restricted stock units     63,428       4,426       -       -       4,426   Dividends paid, $0.64 per share     -       -       ( 3,165 )     -       ( 3,165 ) Stock-based compensation expense     -       9,268       -       -       9,268   Foreign currency translation     -       -       -       26,485       26,485   Adoption of accounting standards, net     -       -       ( 9 )     -       ( 9 ) Net income     -       -       3,274       -       3,274   March 31, 2021     5,140,568     $ 317,652     $ 72,459     $ 16,116     $ 406,227     *Accumulated Other Comprehensive Income (Loss).   See accompanying notes to consolidated financial statements.   Page 35 Table of Contents     Mesa Laboratories, Inc. Consolidated Statements of Cash Flows (In thousands)       Year Ended March 31,       2021     2020     2019   Cash flows from operating activities:                         Net income   $ 3,274     $ 1,778     $ 7,484   Adjustments to reconcile net income to net cash provided by operating activities:                         Depreciation and amortization     17,660       12,990       9,428   Stock-based compensation     9,268       5,525       4,212   Impairment loss on goodwill and long-lived assets     -       298       4,774   Non-cash interest and debt amortization     5,397       3,314       -   Amortization of step-up in inventory basis     ( 436 )     8,502       -   Deferred taxes     ( 3,503 )     ( 1,971 )     ( 2,472 ) Other     161       ( 311 )     ( 763 ) Cash provided by changes in operating assets and liabilities                         Accounts receivable, net     ( 647 )     ( 1,665 )     1,592   Inventories     929       414       2,574   Prepaid expenses and other assets     2,878       ( 432 )     ( 2,898 ) Accounts payable     967       ( 61 )     1,092   Accrued liabilities and taxes payable     ( 317 )     ( 2,147 )     5,477   Unearned revenues     1,442       754       54   Net cash provided by operating activities     37,073       26,988       30,554   Cash flows from investing activities:                         Acquisitions     -       ( 184,102 )     ( 4,840 ) Purchases of property, plant and equipment     ( 1,992 )     ( 1,498 )     ( 1,262 ) Proceeds from the sale of assets     -       15       2,222   Net cash (used in) investing activities     ( 1,992 )     ( 185,585 )     ( 3,880 ) Cash flows from financing activities:                         Proceeds from the issuance of common stock, net     145,935       84,995       -   Proceeds from the issuance of convertible senior notes, net     -       172,500       -   Proceeds from the issuance of debt     -       -       2,000   Dividends     ( 3,165 )     ( 2,722 )     ( 2,462 ) Payments of contingent consideration     ( 304 )     ( 11 )     ( 680 ) Proceeds from the exercise of stock options     4,426       4,945       5,095   Payment of debt issuance costs     ( 664 )     ( 5,430 )     -   Payments of debt     -       ( 23,000 )     ( 25,625 ) Net cash provided by (used in) financing activities     146,228       231,277       ( 21,672 ) Effect of exchange rate changes on cash and cash equivalents     1,176       ( 1,485 )     ( 286 ) Net increase in cash and cash equivalents     182,485       71,195       4,716   Cash and cash equivalents at beginning of period     81,380       10,185       5,469   Cash and cash equivalents at end of period   $ 263,865     $ 81,380     $ 10,185     Supplemental non-cash activity:                         Deferred tax liability related to the conversion option associated with the convertible senior notes   $ -     $ 7,359     $ -   Contingent consideration as part of an acquisition   $ -     $ 490     $ -   Cash paid for:                         Income taxes paid   $ 1,367     $ 2,634     $ 5,870   Interest paid   $ 2,372     $ 1,627     $ 1,637   See accompanying notes to consolidated financial statements.   Page 36 Table of Contents   Mesa Laboratories, Inc. Notes to Consolidated Financial Statements (dollar amounts in thousands, unless otherwise specified)     Note 1. Description of Business and Summary of Significant Accounting Policies   Description of Business   In this Annual Report on Form 10 -K, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries is collectively referred to as “we,” “us,” “our,” the “Company” or “Mesa Labs.”   We are a multinational manufacturer, developer, and seller of quality control products and services, many of which are sold into niche markets that are driven by regulatory requirements. We have manufacturing operations in North America and Europe and our products are marketed by our sales personnel in North America, Europe, and Asia, and by independent distributors in these areas as well as throughout the rest of the world. We prefer markets in which we can establish a strong presence and achieve high gross margins.   As of  March 31, 2021 , we managed our operations in  four  reportable segments, or divisions. Our Sterilization and Disinfection Control division manufactures and sells biological, cleaning, and chemical indicators which are used to assess the effectiveness of sterilization and disinfection processes in the hospital, dental, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the dental industry. Our Instruments division designs, manufactures, and markets quality control hardware and disposable products utilized in the healthcare, pharmaceutical, food and beverage, medical device, industrial hygiene, and environmental air sampling industries. During the year ended  March 31, 2020, we added a new reportable segment: Biopharmaceutical Development as a result of our acquisition of Gyros Protein Technologies Holding AB ("GPT" or the "GPT acquisition"), which is discussed further in Note 4.  "Significant Transactions." Our Biopharmaceutical Development division develops, manufactures, and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions. Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacturing of biotherapeutic drugs. Our Continuous Monitoring division designs, develops, and markets systems which are used to monitor various environmental parameters such as temperature, humidity, and differential pressure to ensure that critical storage and processing conditions are maintained in hospitals, pharmaceutical and medical device manufacturers, blood banks, pharmacies, and laboratory environments.  Non-reportable operating segments (including our Cold Chain Packaging division which ceased operations during the year ended  March 31, 2020)  and unallocated corporate expenses are reported within Corporate and Other.   Principals of Consolidation and Basis of Presentation   Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include our accounts and wholly owned subsidiaries after elimination of all intercompany accounts and transactions. GPT results are consolidated with Mesa's financial statements beginning November 1, 2019, the first full day following the acquisition. Prior period results have not been recast and are therefore not comparable with the year ending March 31, 2021.   Management Estimates   The preparation of our Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our Consolidated Financial Statements and accompanying notes. Actual results could differ from our estimates under different assumptions or conditions.   Summary of Significant Accounting Policies   Foreign Currency Exchange rate adjustments resulting from foreign currency transactions are recognized in net earnings, whereas effects resulting from the translation of financial statements are reflected as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. dollars are translated into U.S. dollars at period end exchange rates, and statements of income accounts are translated at weighted average rates.    Fair Value of Financial Instruments Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. We determine fair value based on the following input hierarchy:   Level 1: Quoted prices for identical assets or liabilities in active markets.   Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated with observable market data.   Level 3: Unobservable inputs supported by little or no market activity. Pricing models, discounted cash flow methodologies, and other similar techniques involving significant management judgment or estimation typically require unobservable inputs.   Revenue Recognition Our revenues are generated from product sales, including hardware and perpetual license software and consumable products, as well as services, including product installations, discrete and ongoing maintenance services, and software subscriptions. Revenues are recognized when we satisfy our performance obligations under the terms of a contract, which occurs when control of the promised products or services transfers to our customers. We recognize as revenue the amount of consideration we expect to receive in exchange for transferring products or services to our customers (the transaction price). For all revenue arrangements, prices are fixed at the time of purchase and no price protections or variables are offered. Substantially all of our revenues and related receivables are generated from contracts with customers that are 12 months or less in duration. We generally recognize revenues as follows:   Page 37 Table of Contents   Product sales:   Our performance obligations related to product sales generally consist of the promise to sell tangible goods to distributors or end users. Control of these goods is typically transferred upon shipment, at which time our performance obligation is satisfied and revenue is recognized.   For products requiring installation, control transfers to the customer and revenue is recognized when our technicians have completed the installation at the customer’s location. Purchase orders typically provide evidence of an arrangement for product sales. Products sold include an assurance-type warranty which is accounted for as part of accrued warranty expense.    Services:  We generate service revenues from three categories: 1 ) discrete installation of hardware and software products, 2 ) discrete calibration, testing, and maintenance services, and 3 ) contracted and recurring calibration, testing, and maintenance services and software license subscriptions. Performance obligations arise when discrete services are contracted in advance and performed at a future time, often at the time of the customer’s choosing. In such cases, our performance obligation is satisfied and revenue is recognized upon the customer’s acceptance of completion of the specified work. Alternately, performance obligations arising from annual service contracts are satisfied by completing any service that is contractually required during the contract period, if requested by the customer, or simply by the passage of time if no services are requested. Performance obligations arising from software subscriptions are satisfied by the passage of time. For both annual service contracts and software subscriptions, revenue is recognized on a straight-line basis over the life of the contract in a faithful depiction of our obligation to provide services over the contract period. Evidence of a service arrangement may be in the form of a formal contract or a purchase order.    Collectability is reasonably assured through our customer review process, and payment is typically due within 60 days or less. Upon adoption of Accounting Standards Codification ("ASC")  606, we elected the practical expedient to expense commission costs as incurred. For the substantial majority of our contracts, which have original durations of one year or less, we have elected not  to disclose the expected timing or allocated transaction prices of future performance obligations. Additionally, we have elected the practical expedient to not assess whether a significant financing component exists when the period between when we perform our performance obligation and when the customer remits payment is one year or less. None of our contracts contained a financing component as of March 31, 2021 or March 31, 2020.    Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. Standalone selling prices are based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price considering available information such as market conditions and internally approved pricing guidelines.    Shipping and handling Payments made by customers to us for shipping and handling costs are included in revenues on the Consolidated Statements of Income, and our expenses are included in cost of revenues. Our performance obligation with respect to shipping and handling consists of a promise to secure such services from a third party on behalf of our customers. Shipping and handling for inventory and materials we purchase is included as a component of inventory on the Consolidated Balance Sheets, and in cost of revenues when products are sold.    Unearned Revenues Certain of our products have associated annual service contracts whereby we provide repairs, technical support, and various other analytical or maintenance services. In the event these contracts are paid in advance by the customer, the associated amounts are deferred and recognized ratably over the term of the service period, generally one year.   Accrued Warranty Expense We provide a limited product warranty on our products and, accordingly, accrue an estimate of the related warranty expense at the time of sale.   Cash and Equivalents We classify all highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents, including highly liquid investments in money market funds with original maturities of three months or less. All cash equivalents are carried at cost, approximating fair value.   Accounts Receivable and Allowance for Doubtful Accounts All trade accounts are reported at net realizable value on the accompanying Consolidated Balance Sheets, adjusted for any write-offs and net of allowances for doubtful accounts. Allowances for doubtful accounts represent our best estimate and current expectation of future credit losses from trade accounts. We estimate credit losses based on historical information, current and expected future economic and market conditions, and reviews of the current status of customers’ trade accounts receivable. Customers are pooled based on shared specific risk factors such as historical credit loss patterns. In circumstances in which we become aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. We do not believe our trade accounts receivable represent significant concentrations of credit risk due to our diversified portfolio of individual customers and geographical areas. Differences may arise between estimated and actual losses, which could materially affect the provision for credit losses and, therefore, net earnings. We recorded $ 100 , $ 1  and $ 13  of expense associated with doubtful accounts for the years ended March 31, 2021 ,  2020 and 2019 , respectively. See "Recently Adopted Accounting Pronouncements" for further information regarding credit losses for accounts receivable and our April 1, 2020 adoption of ASU  No.   2016 - 13,   Financial Instruments - Credit Losses (Topic  326 ): Measurement of Credit Losses on Financial Instruments , as modified by ASU  No.   2018 - 19,   Codification Improvements to Topic  326,  Financial Instruments - Credit Losses .   Inventories Inventories are stated at the lower of cost or net realizable value using a weighted average methodology. Our work in process and finished goods inventories include the costs of raw materials, labor and overhead, which are estimated based on trailing twelve months of expense and standard labor hours for each product. We evaluate labor and overhead costs annually unless specific circumstances necessitate a mid-year evaluation for specific items.   We monitor inventory costs relative to selling prices and perform physical cycle count procedures on inventories throughout the year to determine if a lower of cost or net realizable value reserve is necessary. We estimate and maintain an inventory reserve as needed for such matters as excess or obsolete inventory, shrinkage, and scrap. Once inventory is written down, a new cost basis is established that is not subsequently written back up in future fiscal years.   Page 38 Table of Contents   Property, Plant and Equipment Property, plant and equipment are stated at cost, except for assets acquired in acquisitions, which are recorded at fair value. Expenditures for major renewals and improvements that extend the life of the asset are capitalized, while expenditures for minor replacements, maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the assets’ estimated useful lives. Upon asset retirement or disposal, accounts are relieved of cost and accumulated depreciation, and any related gain or loss is reflected in our results of operations. For certain business consolidation activities, accelerated depreciation may be required for the revised remaining useful lives of assets designated to be abandoned. At least annually, we evaluate and adjust as necessary the estimated lives of property, plant and equipment. Any changes in estimated useful lives are recorded prospectively. Estimated useful lives of depreciable assets are as follows:   Category Useful Lives Buildings 40 years Manufacturing equipment  7 years (or less) Computer equipment  3 years (or less)   Land is not depreciated and construction in progress is not depreciated until placed in service. Leasehold improvements are depreciated over the lesser of the economic life or the remaining term in the respective lease.    Leases We adopted ASU 2016 - 02,  “Leases (Topic 842 )” (“ASC 842” ) as of April 1, 2019. Under ASC 842, we determine whether contractual arrangements contain a lease at the inception of the arrangement. If a lease is identified in an arrangement, we recognize a right-of-use asset ("ROU") and liability on our Consolidated Balance Sheets and determine whether the lease should be classified as a finance or operating lease. We do not have any finance leases. We do  not recognize assets or liabilities for leases with lease terms of less than 12 months and our short-term leases are not material.   Under ASU 2016 - 02, a contract is a lease or contains one when ( 1 ) the contract contains an explicitly or implicitly identified asset and ( 2 ) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments. Adjustments would also be made for accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets, none of which are present in any of our current lease contracts. When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease, otherwise we use our incremental borrowing rate based on the information available at lease commencement.    Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Lease expense is recorded in cost of products, selling, general and administrative, or research and development on our Consolidated Statements of Income, depending on the nature of use of the underlying asset. Many of our leases include one or more renewal or termination options exercisable at our discretion, which are included in the determination of the lease term if we are reasonably certain to exercise the option. We have also entered into lease agreements that have variable payments related to certain indexes. Variable lease payments are recognized in the period in which those payments are incurred. All non-lease components are readily identifiable in our lease contract. We account for non-lease components separately from the lease component to which it is related.    Acquired Intangible Assets Our goodwill and other intangible assets result from acquisitions of existing businesses. Upon acquisition, we record the fair value of identifiable indefinite and definite lived intangible assets using, among other sources of relevant information, independent appraisals, or actuarial or other valuations. Intangible assets affect the amount of future amortization expense and possible impairment charges we may incur.   Goodwill and indefinite lived intangible assets (trademarks we intend to renew and continue using indefinitely) are not subject to amortization and are tested for impairment qualitatively, and if necessary, quantitatively, at least annually during the fourth quarter of our fiscal year, or when events or changes in circumstances indicate it may be more likely than not that carrying value exceeds fair value. We perform impairment tests of goodwill at the reporting unit level and tests for other indefinite lived intangible assets at the asset level.   Intangible assets deemed to have definite lives are amortized on a straight-line basis over their useful lives, generally ranging from five to 15 years (See Note 8. “Goodwill and Long-Lived Assets”). We determine the useful lives of finite intangible assets based on the specific facts and circumstances related to each asset, and we evaluate the appropriateness of assigned useful lives at least annually. Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, our long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset, and economic factors such as competition or specific market conditions. Definite-lived intangible assets are tested for impairment only if events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group might not be recoverable.   The fair value measurement used in testing intangible asset impairment is typically based on discounted cash flow projection models, using Level 3 inputs. See “Fair Value of Financial Instruments” for a description of input levels. In certain cases, management uses other market information when available to estimate fair value. Impairment charges represent the excess carrying amount over estimated fair value. We do not believe our goodwill and other intangible assets are impaired as of March 31, 2021.   Research & Development Costs We conduct research and development activities for the purpose of developing new products and enhancing the functionality, effectiveness, reliability, and accuracy of existing products. Research and development expense is predominantly comprised of labor costs and third -party consultants. Research and development costs are expensed as incurred.   Debt Accounting As of March 31, 2021, our long-term debt balance is related to our 1.375 % convertible senior notes due 2025, which were issued in August 2019 and are carried at their principal amount less unamortized debt discount. We account for our convertible notes as separate liability and equity components. We established the initial carrying amount of the liability component by estimating the fair value of a similar liability without an associated conversion feature. The initial carrying value of the equity component was calculated by deducting the initial carrying value of the liability component from the principal amount of the Notes as a whole. We then allocated transaction costs related to the issuance of the Notes to the liability and equity components in proportion to their initial carrying values. Debt discount is amortized to interest expense in our Consolidated Statements of Income over the term of the convertible notes using the effective interest rate method. We assess the equity classification of the cash conversion feature and the long-term debt classification of the liability component quarterly.   Page 39 Table of Contents   Stock-based Compensation We issue shares in the form of stock options and full-value awards as part of employee compensation pursuant to the Mesa Laboratories, Inc. 2014 Equity Plan (the "2014 Equity Plan").  Stock options and service-based stock awards generally vest equally over a three to  five year term and stock options generally expire after  six  years. Awards granted to non-employee directors generally vest one year from the grant date. We recognize stock-based compensation expense based on the fair value of stock awards at the grant date and recognize the expense over the related service period using a straight line vesting expense schedule. We allocate stock-based compensation expense to cost of revenues, selling, research and development, and general and administrative expense in the Consolidated Statements of Income.   The fair value of each granted stock option is estimated on the grant date using the Black-Scholes option valuation model. The assumptions used to calculate the fair value of granted options reflect market conditions and our historical experience. We estimate forfeitures using a dynamic forfeiture model based on historical data when determining the amount of stock-based compensation costs to recognize each period.   Restricted stock units ("RSUs") issued by us are equivalent to nonvested shares under the applicable accounting guidance. The fair value of RSUs is based on the closing price of Mesa Labs' common stock on the award date, less the present value of expected dividends not received during the vesting period. Expense for performance-based RSUs ("PSUs") is recognized when it is probable the performance goal will be achieved. Performance goals are determined by the Board of Directors and may include measures such as revenues growth and profitability targets. Compensation expense on stock awards subject to performance conditions is recognized over the longer of the estimated performance goal attainment period or time vesting period. As of each reporting period, we estimate the number of PSUs expected to vest based on our current estimate of performance compared to the target metrics in the award documents, and if necessary, a cumulative-effect adjustment is recorded.      Earnings   Per Share Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share (“diluted EPS”) is computed similarly to basic earnings per share, except it includes the effects of potential common shares related to stock options, restricted stock units, performance share units, and convertible debt in periods in which such effects are dilutive. Potentially dilutive securities are excluded from the calculation of diluted EPS in the event they are subject to performance conditions that have not yet been achieved. See Note 12. “Earnings per Share” for EPS calculations for the years ended March 31, 2021, 2020, and 2019.   Income Taxes Income tax expense includes U.S., state, local and international income taxes, plus a provision for U.S. taxes on undistributed earnings of foreign subsidiaries and other prescribed foreign entities not deemed to be indefinitely reinvested. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting basis and the tax basis of existing assets and liabilities. The tax rate used to determine the deferred tax assets and liabilities is based on the enacted tax rate for the year and the manner in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.   We are involved in various tax matters, some of which have uncertain outcomes. We establish reserves to remove some or all of the tax benefits related to our tax positions at the time we determine one of the following conditions exists: ( 1 ) the tax position is not “more likely than not”  to be sustained, ( 2 ) the tax position is “more likely than not”  to be sustained, but for a lesser amount, or ( 3 ) the tax position is “more likely than not”  to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether a tax position is uncertain, ( 1 ) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; ( 2 ) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position; and ( 3 ) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken. A number of years may elapse before a particular uncertain tax position is audited and finally resolved or when a tax assessment is raised. The number of years subject to tax assessments varies depending on the tax jurisdiction. A tax benefit that has been previously reserved because of a failure to meet the “more likely than not”  recognition threshold would be recognized in income tax expense in the first period when the uncertainty disappears under any of the following conditions: ( 1 ) the tax position is “more likely than not”  to be sustained, ( 2 ) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or ( 3 ) the statute of limitations for the tax position has expired (See Note 14. “Income Taxes”).   Acquisition Related Contingent Consideration Liabilit ies Acquisition related contingent consideration liabilities consist of estimated amounts due under various acquisition agreements and are typically based on either revenues growth or specified profitability growth metrics. At each reporting period, we evaluate the expected future payments and the associated discount rate to determine the fair value of the contingent consideration, and we record any necessary adjustments in other expense, net on the Consolidated Statements of Income.   Legal Contingencies We are party to various claims and legal proceedings that arise in the normal course of business. We record an accrual for legal contingencies when we determine it is probable we have incurred a liability and can reasonably estimate the amount of the loss (See Note 15. “Commitments and Contingencies”).   Purchase Accounting for Acquisitions We account for all business combinations in which we obtain control over another entity using the acquisition method of accounting, which requires most assets (both tangible and intangible) and liabilities (including contingent consideration) to be recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets less liabilities is recognized as goodwill. We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses. These types of analyses require us to make and monitor assumptions and estimates regarding industry and economic factors, the profitability of future business strategies, discount rates and cash flow. Certain adjustments to the assessed fair values of acquired assets or liabilities made subsequent to the acquisition date but within the measurement period are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded within earnings. We expense all costs as incurred related to an acquisition in selling, general, and administrative expenses.   Results of operations of the acquired company are included in our Consolidated Financial Statements from the date of the acquisition forward. If actual results are not consistent with our assumptions and estimates, or if our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future. For the years ended March 31, 2021 ,  2020 and 2019 , our acquisitions of businesses (net of cash acquired) totaled $ 0 , $ 184,102 , and $ 4,840 , respectively.   Page 40 Table of Contents   Business Consolidation Costs We estimate our liabilities for business closure activities by gathering detailed estimates of costs and, if applicable, asset sale proceeds, for each business consolidation initiative. For a typical business consolidation initiative, we estimate costs of employee severance, impairment of property and equipment and other assets including estimating net realizable value, if necessary, accelerated depreciation, termination payments for contracts and leases, and any other qualifying costs related to the exit plan. Such charges represent our best estimates; however, they require assumptions about plans that may change over time. The estimated costs are grouped by specific projects within the overall exit plan and are monitored at each reporting period, and any subsequent change to the original estimate is recorded in current earnings.    Risks and Uncertainties The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting periods. These estimates represent management's judgement about the outcome of future events. The current global business environment continues to be impacted directly and indirectly by the effects of the novel coronavirus ("COVID- 19 " ), and it is not possible to accurately predict the future impact of COVID- 19 .  However, we have reviewed the estimates used in preparing the financial statements and have identified the following factors that have a reasonable possibility of being materially affected by the impacts of COVID- 19  during the near term:        ● Estimates regarding the future financial performance of the business used in the impairment tests for goodwill and long-lived assets acquired in a business combination; however, our impairment test conducted during the three months ended March 31, 2021 concluded that goodwill is not impaired;     ● Estimates regarding the recoverability of deferred tax assets and estimates regarding cash needs and associated indefinite reinvestment assertions;     ● Estimates regarding recoverability for customer receivables;     ● Estimates of the net realizable value of inventory.   Immaterial Error Corrections During the  three  months ended  September 30, 2020,  we identified an immaterial error in the design of our Enterprise Resource Planning tool that resulted in a system failure to eliminate intercompany cost of revenues for certain types of transactions. The error resulted in an overstatement of cost of goods sold and an understatement in gross profit for the Continuous Monitoring, Instruments, and Sterilization and Disinfection Control divisions. The issue began during the  three  months ended  June 30, 2019;  we have determined that  no  financial statement prior to  April 1, 2019  was misstated as a result of the previously uneliminated balances in cost of revenues.    In accordance with Staff Accounting Bulletin ("SAB")  No.   99   Materiality , and SAB  No.   108   Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements , we evaluated the error quantitatively and qualitatively and determined that the related impact was  not  material to our financial statements for any prior annual or interim period, but that correcting the cumulative impact of the error would be significant to our results of operations for the  three  months ended  September 30, 2020.  In considering the quantitative and qualitative materiality, we concluded that the impact of the error correction is  not  material in absolute dollar amount, especially since reported results for the year ended March 31, 2020 included various new non-cash charges that reduced net income below historical levels. Accordingly, we have revised previously reported financial information for the immaterial error.   We performed manual intercompany elimination calculations and determined that cost of revenues and accumulated other comprehensive income were overstated by $429  for the year ended  March 31, 2020,  which would increase operating income and net income by  $429  and diluted earnings per share by  $0.10;  there was  no  income tax impact on the full year adjustment since the inventory balance was  not  misstated.  To correct the immaterial error, we have restated retained earnings as of  March 31, 2020. Additionally, during the  three  months ended  June 30, 2020,  cost of revenues was overstated by $372, which after the impact of taxes would increase net income by $192  and diluted earnings per share by  $0.04.  We restated retained earnings as of  June 30, 2020  in the amount of $ 192 . The immaterial error has no impact on total cash flows for any of the periods presented.   The presentation of the balance sheet for the year ended March 31, 2020 and components of the purchase price allocation shown in Note 4. "Significant Transactions" inaccurately classified deferred tax assets and deferred tax liabilities which has been corrected in the related disclosures presented herewith. The error did not affect disclosures related to income taxes, net income, or the statement of cash flows; it was limited to the balance sheet presentation of the deferred tax line items.    Recently Issued Accounting Pronouncements In  August  2020,  the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")  No.   2020 - 06,   Debt with Conversion and Other Options and Derivatives and Hedging Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , which simplifies the accounting for convertible instruments such as our 1.375% convertible senior notes due  August 15, 2025 ( the "Notes"). The ASU is effective for annual reporting periods beginning after  December 15, 2021, and early adoption is permitted for annual periods beginning after December 15, 2020.  The update permits the use of either the modified retrospective or full retrospective method of adoption. We intend to adopt the ASU on a modified retrospective basis effective April 1, 2021.  Under the ASU, the Notes will be recorded in their entirety as a liability and will no longer be bifurcated between equity and liability components. Upon adoption, the $ 30,092 equity conversion feature recorded to common stock (which represents $ 31,073 less allocated issuance costs of $ 981 ) will be removed, as will the associated unamortized discount of $ 22,799 . The net effect of these adjustments, which represents historical non-cash interest expense of $ 7,293 , will be recorded as an increase in the balance of beginning retained earnings as of April 1, 2021. We are currently evaluating the expected deferred tax and other impacts of adoption.    In December 2019, the FASB issued ASU No. 2019 - 12, Simplifying the Accounting for Income Taxes . The new standard removes certain exceptions to the general principles in ASC 740   Income Taxes  and also clarifies and amends existing guidance to provide for more consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We intend to adopt the standard effective April 1, 2021. The ASU is currently not expected to have a material impact on our consolidated financial statements.   Page 41 Table of Contents   Recently Adopted Accounting Pronouncements   In  June 2016,  the FASB issued ASU  No.   2016 - 13,   Financial Instruments - Credit Losses (Topic  326 ): Measurement of Credit Losses on Financial Instruments , as modified by ASU  No.   2018 - 19,   Codification Improvements to Topic  326,  Financial Instruments - Credit Losses , which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. The ASU was effective for public business entities for fiscal years beginning after  December 15, 2019,  with early adoption permitted. On  April 1, 2020,  we adopted the ASU using the modified retrospective transition method. We recorded a net decrease to beginning retained earnings of $ 9  as of  April 1, 2020  due to the cumulative effect of adopting Topic  326's  requirement to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on our trade receivables. As a result of the adoption of the ASU, our allowance for doubtful accounts as of  March 31, 2021  reflects our best estimate of the expected future losses for our accounts receivable based on current economic conditions. We have accounted for the macroeconomic impact of the COVID- 19  pandemic in our estimates, but due to the unprecedented nature of the impact of the pandemic, our estimates  may  change, and future actual losses  may  differ from current estimates. We will continue to monitor economic conditions and will revise our estimate of expected future losses for accounts receivable as necessary.       Note 2 . Revenue Recognition   We design, manufacture, market, sell, and maintain quality control instruments and software, consumables, and services driven primarily by the regulatory requirements of niche markets. Our consumables, such as biological indicator test strips are typically used on a standalone basis; however, some of our chemical solutions, such as protein synthesis and calibration solutions are critical to the ongoing use of our instruments. Hardware and software sales, such as medical meters, protein synthesizers, wireless sensor systems, and data loggers are generally driven by our acquisition of new customers, growth of existing customers, or customer replacement of existing equipment. Hardware sales may be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function. We also offer on-demand and annual service contracts to support customers' use of our equipment. We evaluate our revenues internally based on product line, the timing of revenue generation, and the nature of goods and services provided. Typically, discrete revenue is recognized at the shipping point or upon completion of the service, while contracted revenue is recognized over a period of time reflective of the performance obligation period in the applicable contract. Consumables are typically used on a one -time basis requiring frequent replacement in our customers' operating cycles. Substantially all of our revenues and related receivables are generated from contracts with customers that are  12  months or less in duration.   The following tables present disaggregated revenues for the years ended March 31, 2021 ,  2020 and 2019 :       Year Ended March 31, 2021       Sterilization and Disinfection Control     Instruments     Biopharmaceutical Development     Continuous Monitoring     Corporate and Other     Total   Discrete Revenues                                                 Consumables   $ 45,869     $ 3,135     $ 13,942     $ 63     $ -     $ 63,009   Hardware and Software     505       21,346       13,545       8,623       -       44,019   Services     1,848       7,980       2,928       2,870       -       15,626   Contracted Revenues                                                 Services and Software     4,897       4       3,477       2,905       -       11,283   Total Revenues   $ 53,119     $ 32,465     $ 33,892     $ 14,461     $ -     $ 133,937         Year Ended March 31, 2020       Sterilization and Disinfection Control     Instruments     Biopharmaceutical Development     Continuous Monitoring     Corporate and Other     Total   Discrete Revenues                                                 Consumables   $ 42,654     $ 3,197     $ 4,981     $ 43     $ 2,436     $ 53,311   Hardware and Software     551       25,627       6,015       7,897       -       40,090   Services     1,592       9,160       1,761       2,396       27       14,936   Contracted Revenues                                                 Services and Software     4,863       -       1,094       3,393       -       9,350   Total Revenues   $ 49,660     $ 37,984     $ 13,851     $ 13,729     $ 2,463     $ 117,687         Year Ended March 31, 2019       Sterilization and Disinfection Control     Instruments     Biopharmaceutical Development     Continuous Monitoring     Corporate and Other     Total   Discrete Revenues                                                 Consumables   $ 39,670     $ 3,101     $ -     $ 388     $ 6,430     $ 49,589   Hardware and Software     580       24,500       -       6,987       142       32,209   Services     1,209       8,524       -       2,001       335       12,069   Contracted Revenues                                                 Services and Software     4,838       -       -       4,430       -       9,268   Total Revenues   $ 46,297     $ 36,125     $ -     $ 13,806     $ 6,907     $ 103,135     Page 42 Table of Contents   Contract Balances   Our contracts have varying payment terms and conditions. Some customers prepay for services, resulting in unearned revenues or customer deposits, called contract liabilities, which are included within unearned revenues or other accrued expenses in the accompanying Consolidated Balance Sheets. Contract assets would exist when sales are recorded (for example, the control of the goods or services has been transferred to the customer), but customer payment is contingent on a future event besides the passage of time (such as satisfaction of additional performance obligations). We do not have any contract assets. Unbilled receivables, which are not classified as contract assets, represent arrangements in which sales have been recorded prior to billing and our right to payment is unconditional.   A summary of contract liabilities is as follows:   Contract liabilities balance as of March 31, 2020   $ 7,217   Prior year liabilities recognized in revenues during the year ended March 31, 2021     ( 4,368 ) Contract liabilities added during the year ended March 31, 2021, net of revenues recognized     6,145   Contract liabilities balance as of March 31, 2021   $ 8,994     Contract liabilities primarily relate to service and software contracts with original expected durations of 12 months or less and will be recognized to revenue as time passes.        Note 3. Fair Value Measurements   Our financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, obligations under trade accounts payable, and debt. Due to their short-term nature, the carrying values of cash and cash equivalents, trade accounts receivable, and trade accounts payable approximate fair value. As of March 31, 2021  and March 31, 2020 , respectively, cash and cash equivalents on our Consolidated Balance Sheets included $ 230,822  and $ 66,735 held in a money market account. We classify cash equivalents within Level 1 of the fair value hierarchy, and we value them using quoted market prices in active markets.   The financial instruments that subject us to the highest concentration of credit risk are cash and cash equivalents and accounts receivable. It is our policy to invest in highly liquid cash equivalent financial instruments with high credit ratings and to maintain low single issuer exposure (except U.S. treasuries). Concentration of credit risk with respect to accounts receivable is limited to customers to which we make significant sales. To manage credit risk, we consider the creditworthiness of new and existing customers, and we and regularly review outstanding balances and payment histories. We may require pre-payments from customers under certain circumstances and may limit future purchases until payments are made on past due amounts. We reserve an allowance for potential write-offs of accounts receivable, but we have not written off any significant accounts to date.   We have outstanding $ 172,500 aggregate principal of 1.375 % convertible senior notes due August 15, 2025. We estimate the fair value of the Notes based on the last actively traded price or observable market input preceding the end of the reporting period. The estimated fair value and carrying value of the Notes were as follows:       March 31, 2021     March 31, 2020       Carrying Value     Fair Value (Level 2)     Carrying Value     Fair Value (Level 2)   Notes   $ 145,675     $ 188,780     $ 140,278     $ 173,363     During the year ended March 31, 2021, we entered into a revolving credit facility which has a variable interest rate; there is no balance outstanding on the credit facility as of March 31, 2021. See Note 10. "Indebtedness" for further discussion on the Notes and the revolving credit facility.    Assets recognized or disclosed at fair value on the Consolidated Financial Statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired. Fair values assigned to the assets and liabilities acquired in the GPT Acquisition were measured using Level 3 inputs, as discussed in Note 4. "Significant Transactions." There were no transfers between fair value hierarchy levels during the years ended  March 31, 2021 and March 31, 2020 .      Note 4. Significant Transactions   Business Consolidation Costs   Butler, New Jersey During the year ended March 31, 2021, we made the decision to close our facility located in Butler, New Jersey during the quarter ending June 30, 2021. The facility is primarily used in the production of our gas flow calibration and air sampling equipment, which is part of our Instruments division. Our manufacturing facility in Lakewood, Colorado is currently undergoing renovations that will allow it to accommodate the production of the gas flow calibration and air sampling equipment. Consolidating the production of these products is expected to reduce facilities costs and streamline our use of lean manufacturing tools under central management to further encourage production efficiencies. As a result of the facility consolidation, we incurred a total of $ 588  of business consolidation costs during the year ended March 31, 2021, which were recorded to cost of revenues, selling, and general and administrative expense on the Consolidated Statements of Income. Of the total expense, $ 335 related to severance, and $ 248 related to other costs, including accelerated depreciation. As of March 31, 2021, a total of $ 317 remained outstanding and accrued, which primarily relates to severance costs. We do not expect to incur any material expenses related to the Butler, New Jersey consolidation in future periods.    Page 43 Table of Contents   Dissolution of Packaging Division We exited the packaging business (formerly the Cold Chain Packaging Reportable Segment) during the year ended March 31, 2020 because it has historically been our least profitable segment and was no longer aligned with our long-term strategic goals. During the year ended March 31, 2020, we assisted our customers in transitioning their business to other packaging vendors and we stopped purchasing new inventory. As a result of completing our final sales in the division, we wrote off the remaining value of intangibles and goodwill, resulting in a charge to impairment of goodwill and long-lived assets of $ 276 during the year ended March 31, 2020. During the year ended March 31, 2019 we recorded an impairment of goodwill and long-lived assets of $ 4,774 due to the decline of the packaging division. We incurred $ 51  and $ 150  of severance and facility closure expenses during the years ended March 31, 2020 and March 31, 2019, respectively. All amounts have been paid and no further exit costs are expected to be incurred. We have stopped presenting Cold Chain Packaging as a reportable segment, instead presenting the results of its operations as part of Corporate and Other, which aligns with Management's approach in evaluating the business.   GPT Acquisition   On  October 31, 2019,  we completed the acquisition of  100 % of the outstanding shares of GPT, which comprises our newest reportable segment, Biopharmaceutical Development. The acquisition of GPT expanded our presence into a new market, immunoassays and peptide synthesis solutions that accelerate the discovery, development, and manufacture of biotherapeutic drugs. GPT systems include laboratory instruments, consumables, kits, and software that maximize laboratory productivity by miniaturizing and automating immunoassays at the nanoliter scale. GPT's protein detection is used most frequently by pharmaceutical and biotech companies that are developing protein-based drugs. This division also provides instruments, consumables, and software for the chemical synthesis of peptides from amino acids which are used in the discovery of new peptide-based drug therapies. After adjustments, we paid cash consideration of $ 181,547  to the sellers in the transaction. The acquisition was considered a stock purchase for tax purposes.    Fair Value of Net Assets Acquired We accounted for the GPT Acquisition as the purchase of a business, and GPT's results of operations have been included in our consolidated statements of operations and cash flows from the date of acquisition. Under the acquisition method of accounting, the net assets of GPT were initially recorded as of the acquisition date at their respective estimated fair values using information obtained during due diligence and from other sources. Subsequent to the closing of the transaction, we obtained additional information related to the facts and circumstances that existed at the acquisition date, and we refined our valuation models, assumptions, and inputs accordingly in order to more accurately estimate fair value for the purchase price allocation. The preparation of the valuation required the use of Level  3  inputs, which are subject to significant assumptions and estimates. Critical estimates included, but were  not  limited to, future expected cash flows, including projected revenues and expenses, and applicable discount rates.    During the year ended March 31, 2021, we finalized the valuation of net assets acquired. The significant purchase price allocation changes during the year ended March 31, 2021  included: a net decrease of $ 6,002  in the value of intangible assets; a decrease of $ 3,752  in the value of the inventory step-up; an increase of $ 878  in the value of property, plant and equipment, net; and increases of $ 1,899  to other accrued expenses and $ 500  to accounts receivable, net related to GPT's sales tax obligations that were partially indemnified in our sale and purchase agreement. See Note 15 .  "Commitments and Contingencies" for more information on the sales tax liability. We also made adjustments to deferred tax assets and deferred tax liabilities primarily due to the tax effect of the aforementioned changes to the purchase price allocation. During year ended March 31, 2021,  the cumulative net decrease to amortization expense recorded as a result of the decrease to intangible assets was $ 344 , which is comprised of a benefit of $ 522 recorded in general and administrative costs and $ 178  of expense recorded in cost of revenues. Additionally, a $ 207  cumulative increase to depreciation expense was recorded to general and administrative costs as a result of the increase in the fair value of property, plant and equipment.    Page 44 Table of Contents   The cumulative impacts of all adjustments have been reflected in the consolidated financial statements as of and for the year ended March 31, 2021. The components and allocation of the purchase price consist of the following amounts:     Note   Fair Value   Cash and cash equivalents   $ 4,654   Accounts receivable (a)     6,663   Inventories (b)     12,522   Prepaid income taxes     477   Prepaid expenses and other     14,149   Property, plant and equipment     1,523   Other assets     1,469   Intangible assets:           Customer relationships (c)     77,500   Trade names (c)     4,600   Non-compete agreements (c)     -   Acquired technology (c)     11,800   Goodwill (d)     85,130   Total Assets acquired   $ 220,487               Accounts payable     599   Accrued salaries and payroll taxes     10,735   Other short-term liabilities     157   Unearned revenues     2,089   Other accrued expenses     6,967   Deferred taxes     12,774   Other long-term liabilities     965   Total liabilities assumed   $ 34,286               Total closing amount, net of cash acquired   $ 181,547       (a) Accounts receivable is composed of trade accounts receivable, which is expected to be collected.    (b)   GPT's finished goods inventory includes $ 8,066 of inventory-step up, which is required to be reported at fair value at the time of acquisition. The inventory step-up was amortized to cost of revenues over approximately  eight  months following the acquisition date, which resulted in a temporary reduction in gross profit for the business. During the period from  November 1, 2019 through March 31, 2020 ,  we recorded $ 8,502  of amortization of inventory step-up costs in cost of revenues on the Consolidated Statements of Income. The final inventory valuation was completed during the year ended March 31, 2021 and was lower than our preliminary valuation, resulting in a cumulative effect decrease of $ 436  in amortization of inventory step-up costs.    (c)   Customer relationships and acquired technology are being amortized on a straight-line basis over a  10 -year period. Amortization expense for customer relationships is recorded to general and administrative expenses; amortization expense for acquired technology is recorded to cost of revenues. During the year ended March 31, 2021, $ 7,487 of amortization expense related to the GPT intangible assets was recorded to general and administrative costs, and $ 1,430 of amortization expense was recorded to cost of goods sold and allocated to the Biopharmaceutical Development division, including the cumulative-effect benefit to amortization expense discussed above. Trademarks associated with this acquisition are considered indefinite-lived intangibles. The estimated fair value of identifiable intangible assets was determined primarily using the income approach, which requires a forecast of all expected future cash flows associated with the identified intangible assets.    (d)   Acquired goodwill of $ 85,130 , all of which is allocated to the Biopharmaceutical Development reportable segment, represents the value expected to arise from projected organic revenues growth that is expected to exceed that of our legacy divisions, and the value expected to arise from the opportunity to expand into a new market with well-established market share. The goodwill acquired is  not  deductible for income tax purposes.   Acquisition related costs of $ 1,399  for the year ended  March 31, 2020 are not included as a component of consideration transferred but are expensed in the periods in which the costs are incurred and are reflected on the Consolidated Statements of Income in general and administrative expenses.   Page 45 Table of Contents   Unaudited Pro Forma Information GPT's operations contributed $ 33,892 to revenues and ($ 9,006 ) of net loss to our consolidated results during the year ended March 31, 2021, including cumulative-effect adjustments. The loss includes over $ 8,900  in amortization of intangibles acquired in a business combination and over $ 3,000 of realized and unrealized losses on foreign currency. We included the operating results of GPT in our Consolidated Statements of Income beginning November 1, 2019, immediately subsequent to the acquisition date. The following pro forma financial information presents the combined results of operations of Mesa Labs and GPT as if the acquisition had occurred on April 1, 2018, after giving effect to certain pro forma adjustments. The pro forma adjustments reflected include only those adjustments that are factually supportable and directly attributable to the GPT Acquisition and that have a recurring impact; they do not reflect any adjustments for anticipated expense savings resulting from the acquisition and are not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on April 1, 2019  or of future results.       Year Ended March 31,       2020     2019   Pro forma total revenues (1)   $ 136,792     $ 134,843   Pro forma net income (2)     18,953       ( 3,822 )   ( 1 ) Net revenues were adjusted to include net revenues of GPT.  ( 2 ) Pro forma adjustments to net earnings attributable to Mesa Labs include the following:   ● Excludes acquisition-related transaction costs incurred in the year ended March  31, 2020.   ● Excludes interest expense attributable to GPT's external debt that was paid off as part of the acquisition.   ● Total GPT amortization expense of $ 8,930  for each of the years ended March 31, 2020  and March 31, 2019  based on the adjusted fair value of amortizable intangible assets acquired.   ● Additional charge to cost of revenues of $ 8,066 included in the year ended March 31, 2019  based on the step-up value of inventory. $ 8,596  was excluded from the year ended March 31, 2020 based on the step-up value of inventory which would have been included and fully amortized within the first year of the acquisition.   ● Additional stock-based compensation expense representing expense for performance share units awarded to certain key GPT employees.   ● Income tax effect of the adjustments made at a blended federal and state statutory rate (approximately 25 %).   IBP Acquisition   On April 1, 2019, we completed a business combination (the “IBP Acquisition”) whereby we acquired all of the common stock of IBP Medical GmbH, a company whose business manufactures medical meters used to test various parameters of dialysis fluid (dialysate) and the proper calibration and operation of dialysis machines. During the year ended March 31, 2020, we allocated the purchase price according to the fair value of assets acquired and liabilities assumed using information obtained during due diligence and through the use of financial and other information available to us. Fair value of the assets and liabilities acquired was determined using Level 3 inputs (unobservable inputs) based on a discounted cash flow method.    Under the terms of the IBP agreement, as amended, we are required to pay contingent consideration if the company is able to achieve certain development and regulatory milestones. During the year ended March 31, 2021, we paid $ 296 in conjunction with IBP's attainment of two  of the milestones. We expect that IBP will achieve its final two milestones during the three months ending June 30, 2021, and we will pay approximately $ 237 to fulfill our obligation under the contingent consideration arrangement.     Note 5. Inventories   Inventories consisted of the following:       March 31, 2021     March 31, 2020   Raw materials   $ 5,755     $ 4,738   Work in process     426       329   Finished goods     4,997       9,163   Inventories, net   $ 11,178     $ 14,230     The remaining balance of the adjustment to step up inventory acquired in the GTP Acquisition to fair value, which was included in finished goods, was $ 0  and $ 2,901 , respectively, as of  March 31, 2021 and  March 31, 2020;  see Note 4. "Significant Transactions."    Page 46 Table of Contents     Note 6. Property, Plant and Equipment   Property, plant and equipment were as follows:       March 31, 2021     March 31, 2020   Land   $ 889     $ 889   Buildings     18,857       18,880   Manufacturing equipment     12,163       9,851   Computer equipment     4,350       3,601   Construction in progress     985       242   Other     1,084       1,344   Gross total     38,328       34,807   Accumulated depreciation     ( 16,330 )     ( 12,741 ) Property, plant and equipment, net   $ 21,998     $ 22,066     During the year ended March 31, 2021, as part of the finalization of the purchase price adjustment of GPT, we recorded an increase of $ 878  in the value of property, plant and equipment, net. Depreciation expense for the years ended March 31, 2021 ,  2020 and  2019 was $ 2,959 , $ 2,234 , and $ 2,338 respectively.     Note 7. Leases   We have operating leases for buildings and office equipment. The following table presents the lease balances within the Consolidated Balance Sheets related to our operating leases:   Lease Assets and Liabilities Balance Sheet Location   March 31, 2021     March 31, 2020   Operating lease ROU asset Other assets   $ 1,801     $ 2,480   Current operating lease liabilities Other accrued expenses     1,023       1,095   Noncurrent operating lease liabilities Other long-term liabilities     677       1,262     The components of lease costs, the weighted average remaining lease term and the weighted average discount rate were as follows:       Year Ended March 31,       2021     2020   Operating lease expense   $ 1,130     $ 987   Variable lease expense     272       68   Total lease expense   $ 1,402     $ 1,055   Weighted average remaining lease term in years     1.8       2.3   Weighted average discount rate     3.3 %     3.9 % Supplemental cash flow information related to leases was as follows:       Year Ended March 31,       2021     2020   Cash paid for amounts included in the measurements of lease liabilities   $ 1,192     $ 914   Operating lease assets obtained in exchange for operating lease obligations     558       1,845     Maturities of lease liabilities are as follows as for the years ending March 31:   2022   $ 1,055   2023     580   2024     96   2025     11   Future value of lease liabilities     1,742   Less: imputed interest     42   Present value of lease liabilities   $ 1,700       Note 8 . Goodwill and Long-Lived Assets   Goodwill arises from the excess purchase price of acquired businesses over the fair value of acquired tangible and intangible assets, less assumed liabilities. We assess the goodwill of each of our reporting units for impairment at least annually during the fourth quarter of our fiscal year and as triggering events occur that indicate it may be more likely than not that an impairment exists. We begin by performing a qualitative goodwill assessment, and if the results of that test indicate it is more likely than not an impairment exists for any reporting unit, we then perform a quantitative goodwill impairment test on the reporting unit. When we perform quantitative impairment tests, we estimate the fair value of the reporting unit using the income approach. Under the income approach, fair value is estimated as the present value of the reporting unit's estimated future cash flows. The projected cash flows incorporate various assumptions related to weighted average cost of capital, growth rates specific to the reporting unit, assumptions for net sales growth, and terminal growth rates.     Page 47 Table of Contents   The change in the carrying amount of goodwill was as follows:       Sterilization and Disinfection Control     Instruments     Biopharmaceutical Development     Continuous Monitoring     Corporate and Other     Total   March 31, 2019   $ 29,780     $ 18,235       -     $ 18,103       259       66,377   Effect of foreign currency translation     ( 186 )     ( 20 )     ( 2,446 )     -       ( 1 )     ( 2,653 ) Acquisitions     -       908       77,162       -       -       78,070   Impairment     -       -       -       -       ( 258 )     ( 258 ) March 31, 2020     29,594       19,123     $ 74,716     $ 18,103     $ -     $ 141,536   Effect of foreign currency translation     559       63       10,715       -       -       11,337   Goodwill adjustment related to GPT acquisition     -       -       7,968       -       -       7,968   March 31, 2021   $ 30,153     $ 19,186     $ 93,399     $ 18,103     $ -     $ 160,841     Other intangible assets were as follows:       March 31, 2021     March 31, 2020       Gross Carrying Amount     Accumulated Amortization     Net Carrying Amount     Gross Carrying Amount     Accumulated Amortization     Net Carrying Amount   Intellectual property   $ 21,201     $ ( 8,595 )   $ 12,606     $ 15,731     $ ( 6,454 )   $ 9,277   Trade names     8,612       ( 3,129 )     5,483       5,839       ( 2,855 )     2,984   Customer relationships     145,754       ( 52,206 )     93,548       146,106       ( 38,777 )     107,329   Non-compete agreements     1,299       ( 1,195 )     104       1,447       ( 1,166 )     281   Total   $ 176,866     $ ( 65,125 )   $ 111,741     $ 169,123     $ ( 49,252 )   $ 119,871     The increase in the carrying amount of intangible assets was attributable to changes in foreign currency and adjustments to the preliminary purchase price of GPT that are discussed further in Note 4 .  "Significant Transactions." We acquired trade names as part of the GPT acquisition, which are valued at $ 4,990  as of March 31, 2021 and are considered to be indefinite lived. As these trade names are not subject to amortization, they are tested for impairment at least annually or more frequently if triggering events indicate it may be more likely than not that an impairment exists.    The range of useful lives and weighted-average remaining useful lives of amortizable intangible assets as of March 31, 2021 were as follows:                Weighted Average       Estimated Useful Life     Remaining Life   Description   (Years)     (Years)   Intellectual Property     10 - 15       8.4   Trade Name     5 - 10       4.3   Customer Relationships     5 - 10       8.5   Non-compete Agreements     5 - 10       2.0     The following is estimated amortization expense for the years ending March 31:   2022   $ 14,930   2023     14,721   2024     14,206   2025     12,612   2026     11,824     Amortization expense of intangibles acquired in a business combination for the years ended  March 31, 2021 ,  2020 and  2019 was $ 14,513 , $ 10,637 , and $ 7,090 respectively.     Note 9. Supplemental Balance Sheets Information   Accrued payroll and benefits consisted of the following:       March 31, 2021     March 31, 2020   Bonus payable   $ 3,504     $ 4,069   Wages payable     3,562       2,485   Payroll related taxes     2,043       2,228   Other benefits payable     279       158   Total accrued payroll and benefits   $ 9,388     $ 8,940     Page 48 Table of Contents   Other accrued expenses consisted of the following:       March 31, 2021     March 31, 2020   Accrued business taxes   $ 4,749     $ 3,555   Current operating lease liabilities     1,023       1,095   Interest payable     303       296   Professional services fees     473       857   Contingent consideration     235       504   Other     1,514       298   Total other accrued expenses   $ 8,297     $ 6,605       Note 10 . Indebtedness   Credit Facility On March 5, 2021, we entered into a four -year senior secured credit agreement that includes 1 ) a revolving credit facility in an aggregate principal amount of up to $ 75,000 , 2 ) a swingline loan in an aggregate principal amount not exceeding $ 5,000 , and 3 ) letters of credit in an aggregate stated amount not exceeding $ 2,500 at any time. The Credit Facility also provides for an incremental term loan or an increase in revolving commitments in an aggregate principal amount of at a minimum $ 25,000 and at a maximum $ 75,000 , subject to the satisfaction of certain conditions and lender considerations (together, the available facilities are referred to as the "Credit Facility").   The Credit Facility bears interest at either a base rate or a Eurodollar rate, plus an applicable spread. We have recorded customary lender fees totaling $ 664  within prepaid expenses and other and other assets on the Consolidated Balance Sheets. The fees are being expensed on a straight line basis over the life of the agreement.    The most restrictive financial covenants include a maximum leverage ratio of 5.50 to 1.00 for the first four testing dates on which the line of credit is outstanding; 5.0 to 1.0 on each of the fifth, sixth, seventh, and eighth testing dates; and 4.5 to 1.0 on each testing date following the eighth testing date, except that we may have a leverage ratio of 5.75 to 1.0 for a period of four consecutive quarters following a permitted acquisition. The Credit Agreement also stipulates a minimum fixed charge coverage ratio of 1.25 to 1.0. Other covenants include restrictions on our ability to incur debt, grant liens, make fundamental changes, engage in certain transactions with affiliates, or conduct asset sales. As of March 31, 2021, we were in compliance with all required covenants.   As of and throughout the year ended March 31, 2021, we had no outstanding balance under the Credit Agreement.   Convertible Notes On August 12, 2019, we issued an aggregate principal amount of $ 172,500 of convertible senior notes (the “Notes). Net proceeds after deducting underwriting discounts and commissions and other related offering expenses payable approximated $ 167,070 . The Notes mature on August 15, 2025, unless earlier repurchased or converted, and bear interest at a rate of 1.375 % payable semi-annually in arrears on February 15 and August 15 of each year beginning February 15, 2020.    The Notes are initially convertible at a rate of  3.5273  shares of common stock per  $1,000  principal amount of Notes, which is equivalent to an initial conversion price of approximately $ 283.50  per share of common stock. Noteholders may convert their Notes at their option only in the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending December  31, 2019 (and only during such calendar quarter), if the last reported sale price per share of  our common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the five consecutive business days immediately after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (iii) upon the occurrence of certain corporate events or distributions on our common stock, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets; and (iv) at any time from, and including, April  15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. Our current intent is to settle conversions entirely in shares of common stock. We will reevaluate this policy from time to time as we receive conversion notices from noteholders.   If a fundamental change occurs prior to the maturity date, holders may require us to repurchase all or a portion of their Notes for cash at a price equal to  100 % of the principal amount of the Notes to be repurchased plus unpaid accrued interest. Noteholders who convert their Notes in connection with a notice of a redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the Notes.     The circumstances required to allow noteholders to convert their Notes were met once during year ended March 31, 2021; however, none of the note holders exercised their option to convert. As of March 31, 2021, the Notes were not convertible as the circumstances for conversion were not satisfied on that date, thus classification of the Notes as a long-term liability on our Consolidated Balance Sheets as of March 31, 2021 remains appropriate. The if-converted value of the Notes did not exceed the principal balance as of March 31, 2021.   We accounted for the issuance of the Notes by bifurcating the Notes into liability and equity components. The carrying amount of the liability component was $ 141,427 upon issuance as calculated by measuring the fair value of a similar debt instrument that does  not  have an associated convertible feature using the income approach. The implied interest rate (a Level 3 unobservable input) assuming no conversion option was estimated using the Tsiveriotis-Fernandez model; all other assumptions used in measuring the fair value represent factors market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs. The carrying amount of the equity component, representing the value of the conversion option, was $ 31,073 and was determined by deducting the fair value of the liability component from the par value of the Notes. The equity component is not remeasured provided it continues to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount (the debt discount) is being amortized to interest expense using the effective interest method over the six -year contractual term of the Notes.   Page 49 Table of Contents   Debt issuance costs related to the Notes include discounts and commissions payable to the initial purchasers of $ 5,175  and third party offering costs of $ 255 . We allocated the total amount incurred to the liability and equity components of the Notes based on their relative values. Issuance costs attributable to the liability component were $ 4,452  and will be amortized to interest expense using the effective interest method over the contractual term. Issuance costs attributable to the equity component were netted with the equity component in stockholders’ equity.   The net carrying amount of the Notes was as follows:       March 31, 2021     March 31, 2020   Principal outstanding   $ 172,500     $ 172,500   Unamortized debt discount     ( 23,497 )     ( 28,205 ) Unamortized debt issuance costs     ( 3,328 )     ( 4,017 ) Net carrying value   $ 145,675     $ 140,278     The net carrying amount of the equity component of the Notes was as follows:       March 31, 2021     March 31, 2020   Amount allocated to conversion option   $ 31,073     $ 31,073   Less: allocated issuance costs and deferred taxes     ( 8,338 )     ( 8,338 ) Equity component, net   $ 22,735     $ 22,735     We recognized interest expense on the Notes as follows:       Year Ended March 31,       2021     2020   Coupon interest expense at 1.375%   $ 2,372     $ 1,502   Amortization of debt discounts and issuance costs     5,397       3,314   Total   $ 7,769     $ 4,816     The effective interest rate of the liability component of the note is approximately 5.5 %.   See "Recently Issued Accounting Pronouncements" in Note 1. "Description of Business and Summary of Significant Accounting Policies" for the impact our anticipated April 1, 2021 adoption of ASU 2020 - 06 is expected to have with respect to the Notes.      Note 11 . Stock Transactions and Stock-Based Compensation   In November 2005, our Board of Directors approved a program to repurchase up to 300,000 shares of our outstanding common stock. Under the program, shares of common stock may be purchased from time to time in the open market at prevailing prices or in negotiated transactions off the market. Shares of common stock repurchased will be cancelled and repurchases of shares of common stock will be funded through existing cash reserves. There were no repurchases of our shares of common stock under this plan during the years ended March 31, 2021 ,  2020 and  2019 . As of March 31, 2021 , we have purchased 162,486 shares under this plan.   Under applicable law, Colorado corporations are not permitted to retain treasury stock. The price paid for repurchased shares is allocated between common stock and retained earnings based on management’s estimate of the original sales price of the underlying shares.   Public Offerings of Common Stock  On June 12, 2020, we completed the sale and issuance of a total of 600,000 shares of our common stock and on June 19, 2020, our underwriters exercised in full their option to purchase an additional 90,000 shares of our common stock. The offering price to the public was $ 225.00 per share. The total proceeds we received from the offering, net of underwriting discounts and commissions and other offering expenses we paid, was $ 145,935 .   On August 12, 2019, we completed the sale and issuance of a total of 431,250 shares of our common stock, which includes our underwriters' exercise in full of an option to purchase up to  56,250 additional shares. The offering price to the public was $ 210.00 per share. The total proceeds we received from the offering, net of underwriting discounts and commissions and other offering expenses we paid, was $ 84,995 .   Stock-Based Compensation Pursuant to the Mesa Laboratories, Inc. 2014 Equity Plan, we grant stock options, RSUs and PSUs to employees and non-employee directors. We issue new shares of common stock upon the exercise of stock options and the vesting of RSUs and PSUs. Shares issued pursuant to awards granted prior to The 2014 Equity Plan were issued subject to previous stock plans, and some vested awards are still outstanding under previous plans. For the purposes of counting the shares remaining as available under the 2014 Equity Plan, each share issuable pursuant to outstanding full value awards, such as RSUs and PSUs, counts as five shares issued, whereas each share underlying a stock option counts as one share issued. Under the 2014 Plan, 1,100,000 shares of common stock have been authorized and reserved for eligible participants, of which 44,039 shares were available for future grants as of March 31, 2021 .   Page 50 Table of Contents   Stock-based compensation expense recognized in the Consolidated Financial Statements was as follows:       Year Ended March 31,       2021     2020     2019   Stock-based compensation expense   $ 9,268     $ 5,525     $ 4,212   Amount of income tax (benefit) recognized in earnings     ( 1,816 )     ( 1,576 )     ( 2,370 ) Stock-based compensation expense, net of tax   $ 7,452     $ 3,949     $ 1,842     Stock Options   The weighted average assumptions utilized in the Black-Scholes option-pricing model to estimate the fair value of stock option awards granted each year were as follows:        2021     2020     2019   Risk-free interest rate     0.27 %     1.80 %     2.63 % Expected life (years)     3.86       4.33       5.00   Expected dividend yield     0.10 %     0.13 %     0.45 % Volatility     38.83 %     36.52 %     35.96 % Weighted-average Black-Scholes fair value per share at date of grant   $ 67.66     $ 66.02     $ 54.02     The expected life of options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules, and expectations of future employee behavior. The majority of options granted during the year ended March 31, 2021 vest equally on the first, second, and third  anniversary of the grant date. Expected stock price volatility is based on historical volatility of our own stock price over the period of time commensurate with the expected life of the award. The risk-free rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. The dividend yield assumption is based on our anticipated cash dividend payouts. The amounts shown above for the estimated fair value per option granted are before the estimated effect of forfeitures, which reduces the amount of expense recorded in our Consolidated Statements of Income. We base forfeiture rates on company-specific historical experience of similar awards for similar subsets of our employee population.   Stock option activity under The 2006 Equity Compensation plan and The 2014 Equity Plan as of March 31, 2021, and changes for the year then ended are presented below (shares and dollars in thousands, except per-share data):       Stock Options       Shares Subject to Options     Weighted- Average Exercise Price per Share     Weighted-Average Remaining Contractual Life (Years)     Aggregate Intrinsic Value   Outstanding at March 31, 2020     286     $ 107.72       3.1       33,927   Awards granted     36       226.72                   Awards forfeited or expired     ( 13 )     115.23                   Awards exercised or distributed     ( 56 )     84.40                   Outstanding as of March 31, 2021     253     $ 129.55       2.7     $ 28,856   Exercisable as of March 31, 2021     121     $ 102.31       2.0     $ 17,155   Vested and expected to vest, March 31, 2021     246     $ 132.59       2.7     $ 28,847     The total intrinsic value of stock options exercised during the years ended  March 31, 2021 ,  2020 and  2019 was $ 9,559 , $ 9,574 , and $ 10,895 , respectively. Unrecognized stock-based compensation expense for stock options as of  March 31, 2021 was $ 3,758  and is expected to be recognized over a weighted average period of 2.2  years. The total fair value of options vested was $ 2,005 , $ 1,912 , and $ 2,400 during the years ended March 31, 2021 ,  2020 and  2019 , respectively. The weighted-average grant price of awards granted during the years ended March 31, 2020  and March 31, 2019  was $ 206.35  and $ 144.96 , respectively.   Time-Based Restricted Stock Units (RSUs) RSU activity under The 2014 Equity Plan was as follows (shares and dollars in thousands, except per-share data):       Time-Based Restricted Stock Units       Number of Shares     Weighted- Average Grant Date Fair Value per Share     Weighted- average Remaining Contractual Life (Years)     Aggregate Intrinsic Value   Nonvested at March 31, 2020     28     $ 180.15       1.7     $ 6,258   Awards granted     22       231.61                   Awards forfeited or expired     ( 3 )     204.30                   Awards distributed     ( 10 )     189.01                   Nonvested as of March 31, 2021     37     $ 206.56       1.1     $ 8,948     There were 34  RSUs with a weighted average grant date fair value per share of $ 206.30  that are expected to vest as of March 31, 2021 . For the years ended March 31, 2020  and 2019, the weighted average fair value per RSU granted was $ 213.31  and $ 157.14 , respectively. Unrecognized stock-based compensation expense for RSUs that we have determined are probable of vesting was $ 4,396  as of March 31, 2021 . The total fair value of RSUs vested was $ 1,819 , $ 959 , and $ 460 during the years ended March 31, 2021 ,  2020 and  2019 .   Page 51 Table of Contents   Performance-Based Restricted Stock Units (PSUs) PSU activity under The 2014 Equity Plan was as follows (shares and dollars in thousands, except per-share data):       Performance-Based Restricted Stock Units       Number of Shares     Weighted- Average Grant Date Fair Value per Share     Weighted- average Remaining Contractual Life (Years)     Aggregate Intrinsic Value   Nonvested at March 31, 2020 at target     22     $ 204.68       1.6     $ 4,903   Awards forfeited or expired at target     ( 2 )     228.27                   Nonvested as of March 31, 2021 at target     20     $ 207.88       0.8     $ 4,884   Expected to vest     34     $ 195.78       0.6       8,359     For the year ended March 31, 2020, and March 31, 2019, the average fair value per PSU granted was $ 215.47 and $ 192.99 . Unrecognized stock-based compensation expense for PSUs that we have determined probable of vesting was $ 841  as of March 31, 2021  and is expected to be recognized over a weighted average period of 0.6 years. No PSUs were distributed during the years ended March 31, 2021, March 31, 2020, or  March 31, 2019.    During the year ended March 31, 2020, we awarded PSUs to key employees of GPT that are subject to both service and performance conditions ("GPT PSUs"). Originally, the GPT PSUs had a grant date fair value of $ 240.52  per share and vest based on continued service, completion of certain compliance requirements related to the acquisition; and achievement of specific financial performance targets for the period from January 1, 2020 through March 31, 2021. The quantity of shares that will be issued upon vesting would range from 0 % to 150 % of the targeted number of shares; if financial performance is less than 90 % of targets, then no shares would vest. During the year ended March 31, 2021, our Compensation Committee modified the performance targets for these grants, and as a result, they will vest at 60 % of the modified performance target. We recorded the change to the performance target as a modification of the award, resulting in $ 432  of expense recorded during the three months ended March 31, 2021 and we expect to record an additional $ 18 of expense during the three months ending June 30, 2021. We expect to issue 2 shares to recipients of GPT PSUs during the three months ending June 30, 2021.    During the year ended March 31, 2020, we awarded 8 PSUs (the "FY 20  PSUs") that are subject to both service and performance conditions to eligible employees. The FY 20  PSUs had a grant date fair value of $ 202.00 per share and vest based on our achievement of specific performance criteria for the three -year period from April 1, 2019 through March 31, 2022 and on a pro-rata basis after 12 months of continued service through June 15, 2022. The quantity of shares that will be issued upon vesting will range from 0 % to 200 % of the targeted number of shares; if the defined minimum targets are not met, then no shares will vest. During the year ended March 31, 2021, we adjusted our estimate of the FY 20  PSUs that we expect to vest based on results achieved and expected to be achieved and we recorded total cumulative effect catch-ups of $ 394  ($ 290  after taxes and $ 0.06 per basic and diluted share). As a result of our new estimate of achievement against our performance targets, we expect expense associated with the FY 20  PSUs that are expected to vest to be approximately $ 95  per quarter.   During the year ended March 31, 2019,  we awarded 11 PSUs (the "FY19  PSUs") with a grant date fair value of $ 192.99 per share. The awards vest both based on our achievement of specific performance criteria for the three -year period from April 1, 2018 through March 31, 2021, as well as on a pro-rata basis after 12 months of continued service through June 15, 2021. Subject to final adjustments, we expect to issue 27  shares under the FY 19  PSUs plan based on actual performance results. During the year ended March 31, 2021, we recorded net cumulative effect true ups of $ 997 ($ 734  net of tax and $ 0.15 and $ 0.14  per basic and diluted share, respectively) related to the FY19  PSUs. During the three months ending June 30, 2021,  we expect to record an additional $ 364  of expense representative of the ongoing service element of the award.     Note 12 . Earnings  Per Share   Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similarly to basic earnings per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Potentially dilutive securities include common shares related to stock options and RSUs (collectively “stock awards”) and convertible debt. Stock awards are excluded from the calculation of diluted EPS in the event that they are subject to performance conditions that have not yet been achieved or are antidilutive. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect.    Page 52 Table of Contents   The impact of the assumed conversion of the Notes calculated under the if-converted method was anti-dilutive, and as such shares underlying the Notes were excluded from the diluted EPS calculation for the year ended March 31, 2021 .    The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share (shares in thousands):       For the Year Ended March 31,       2021     2020     2019   Net income available for shareholders   $ 3,274     $ 1,778     $ 7,484   Weighted average outstanding shares of common stock     4,975       4,200       3,839   Dilutive effect of stock options     125       159       186   Dilutive effect of RSUs     10       12       8   Dilutive effect of PSUs     14       -       -   Fully diluted shares     5,124       4,371       4,033                             Basic earnings per share   $ 0.66     $ 0.42     $ 1.95   Diluted earnings per share   $ 0.64     $ 0.41     $ 1.86      The following stock awards were excluded from the calculation of diluted EPS:       For the Year Ended March 31,       2021     2020     2019   Assumed conversion of convertible debt     608       387       -   Stock awards that were anti-dilutive     44       24       1   Stock awards subject to performance conditions     14       18       10   Total stock awards excluded from diluted EPS     666       429       11       Note 13 . Employee Benefit Plan s   We adopted the Mesa Laboratories, Inc. 401 (K) Retirement Plan effective January 1, 2000. Under this plan, we match 100 % of the first 4 % of pay contributed by each eligible employee, and contributions vest immediately. Participation is voluntary, and employees are eligible on the first day of the month following their start date. For certain GPT subsidiaries, we have maintained the terms of the 401 (K) plan that was in effect for the business immediately prior to acquisition. Under this plan, we match 100 % of the first 6 % of pay contributed by each eligible employee, and contributions vest over three years. For the years ended March 31, 2021 ,  2020 and  2019 , respectively, we contributed $ 935 , $ 661 , and $ 663 to 401 (K) retirement plans on behalf of employees.       Note 14 . Income Taxes   Earnings before income taxes are as follows:       Year Ended March 31,       2021     2020     2019   Domestic   $ 6,297     $ 16,059     $ 12,133   Foreign     ( 3,994 )     ( 12,197 )     ( 3,510 ) Total earnings before income taxes   $ 2,303     $ 3,862     $ 8,623     The components of our provision for income taxes are as follows:       Year Ended March 31,       2021     2020     2019   Current tax provision                         U.S. Federal   $ 1,500     $ 2,348     $ 1,831   U.S. State     628       814       449   Foreign     404       993       1,166   Total current tax expense     2,532       4,155       3,446   Deferred tax provision:                         U.S. Federal     ( 2,410 )     60       ( 741 ) U.S. State     ( 619 )     599       ( 106 ) Foreign     ( 474 )     ( 2,730 )     ( 1,460 ) Total deferred tax benefit     ( 3,503 )     ( 2,071 )     ( 2,307 ) Total income tax (benefit) expense   $ ( 971 )   $ 2,084     $ 1,139     Page 53 Table of Contents   The components of net deferred tax assets and liabilities are as follows:       March 31, 2021     March 31, 2020   Deferred tax assets:                 Net operating loss   $ 8,990       8,874   Stock compensation deductible differences     2,099       1,265   Inventories     838       504   Allowances and reserves     1,471       105   Accrued employee-related expenses     209     $ 208   Credits     169       47   Other     25       458   Total deferred tax assets     13,801       11,461   Deferred tax liabilities:                 Goodwill and intangible assets     ( 23,029 )     ( 24,825 ) Debt     ( 4,723 )     ( 5,982 ) Property, plant and equipment     ( 1,275 )     ( 1,286 ) Other     ( 29 )     ( 65 ) Total deferred tax liabilities     ( 29,056 )     ( 32,158 ) Valuation allowance     ( 404 )     ( 391 ) Net deferred tax liability   $ ( 15,659 )   $ ( 21,088 )   A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:       Year Ended March 31,       2021     2020     2019   Federal income taxes at statutory rates   $ 483     $ 811     $ 1,811   State income taxes, net of federal benefit     ( 221 )     1,122       208   Tax benefit of stock option exercises     ( 1,816 )     ( 1,576 )     ( 2,034 ) Foreign-derived intangible income deduction     ( 999 )     -       -   Research and development credit     ( 165 )     ( 191 )     ( 158 ) Limitation for 162(m)     1,113       1,112       766   Foreign rate differential     810       657       -   Other     ( 176 )     149       546   Total income tax (benefit) expense   $ ( 971 )   $ 2,084     $ 1,139     We or one of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our federal tax returns for all years after 2017, state tax returns after 2016  and foreign tax returns after 2016  are subject to future examination by tax authorities for all our tax jurisdictions. Although the outcome of tax audits, if any, is always uncertain, we believe that we have adequately accrued for all amounts of tax, including interest and penalties and any adjustments that may result. The tax year ended  December 31,  2018  for Gyros US, Inc., and its subsidiary (together "Gyros U.S."), which we acquired as part of the GPT Acquisition, is under examination by the IRS. Additionally, the tax year ended March 31, 2019 for Mesa Laboratories, Inc. is under review by the IRS. We expect the examinations for these tax years to be completed during the year ending March 31, 2022.   We recognize interest and penalties related to unrecognized tax benefits in other expense and general and administrative expense, respectively. Accrued interest and penalties related to unrecognized tax benefits were $ 0 , $ 19  and $ 40 as of March 31, 2021 ,  2020 and  2019 , respectively.   A reconciliation of the changes in the balance of unrecognized tax benefit amounts is as follows:       Year Ended March 31,       2021     2020     2019   Beginning balance   $ 653     $ 1,361     $ 827   Decreases related to prior period tax positions     ( 629 )     ( 1,027 )     -   Increases related to current period tax positions     40       319       534   Ending balance   $ 64     $ 653     $ 1,361     During the year ended March 31, 2021, we recorded an income tax benefit of approximately $ 630 , including interest, related to our foreign-derived intangible income deduction recognition based on updated Treasury Regulations, and application of those regulations to our operations, which reduced the effective tax rate by 6.0 %.   The remaining amount of tax benefits that, if recognized, would affect the effective tax rate was $ 64 as of March 31, 2021, excluding interest and penalties. We expect that the remaining amount of unrecognized tax benefits will change in the next 12 months; however, we do not expect the change to have a significant impact on our consolidated statements of operations or consolidated balance sheets. At this time, we expect resolution of the uncertain tax position within 12 months.   Page 54 Table of Contents   As of March 31, 2021 , and March 31, 2020, respectively, undistributed earnings of our foreign subsidiaries amounted to $ 9,951 and $ 12,900 , respectively. Those earnings are considered indefinitely reinvested and, accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability. Furthermore, as a result of the Tax Cuts and Job Act, a significant portion of the distribution may  not be subject to current U.S. income taxes, resulting in no foreign tax credits.    As of March 31, 2021 , we had $27,547 of gross net operating losses for foreign tax purposes. The foreign net operating losses do not expire. Furthermore, Gyros U.S. had gross net operating loses of $ 11,936 and $ 11,449 , for federal and state tax purposes, respectively, of which the federal net operating losses do not expire, and the state net operating losses begin to expire in the 2022 tax year. In addition, we had $ 16  of foreign tax credit carryovers which will expire in the tax year 2029.  Gyros U.S. also had $ 153 of Research and Development credit carryforward which will begin to expire in the 2030 tax year.     Note 15.   Commitments and Contingencies   We are party to various legal proceedings arising in the ordinary course of business. As of March 31, 2021, we are not party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations, or cash flows.    Companies are required to collect and remit sales tax from certain customers if the company is determined to have nexus in a particular state. The determination of nexus varies by state and often requires technical knowledge of each jurisdiction's tax case law. During the year ended March 31, 2021,  we determined that certain subsidiaries of GPT had established nexus in various jurisdictions during prior periods without properly collecting and remitting sales tax, and in certain cases had collected sales tax and not  remitted it. We estimate the total net exposure including interest and penalties is $ 2,714 , which is included in other accrued expenses on the Consolidated Balance Sheets. Approximately $ 1,899  of the liability is considered a preacquisition contingency and is included in purchase accounting, which is described in further detail in Note 4 .  "Significant Transactions." The remainder of the liability represents $ 565  of sales tax payable for sales made in states where we have established nexus and $ 250  of interest incurred on the liabilities subsequent to the date of acquisition. The amount ultimately remitted may differ from our estimates, which could materially impact the financial statements. We reevaluate the estimated liability each reporting period. We expect to resolve the liability during the fiscal year ending  March 31, 2022.     Note 16.   Segment Data   Segment information is prepared on the same basis that our CEO, who is our Chief Operating Decision Maker, uses to manage the segments, evaluate financial results, and make key operating decisions. We have four reportable segments based primarily upon product type: Sterilization and Disinfection Control, Instruments, Biopharmaceutical Development, and Continuous Monitoring. When determining the reportable segments, we aggregated operating segments based on their similar economic and operating characteristics. We evaluate the performance of our operating segments based on revenues, organic revenues growth, and gross margin. The accounting policies of the operating segments are the same as those described in Note 1. "Description of Business and Summary of Significant Accounting Policies." The following tables set forth our segment information:       Year Ended March 31,       2021     2020     2019   Total revenues (a)                         Sterilization and Disinfection Control   $ 53,119     $ 49,660     $ 46,297   Instruments     32,465       37,984       36,125   Biopharmaceutical Development     33,892       13,851       -   Continuous Monitoring     14,461       13,729       13,806   Reportable segment revenues     133,937       115,224       96,228   Corporate and Other (b)     -       2,463       6,907   Total revenues (a)   $ 133,937     $ 117,687     $ 103,135                             Gross profit (loss)                         Sterilization and Disinfection Control   $ 39,870     $ 35,797     $ 31,861   Instruments     20,158       24,247       22,866   Biopharmaceutical Development     21,035       382       -   Continuous Monitoring     5,954       4,518       5,582   Reportable segment gross profit     87,017       64,944       60,309   Corporate and Other (b)     ( 3 )     418       607   Gross profit   $ 87,014     $ 65,362     $ 60,916   Reconciling Items:                         Operating expenses     74,656       57,439       51,135   Operating income     12,358       7,923       9,781   Nonoperating expense, net     10,055       4,061       1,158   Earnings before income taxes   $ 2,303     $ 3,862     $ 8,623         (a) Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.   (b) Non-reportable operating segments (including our Cold Chain Packaging Division which ceased operations during the year ended March 31, 2020)  and unallocated corporate expenses are reported within Corporate and Other.    Page 55 Table of Contents         Year Ended March 31,       2021     2020     2019   Depreciation and amortization                         Sterilization and Disinfection Control   $ 857     $ 902     $ 902   Instruments     164       179       207   Biopharmaceutical Development     1,427       672       -   Continuous Monitoring     256       328       272   Reportable segment depreciation and amortization     2,704       2,081       1,381   Corporate and Other (c)     14,956       10,909       8,047   Depreciation and amortization   $ 17,660     $ 12,990     $ 9,428                             Capital expenditures                         Sterilization and Disinfection Control   $ 136     $ 291     $ 384   Instruments     128       165       56   Biopharmaceutical Development     539       233       -   Continuous Monitoring     40       201       254   Reportable segment capital expenditures     843       890       694   Corporate and Other     1,149       608       568   Capital expenditures   $ 1,992     $ 1,498     $ 1,262       (c) Amortization of intellectual property is included in the calculation of gross margin by segment. Amortization pertaining to other types of intangible assets, such as customer relationships and trademarks, is included in general and administrative on the Consolidated Statements of Income. Within the table above, the depreciation and amortization costs that are included in calculating the gross margin of the noted segment are included; other costs such as amortization that is recorded to general and administrative expense is shown in corporate and other.    The following table sets forth net inventories by reportable segment. Our chief operating decision maker is not provided with any other segment asset information.        March 31, 2021     March 31, 2020   Sterilization and Disinfection Control   $ 2,333     $ 2,104   Instruments     3,253       3,065   Biopharmaceutical Development     4,162       7,438   Continuous Monitoring     1,430       1,623   Reportable segment Inventory     11,178       14,230   Corporate and administrative     -       -   Total inventories   $ 11,178     $ 14,230     The following table sets forth a summary of long-lived assets by geographic area. Long-lived assets exclude goodwill and intangible assets acquired in a business combination.        As of March 31,       2021     2020   United States   $ 21,443     $ 23,306   Foreign     3,085       1,240   Total   $ 24,528     $ 24,546     Page 56 Table of Contents   Revenues from external customers are attributed to individual countries based upon locations to which the product is shipped or exported, as follows:       Year Ended March 31,       2021     2020     2019   United States   $ 71,387     $ 66,344     $ 64,828   Foreign     62,550       51,343       38,307   Total revenues   $ 133,937     $ 117,687     $ 103,135     No customer accounts for 10% or more of our revenues. No foreign country exceeds 10%  of total revenues.     Note 17 . Quarterly Results (unaudited)   Quarterly financial information for the years ended  March 31, 2021 and  2020 is summarized as follows. Earnings per share per quarter will not sum to reported annual earnings per share due to differences in average outstanding shares as reported on a quarterly basis (in thousands, except per share data):   2021   First Quarter     Second Quarter     Third Quarter     Fourth Quarter   Revenues   $ 29,941     $ 31,860     $ 34,172     $ 37,964   Gross profit     20,340       21,285       20,653       24,736   Net income (loss)     1,217       2,679       ( 4,542 )     3,920   Basic earnings (loss) per share   $ 0.27     $ 0.52     $ ( 0.89 )   $ 0.76   Diluted earnings (loss) per share     0.26       0.51       ( 0.89 )     0.74       2020   First Quarter     Second Quarter     Third Quarter     Fourth Quarter   Revenues   $ 26,288     $ 25,536     $ 31,655     $ 34,208   Gross profit     16,204       15,586       14,803       18,769   Net income     4,662       3,172       ( 4,504 )     ( 1,552 ) Basic earnings per share   $ 1.20     $ 0.76     $ ( 1.03 )   $ ( 0.37 ) Diluted earnings per share     1.14       0.73       ( 1.03 )     ( 0.37 )     Note 18 . Subsequent Events   In April 2021, our Board of Directors declared a quarterly cash dividend of $ 0.16 per share of common stock, payable on June 15, 2021 , to shareholders of record at the close of business on May 31, 2021 .     Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   None.   Page 57 Table of Contents